o'I-ORID

NEW ISSUE NOT RATED

In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described in this Official Statement, under existing law, interest on the Series 2009-A Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, and (iii) is not taken into account in computing adjusted current earnings, which is used as an adjushncnt in determining the federal alternative minimum tax for certain corporations. In addition, in the opinion of Bond Counsel, interest on the Series 2009-A Bonds is exempt from personal income taxation imposed by the Stilte of California. The Series 2009-A Bonds arc "qualified tax-exempt obligations" under Section 265(b)(3)ofthe Internal Revenue Code of1986,as amended. See "LEGAL MATTERS-Tax Matters" herein.

Dated: Date of Delivery

$2,615,000 WEST PATTERSON FINANCING AUTHORITY

COMMUNITY FACILITIES DISTRICT NO. 2001-1 (PUBLIC IMPROVEMENTS)

SPECIAL TAX REFUNDING BONDS, SERIES 2009-A ]Bank Qualified]

Due: September 1, as shown below

Authority for Issua11ce. The bonds captioned above (the "Series 2009-A Bonds") arc being issued under the Mello-Roos Community Facilities Act of 1982 (the "Act") and a Fiscal Agent Agreement, dated as of January 1, 2002 (as amended and supplemented as described herein, the "Fiscal Agent Agreement"), by and between the West Patterson Financing Authority (the "Authority), for and on behalf of its Community Facilities District No. 2001-1 (Public Improvements) (the "Community Facilities District"), and l11c Bank of New York Mellon Trust Com puny, N.A. (successor to BNY Western Trust Company), as fiscal agent (the "Fiscul Agent"). See "THE SERIES 2009-A BONDS­Authority for Issuance."

Security a11d Sources of Paymeut. The Series 2009-A Bonds are payable from: (i) the Special Tax Revenues (as defined in the Fiscal Agent Agreement) derived from the levy of special taxes (the "Special Taxes") on certain property within the Community Facilities District, and (ii) moneys deposited in certain funds and accounts held by the Fiscal Agent under the Fiscal Agent Agreement. See "SECURITY FOR THE SERIES 2009-A BONDS-General." The Authority, for and on behalf of the Community Facilities District, has issued five series of special tax bonds of which $67,415,000 is currently outstanding (collectively, the "Prior Bonds"), as well as two series of bond anticipation notes one of which has been repaid in full and the other of which is to be repaid, in part, with proceeds of the Series 2009-A Bonds and, in part, with the proceeds of a concurrent issue of subordinate bonds (the "Subordinate Bonds"). See "THE COM!v1UNITY FACILITIES DISTRICT -Community Facilities District Proceedings." The Prior Bonds are secured on a parity with the Series 2009-A Bonds under the Fiscal Agent Agreement. See "SECURITY FOR THE SERIES 2009-A BONDS-Parity Lien on Pledged Collateral."

Use of Proceeds. The Series 2009-A Bonds arc being issued to (i) repay, in part, the principal of the Authority's Community Fadlitics District No. 2001-1 (Public Improvements) Bond Anticipation Notes, Series 2007-A (the "2007 Notes"), (ii) to pay a portion of the interest on the Series 2009~A Bonds for a limited periOO of time, and (iii) to pay a portion of the costs of issuance of the Series 2009-A Bonds and the Subordinate Bonds. Pnx:eeds_of the Subordinate Bonds will provide the additional funds needed to repay, in full, the principal of the 2007 Notes. Sec '"ESTIMATED SOURCES AND USES OF FUNDS."

Bo11d Terms. Interest on the Series 2009-A Bonds is payable on September 1, 2009 and semiannually thereafter on each March 1 and September 1. The Series 2009-A Bonds will be issued in dent1minations of $5,000 or integral multiples of $5,000. The Series 2009-A Bonds, when delivered, will be in fully registered form as physical certificates and will be eligible for registration with The Depository Trust Company, New York, New York ("DTC"). See "THE SERIES 2009-A BONDS--General Bond Terms."

Redemptio11. Prior to their maturity, the Series 2009-A Bonds arc subject to optional redemption, mandatory sinking fund redemption and redemption from prepayments of Special Taxes. See "THE SERIES2009-A BONDS-Redemption."

NEITHER THE FAITH AND CREDIT NOR THE GENERAL TAXING POWER OF THE AUTHORITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE SERIES 2009-A BONDS. THE SERIES 2009-A BONDS ARE NOT GENERAL OBLIGATIONS OF THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE COMMUNITY FAOLITIES DISTRICf PAYABLE SOLELY FROM THE PROCEEDS OF THE SPECIAL TAX AND CERTAIN AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED HEREIN. THE CITY OF PATTERSON (THE ""CITY'") HAS NO OBLIGATION WHATSOEVER WITH RESPECfTOTHE SERIES 2009·A BONDS OR THE COMMUNITY FACILITIES DISTRICf.

This cover page contains certain information for quick reference only .It is not a summary of the issue. Potential investors must read this entire Official Statement to obtain information essential to the making of an informed inveshncnt dedsion with respect to the Series 2009-A Bonds. Investment in the Series 2009-A Bonds involves risks that may not be nppropriatc for some investors. See "BONDOWNERS' RISKS" for a discussion of special risk factors that should be considered in evaluating the inveshnent quality of the Series 2009--A Bonds.

MATURITY SCHEDULE $2,615,000 8.625% Term Bonds due September 1, 2039; Yield 8.875% CUSIP: 955232 DWOt

The Series 2009-A Bonds arc offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the Authority by City Attorney of the City of Patterson, acting as general counsel to the Authority. Quint & Thimmig LLP also is acting as disclosure counsel to the Authority with respect to the Series 2009-A Bonds. It is anticipated that the Series 2009-A Bonds in book-entry form will be available for delivery on or about July 28,2009.

The date of this Official Statement is: July 2, 2009

WULFF, HANSEN & Co. EsTABUSliED 1931

INVESTMENT BANKERS

t Copyright 2009, American Bankers Association, CUSIP data are provided by Standard & Poor's CUSIP Service Burcew, a division of The McGraw­Hill Compa nics, Inc., and are provided for convenience of reference only. Neither the i\ulhority nor the Underwriter asstum.'S any respon:~ibility for the accuracy of thcCUSIP data.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

Use of Officinl Stntemcut. This OffiQal Statement is submitted in connection with the sale of the Series 20lN-A Honds referred to in this Offici<'\l Statenwnt and ml\y not be reproduced or used, in whole or in part, for <my other purpose.

Preparatiou of this Official Statement. The information setforth in this Offici" I Statement has been obtained from the Authority, The Depository Trust Company cmd other sources which are believed to be current and reliable, but the accuracy or con1pletencss of such informCition is not gunranteed by the Authority or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, ond neither the delivery of this Officit1l St<1tement nor any sale made hereunder shall, under any circumstcmccs, give rise to any implication that there has been no change in the affairs of the Authority or the Community F?lcilities District since the date hereoC All summaries of the Fiscal Agent Agreement or other documents herein ?Ire made subject to the provisions of sud1 doclllnents respectively and do not purport to be complete statemenb of any or oil of such provisions. Reference is hereby rna de to such documents on file with the Authority for further information in connection therewith.

The Unden.vriter has provided the following sentence for inclusion in this Official Staten1ent: the Underwriter has reviewed the information in this Official Statement in accord<1nce with, and <lS part of, its responsibilities to investors under the federal securities laws as npplicd ttl the facts and circumstances of this transaction, but the Underwriter docs not guarantee the aca1racy or completeness of sud1 information.

Estimates nud Forecn sts. \Nhen used in this Official Statement and in any continuing disclosure by the Authority, in any press release and in any oral statement made with the approval of an authorized officer of the Authority, the words or phrases "will likely result," "are expected to," "will continue," "is onticipated," "cstin1ate," "project," "forecC~st," "expect," "intend" and sin1ilC1r expressions identify "forward lcx)king stC~temcnts" within the meaning of the Private Securities Litigation Reform Act of -1995. Such statements arc subject to risks and uncertain ties that could cause actua I results to differ materially fro.n1 those contempl<1ted in such forward-looking statements. Any forecast is subject to sud1 uncertainties. Inevitably, some assumptions used to develop the forecasts \Vill not be realized and unanticip<1tcd events and circumstances mav occur. Therefore, there are likelv to be differences between forecasts and actual results, and those diffcren"'ces may be m<1teri<1l. J

Limit. of Offering. No dealer, broker, salesperson or other person has been authorized by the Authority or the Undenvriter to give any inforn1ation or to make any repre_sentations in connection with the offer or sale of the Series 2009-A Bonds other than thoSe contained in this Official Statement Clnd, if given or made, sud1 other information or rcpresentntion n1ust not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any s<1le of the Series 2009-A Bonds by a person in any jurisdiction in which it is unlawful for such person to make sudt an offer, solicitation or sa\e. This Official Statement is not to be construed as a contract with the purchasers of the Series 200SJ~A Bonds.

StnbiUzatiou of Prices. In connection with this offering, the Underwriter of the Series 2009-A Bonds tnay ovcrallot or effect transactions whid1 stabilize or nlaintair1 the n1arket price of the Series 2009-A Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if con1menced, mav be discontinued at anv time. The Underwriter mav offer and Sell the Series 2009-A Bonds to certain de;lers nnd others at prices .. lower than the public offering prices set forth on the cover page hereof and said public offering prices ma:-' be d1anged from tin1e to titnc by the Underwriter.

THE SERIES 2000-A BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS CONTAINED IN SUCH ACT. THE SERIES 2009-A BONDS I-lA VE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

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WEST PATTERSON FINANCING AUTHORITY BOARD OF DIRECTORS and

CITY OF PATTERSON CITY COUNCIL

Dominic Farinha Vice Chair/Vice Mayor

Annette Sn1ith

Becky Campo Clwir/Moyor

Sam Cuellar Board Me111 hcr/Co1111 cil !vlt:/11 !Ja

Dejeune Shelton Bmrd fvtt'l!! IJCr/Co!f 11 ci l Mt~l!lhcr B()(lnf Mclllhcr/Co!lllCil Mc11tbcr

AUTHORITY OFFICERS

Becky Cmnpo Cltair

Cleve J\1orris F . .rt'CutiPc Director

Maricela L Vela Secretary

Dominic Farinha Vice Clwir

George C. Log<nl, Esq. Ct;ncml Colt lise/

Linda DeForest Trca~u n'r

CITY ADMINISTRATION

Cleve Morris City Mmw8cr

Mmicela L. Vela Cii1J Clerk

Mike Willett Oin'cfor <if P1thlic Works

George G. Logan, Esq. City Altonu~y

Margcuet Souza F ilumcc Director

Rod R. SimpS<-lll Dirl'clor t!{ PI ann ing muf Ru ildins,

PROFESSIONAL SERVICES

Specinl Tax Consultant Ct)()dV\'in Consulting Group, Inc.

Sacramen t{l, ca·li forn ia

Bond and Disclosure Counsel Quint& Thin1rnig LLP

San Francisn),California

Fisc<1l Agent The Bank of New York Mellon Trust Company, N.A.

Los Angeles,Californi<1

FOR ADDITIONAL INFORMATION Cleve Morris, Executive Director, West P<1tterson Financing Authority (209) 895-8015

Mark Pressman, Wulff, !-Ionsen & Co. (415) 421-H900

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TABLE OF CONTENTS

INTRODUCTION ..................................................................... ] Status of Expenditure of Proceeds of Prior The Issuer ............................................................................... 1 Financings ............................................................................ 31 Authority for Issuance of the Bonds ............................. l Status of Development; Projected The Community Facilities District; Absorption of Undeveloped Property ...................... .32 Outstanding Bonded Indebtedness ............................. 2 Property Value and Value to Burden Ratio ............. 33 Status of Development ....................................................... 2 Over Ia pping Governmenta I Obi iga tions ................ .35 Purpose of the Series 2009-A Bonds ............................. 3 Special Tax Delinquencies ............................................ .37 Security and Sources of Payment for the BONDOWNERS' RISKS ..................................................... .39 Series 2009-A Bonds ......................................................... 3 Limited Obligation of the Issuer to Pay Limited Obligation ......................................................... ..4 Debt Service ......................................................................... 39 Risk Factors Associated with Purchasing Levy and Collection of the Special Tax .................... .39 the Series 2009-A Bonds ................................................... 4 Special Tax Delinquencies ............................................ .39 Forward-Looking Statements... . ..................... 4 Payment of Special Tax is not a Personal Professionals Involved in the0ffering ....................... .4 Obligation of Property Owners ................................ ..40 Other Information ............................................................. 5 Absorption of Undeveloped Property ..................... ..40

ESTIMATED SOURCES AND USES OF FUNDS ........ 6 Concentrntion of Ownership ........................................ .40 THE SERIES 2009-A BONDS .............................................. 6 Property Values...................................... . .... ..41

General Bond Terms.............. . .................................... 6 Other Possible Claims Upon the Value of Authority for Issuance ....................................................... ? Taxable Property ............................................................ ..41 Debt Service Sched ule ........................................................ 8 Exempt Properties ............................................................. 42 Redemption ........................................................................... 9 Depletion of Reserve Fund ............................................. 42 Registration, Transfer and Exchange ....................... .lO Bankruptcy and Foreclosure Delays ......................... .43 Parity Bonds ....................................................................... 11 Risks Related to Adjustable Rate

SECURITY FOR THE SERIES 2009-A BONDS .......... l2 Mortgages, Creative Mortgage Financing General .................................................................................. 12 Tools and Declines in Real Estate Prices ...... 44 Parity Lien on Pledged Col1ateral .............................. 12 Disclosure to Future Purchasers ................................ ..45 Special Taxes ...................................................................... 13 No Acceleration Provisions ........................................... 46 Rate and Method .............................................................. .14 Loss ofT ax Exemption .................................................. 46 Expected Special Tax Revenues and Debt Voter Initiatives ................................................................. 46 Service Coverage...................................... . ....... 17 Limitations on Remedies .............................................. .47 Prepayment and Satisfaction of Special Secondary Market; Potential Reductions Tax .......................................................................................... lS in Bond Values. .. ........................................ 47 Covenant to Foreclose ...................................................... 19 CONTINUING DISCLOSURE ......................................... ..48 Special Tax Fund .............................................................. 20 LEGAL MATTERS................... . ................ ..48 Bond Ftmd ........................................................................... 21 Legal Opinions .................................................................. 48 Reserve Fund ....................................................................... 22 Tax Matters ......................................................................... 49 Investment of Moneys in Ftmds .................................. 23 Absence of Material Litigation ................................... .Sl Limited Obligation ......................................................... .24 NO RATING ............................................................................ .51 No Acceleration ................................................................. 24 UNDERWRITING ................................................................. .Sl

THE AUTHORITY ................................................................. 24 PROFESSIONAL FEES...................................... . .. .52 THE COMMUNITY FACILITIES DISTRICT .............. 25 MISCELLANEOUS .............................................................. .52

General ................................................................................ 25 EXECUTION ......................................................................... .53 Community Facilities District Proceedings ......................................................................... 29

APPENDIX A APPENDIXB APPENDIXC APPENDIXD APPENDIXE APPENDIXF

AUTHORIZED FACILITIES AND THE RATE AND METHOD SUMMARY OF THE FISCAL AGENT AGREEMENT ABSORPTION ANALYSIS FORM OF CONTINUING DISCLOSURE CERTIFICATE FORM OF OPINION OF BOND COUNSEL GENERAL INFORMATION REGARDING THE CITY OF PATTERSON AND THE COUNTY OF STANISLAUS

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OFFICIAL STATEMENT

$2,615,000 WEST PATTERSON FINANCING AUTHORITY

COMMUNITY FACILITIES DISTRICT NO. 2001-1 (PUBLIC IMPROVEMENTS)

SPECIAL TAX REFUNDING BONDS, SERIES 2009-A

This Official Statement, including the cover page and attached appendices, is provided to furnish information regarding the bonds captioned above (the "Series 2009-A Bonds") to be issued by West Pntterson Financing Authority (the" Authority") for and on behnlf of the West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) (the "Community Facilities District").

INTRODUCTION

This introduction is not a summary of this Offjcial Statement. It is only a brief description of and guide to, and is qualified by, the more complete and detailed information contained in this entire Official Statement, including the cover page hereto and attached appendic~s, and the documents summarized or described in this Official Statement. A full review should be mode of this entire Official Statement by those interested in purchasing the Series 2009-A Bonds. The offering of the Series 2009-A Bonds to potential investors is made only by means of this entire Official Stntemcnt. ·

The Issuer

The Authority was formed on June 5, 2001 pursuant to a joint exercise of powers agreement between the City of Patterson, California (the "City") and the Redevelopment Agency of the City of Patterson (the" Agency"). For further information about the Authority and the City, see "THE AUTHORJTY" and "APPENDIX F-General Information Regarding the City of Patterson and the County of Stanislaus." The Authority is a separate legal entity frorn the City and the Agency. The City and the Agency have no obligations whatsoever with respect to the Series 2009-A Bonds or the Community Facilities District.

Authority for Issuance of the Bonds

The Series 2009-A Bonds are issued under the following:

• the Mello-Roos Community Facilities Act of 1982, as amended (the" Act"),

• cert<>in resolutions adopted by the Board of Directors of the Authority (till' nBocnd of Directors"), acting as the legislative body. for the Con1nll111ity Facilities District, and

• a Fiscal Agent Agreement, dated as of january 1, 2002 (as amended and supplemented, the "Fiscal Agent Agreement"), by and between the Authority, for and on behalf of the Communitv Facilities District, and The Bank of New York Mellon Trust Company, N.A. (;uccessor to BNY Western Trust Company), as fiscal agent (the "Fiscal Agent"). See "THE SERIES 2009-A BONDS­Authoritv for Issuance" and "THE COMMUNITY FACIUTIES DISTRICT­Conlnuniity Facilities District Proceedings."

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Cnpitalized tern1s used in this Official Staten1ent and not otherwise defined herein lk1ve the meanings given to such terms in the Fiscal Agent Agreement, some of which arc set forth in "APPENDIX B-Summary of the Fiscal Agent Agreement- Definitions."

The Community Facilities District; Outstanding Bonded Indebtedness

The Community Facilities District is located in the City, in Stonislaus County, California (the "County"). See "THE COMMUNITY FACILITIES DISTRICT." The County is located in the Central Valley of Colifornia, opproximately 90 miles east of San Francisco and 60 miles south of Sacramento. The City is located on Stote Route 33, approximately four miles east of U.S. Interstate Highwoy 5 and approximately 18 miles southwest of Modesto.

The Community Facilities District was formed pursuant too Resolution of Formation and related proceedings odopted by the Authority's Board of Directors (the "Bmrd of Directors") on December 18, 20lll. The Communitv Facilities District is authorized to finance various public infrastructure e1nd other public iin~~roveinents, including water, SC'A'Cr, stonTl drain, \\'oste'A'ater, road,vay and other infrastructure in1provetnents, and certain conlmtlllity, school and fire station facilities (collectively, the "Focilities"). See "THE COMMUNITY FACILITIES DISTRICT-Status of Expenditure of Proceeds of Prior Financing" and "APPENDIX A-Authorized Facilities and the Rate and Method." In order to finance the Facilities, the Authority, for and on behalf of the Community Focilities District, has issued five series of special tax bonds, of which $67,4.15,000 principal amount is currently outstanding (collectively, the "Prior Bonds"). See "THE BONDS-Debt Service Schedule." The l'rior Bonds are secured on a parity with the Series 2009-A Bonds under the Fiscol Agent Agreement. See "SECURITY FOR THE SERIES 2009-A BONDS-Parity Lien on Pledged Colla tera I."

The Prior Bonds and the Series 2009-A Bonds are collectively referred to in this Official Statement as the "Outstanding Bonds," and the Prior Bonds, the Series 2009-A Bonds and any future Parity Bonds (see "THE SERIES 2009-A BONDS-Parily Bonds"), are collectively referred to herein as the "Bonds."

In additionto.the Prior Bonds, on September 29, 2005, the Authority issued, for and on behalf of the Community Facilities District, $4,'100,000 of its Bond Anticipation Notes, Series 2005A (the "2005 Notes") to provide additioml financing for the Facilities, and on August 1, 2007, the Authority issued, for and on behalf of the Community Facilities District, $4,810,000 of its Bond Anticipation Notes, Series 2007-A (the "2007 Notes"). The net proceeds of the 2007 Notes were used to pay in full the 2005 Notes at their maturity, and proceeds of the Series 2009-A Bonds and of the Subordinate Bonds (described below) will be used to repay the principal of the 2007 Notes at their maturity. See "INTRODUCTION-Purpose of the Series 2009-A Bonds" and "THE COMMUNITY FACILITIES DISTRICT-Community Facilities District Proceedings."

Status of Development

The property within the Community Facilities District which is subject to the levy of the Special Tax securing the repayment of the Bonds (including the Series 2009-A Bonds) has been developed into a total of 2,472 sepMate lots each improved or expected to be improved with a single family dwelling unit, in six sepamte developments. The developments are identified in this Official Statement as Walker Ranch I, Walker Ranch II, Creekside Meodows, Mira~gio (formerly known as Shire Place), Patterson Gardens and Sutter Point (formerly know1i as Wilding Ranch). Sec "THE COMMUNITY FACILITIES DISTRICT-General."

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The construction and sales of homes in the Community F~cilities District began in 2003 and is ongoing. Based upon information provided by the Authority, as of June 8, 2009, all but 244 of the 2,472 lots located within the Community Facilities District had been improved with completed singk-fan1ily d\vclling units. Special Taxes, which have been levied in the Community Facilities District since Fiscal Year 2003-2004, have been fully prepaid with respect to 34 of the parcels and piHtially prepaid with respect to 3 of the parcels. The Special Taxes arc expected to be levied for Fiscal Year 2009-2010 on 2,438 of the· parcels in the Community Facilities District, including 2,153 lots with completed single family homes, 38 lots with completed senior housing, 244 undeveloped lots, and 3 lots with single family homes that have partially prepaid their respective Special Tax obligation. See "THE COMMUNJTY FACILITIES DISTRICT-Status of Development; Absorptim1 of Undeveloped Property."

Purpose of the Series 2009-A Bonds

Proceeds of the Series 2009-A Bonds will be used to (i) repay, in part, the principal of the 2007 Notes at their maturity on August 1, 2007, (ii) pay a portion of the interest on the Series 200Y-A Bonds for a limited period of time, and (iii) pay a portion of the costs of issuing the Series 2009-A Bonds and the Subordinate Bonds described below. See "ESTIMATED SOURCES AND USES OF FUNDS."

Concurrent with the issuance of the Series 2009-A Bonds, the Authority is issuing, for and on behalf of the Community Facilities District, its $3,240,000 West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) Su bord ina te Special Tax Refunding Bonds, Series 200Y-B (the "Subordinate Bonds") to provide additional funds to repay the principal of the 2007 Notes. The Subordinate Bonds arc secured by a lien on and pledge of the Special Tax Revenues subordinate to the lien on and pledge thereof under the Fiscal Agent Agreement for the benefit of the Bonds (including the Series 2009-A Bonds). The net proceeds of the Subordinate Bonds, together with the net proceeds of the Series 2009-A Bonds and amounts held by the fiscal agent for the 2007 Notes in the Note Repayment Fund established under the Resolution of the Authority authorizing the issuance of the 2007 Notes, will be sufficient to pay, without reinvestment, the principal of and interest on the 2007 Notes due at their maturity on August I, 2009.

Security and Sources of Payment for the Series 2009-A Bonds

The Series 2009-A Bonds are secured by and payable from, on a parity with the Outstanding Bonds, a pledge of ilnd lier~ on the "Specitll Tax Revenues" and moneys in the Special Tax Fund, the Bond Fund and the Reserve Fund established under the Fiscal Agent Agreement (collectively referred to in this Official Statement as the "Pledged Collateral"). The Fiscal Agent Agreement defines Special Tax Revenues as proceeds of the special taxes levied within the Community F~cilities District (the "Special Taxes"), including any scheduled payments and prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. The Special Tax Revenues do not include penalties collected in connection with delinquent Special Taxes or amounts to be transferred to the Subordinate Fiscal Agent pursuant to the Special Tax Fund provisions of the Fiscal Agent Agreement. See "SECURITY FOR THE SERIES 2009-A BONDS-General."

The Special Taxes have been, and will continue to be levied within the Community Facilities District in accordance with the Rate and Method of Apportionment of Special Taxes for the District (the "Rate and Method"). See "SECURITY FOR THE BONDS-Rate and Method" and "APPENDIX A-Authorized Facilities and the Rate and Method." The Special Taxes are being collected on the County's ad valorem property tax roll. The Authority has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be con1n1enced

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and prosecuted, in certain circumstances, against parcels with 9elinquent installn1ents of the Special Tax. For a more detoiled description of the foreclosure covenant, see "SECURITY FOR THE SERIES 2009-A BONDS-Covenant to Foreclose."

Limited Obligation

All obligations of the Authority under the Fiscal Agent Agreement and with respect to the Bonds (including the Series 2009-A Bonds) are special obligations of the Authority, payoble solely from the Pledged Collateral. See "THE AUTHORITY." The City of Patterson has no obligotion whatsoever with respect to the Bonds, the Fiscal Agent Agreement or the Community Facilities District.

Risk Factors Asso~iated with Purchasing the Series 2009-A Bonds

Investment in the Series 2009-A Bonds involves risks that may not be appropriate for some investors. See "BONDOWNERS' RISKS" for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the Series 2009-A Bonds.

Forward-Looking Statements

Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of :I 995, Section 21 E of the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the United States Securities Act of 1933, as amended (the "Securities Act"). Such statements are generally identifiable by the terminology used such as "plan," "projection," "expectotion," "estirnate," "budget" or other similar words. All statements other than statements of historical focts included in this Official Statement are Forward-Looking Statements. Although the expectations reflected in such Forward-Looking Statements reflect the Authority's and others current expectations, there can be no assurance that such expectations \Viii prove to be correct.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWAIW-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PEJ{FORMANCE 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

Professionals Involved in the Offering

The following professiona Is are participating in this financing:

• The Bank of New York Mellon Trust Company, N.A. (successor to BNY Western Trust Company), San Francisco, California, is serving as the Fiscal Agent under the Fisc a I Agent Agreement.

• Good\vin Consulting Group, Sacrarnento, California, acted os special tox consultant in connection with the formation of the Community Focilitics District, has assisted the Authority with the administration of the Community

Facilities District since its inception nnd will act as the dissen1ination agent under the Continuing Disclosure Certificate.

• Quint & Thimn1ig LLP, San Francisco, Ccdiforni(l, is serving os Bond Counsel and as Disclosure Counsel to the Authority.

• George Logan, City Attorney for the City of Potterson, Californio, IS scrvmg as general counsel to the Authority.

• Wulff Hansen & Co., San Francisco, Califon'lia, is the Underwriter of the Series 2009-A Bonds.

• Stephen R. Clark - Appraiser & Consultant, Inc., Stockton, California has provided nn Clbsorption analysis for the undeveloped lots in the Con1n1unity Facilities District.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change. Except where otherwise indicated, all information contained in this Official Statement has been provided by the Authority on behalf of the Community Facilities District.

The Series 2009-A Bonds are offered when, as and if executed, delivered and received by the Underwriter, subject to approval as to their legality by Bond Counsel and the satisfaction of certain other conditions. It is anticipated that the Series 2009-A Bonds will be available for delivery on or about July 28, 2009.

Copies of the Fiscal Agent Agreement and certain other documents referenced herein are available for inspection, and upon vvritten request and payment to the Authority of a charge for copying, tnailing and handling are available for delivery, from the Finance Director for the City of Patterson, whose address is ·1 Plaza, Patterson, California 95363. Reference is hereby made to such documents on file with the Authority for further information in com1ection therevvith.

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ESTIMATED SOURCES AND USES OF FUNDS

The sources end uses of funds derived from the sale of the Series 2009-A Bonds are expected to be ns follows:

Table No.1 Estimated Sources and Uses of Funds

SOURCES

Principal Amount of Series 2009-A Bonds 2007 Notes Repayment Fund 2007 Notes Project Fund Excess Funds in Ueserve Fund 11 r Less: Underwriter's Discount Less: Original Issue Discount

Tota I Sou rccs

Payment of the 2007 Notes12r Deposit to Capitalized Interest Account<'r Deposit to Reserve Fund1"r Deposit to Bond Fund 15r Deposit to Improvement Fund 16r Deposit to Costs of Jssuance f'und( 71

Total Uses

$2,615,000 126,263

1 ;558,016 697,843 (65,375)

_ _,(-"6"'8' 644)

$4,863,103

$2,483,481 81,763

515,544 182,299

1,558,016 42 000

$4,1'63,103

(lJ Represents Clmounts in the Reserve Fund in excess of Reserve Requirement in effect prior to isswmcc of the Series 2009-J\ Bonds. See "SECURITY FOR THE SERIES 2009-J\ BONDS-Reserve Fund."

(:!) To be used, together with net proceeds of the Subordinate Bonds, h)pay the principal and interest due on the 2007 Noles at their maturity.

(::t) To he used to p<ty a portion of the _scheduled interest on the Series 2009-A Bonds for a limited period of time. See "SECURITY FOR THE SERIES 2009-A BONDS-Bond Fund."

!~J The amount needed tl) increase the am{)Unt on deposit in the Reserve Fund to the Reserve Requiren1ent in effect following the issuance of the Series 2009-A Bonds.

(;;J Excess in F.eserve Fund not needed for purposes described in fooh1ote 4 (lbove. See "SECURITY FOR THE SERIES 201N-J\ BONDS-Reserve Fund."

!~>J To be used to complete the facilities mtthorized to be funded by the Community Pacilities District. See '"THE COMMUNITY FACILITIES DISTRICT-Status of Expenditure of Prior Financings."

(/J Includes, (11110ng other things, the fees and expenses of Bond Counsel, Disclosure Counstd and Aut~1ority Counsel, the cost of printing the Preliminary and final Official Statements, fees and expenses of the Fisc<ll Agent, the fees of the Special Tax Consultant, expenses of the Authority, and other costs of issuance of the Series 2009-A Bonds and of the Subordin<-lte Bonds.

THE SERIES 2009-A BONDS

General Bond Terms

Dated Date, Maturity and Authorized Denominations. The Series 2009-A Bonds will be dated their date of delivery and will mature in the principal amount and on the date set forth on the cover page of this Official Statement. The Series 2009-A Bonds will be issued in fully" registered form as physical certificates in denomimtions of $5,000 each or any integral

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multiple thereof and will be eligible for registration with The Depository Trust Company ('' DTC").

loteLest. The Series 2009-A Bonds will be<H interest at the annual rate set forth on the cover page of this Official Statement. payable semiamlllally on each March 1 and September 1, commencing September 1, 2009 (each, an "Interest Payment Date"). Interest will be calculated on the basis of a 360-d«y year composed of twelve 30-day months. Each Series 2009-A Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Pavment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest l'ay,{,ent Date, in which event it shall bear interest from its dated date; provided, however, that if at the time of authentication of a Series 2009-A Bond, interest is in default thereon, such Series 2009-A Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. "Record Date" is defined in the Fiscal Agent Agreement as the 15th day of the calendar month next preceding an Interest Payment Date, whether or not such day is a Business Day.

Method of Paxment. Interest on the Series 2009-A Bonds (including the fina I interest pnyment upon maturity or earlier redemption), is payable by check of the Fiscal Agent mailed by first class mail to the registered Ovvner thereof at such registered Owner's address as. it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions of ony Owner of $1,000,000 or more in aggregate principal amount of Series 2009-A Bonds received by the Fiscal Agent prior to the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such Series 2009-A Bonds Me transferred to o new Owner. The principal of the Series 2009-A Bonds and any premium on the Series 2009-A Bonds ore payable in lawful monei of the United States of America upon surrender of the Series 2009-A Bonds at the Principal Office of the Fiscal Agent in Los Angeles, Colifornia.

Authority for Issuance

On June 16, 2009, the Board of Directors of the Authority, as the legislative body for the District, adopted Resolution No. 2009-1 authorizing the issuance of the Series 2009-A Bonds and the issuance of the Subordinate Bonds. Also on June 16, 2009, the City Council of the City held a public hearing regarding the issuance of the Series 2009-A Bonds and of the Subordinate Bonds, and approved the issuance of the· Series 2009-A Bonds and the Subordim te Bonds and the use of the proceeds thereof to repay the 2007 Notes. See "THE COMMUNITY FACILITIES DISTRICT-Community Facilities District Proceedings." The Series 2009-A Bonds will be issued under the provisions of the Act ·ond the Fiscal Agent Agreen1ent.

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Debt Service Schedule

The following table presents the scheduled a m1u a I debt service on the Prior Bonds and the scheduled annual debt service on the Series 2009-A Bonds (in each case including sinking fund redemptions), with the 2009 debt service before expected redemptions of Series 2002-A Bonds and Series 2003-A Bonds to occur on September 1, 2009 from prepayments of Special Taxes, and the debt service for following years after the expected September 1, 2009 Bond redemptions vvith Special Tax prepayn1ents, and assun1ing there are no optionol redemptions of the Outstanding Bonds after September 1, 2009 or additional redemptions of the Outstanding Bonds after September 1, 2009 with the proceeds of Special Tax prepayments.

!hind Year Ending

September 2.00Y 2010 21111 2012 2013 201~

2015 2016 2017 2018 20\Y 2020 202"1 2022 2023 2024 2025 2020 2027 2112H 2029 20:1() 2031 2032 2033 2034 2035 2030 2037 2038 2039 T otrtl

Series 2002-A Bonds111

$ 265,00(1 262,300 263,875 265,063 200,91 s 26"1,713 262,-160 262,248 261 ,Y98 261,378 260,378 2fi3,Y88 261,860 25Y,323 261 ,270 262,545 263,150 263,083 257,345 2fd ,273 . 25Y ,193 26'1 ,443 262,685 262,lJ2U

67,150 68,438 69,380

$G,492,081

Series 2003-A Bonds111

$ 802,9'! 5 800.403 Rll7,203 807,865 807.740 ~11 ,Y40 8 I 5,1 OS 8'1 7,223 813,265 818,553 822,428 S2Y,040 834,015 842,353 843,715 848.440 856,203 856,665 865,165 8(15,65() SGS,S 18 874,330 881,858 8lJ'l ,070 891,630 248,875 245,038 2-15,525

$21,713,02R

Table No.2 Debt Service Schedule

Series 2003-8 Series 2004-A

Bonds Bonds $ I ,(11 Y ,640 $ 1.148,753

1,024,640 1,213,751 I ,1144.3'!11 1,230,9YO 1,1158,115 1,247,165 1,075,995 I ,267,178 l,OY2,755 1.285,678 1,113,355 1,302,928 1,127,475 1,323,478 1.1~5.288 1,337,453 1 ,166,438 1,359,528 1,185,h3S 1.37Y,678 I ,203,038 I ,397,598 1,223,038 1,418,218 1,241.450 1.430,178 1,262,075 I .~Ill ,398 1,285.200 1.421 ,7'18 1,:104,525 I .444.498 1,325,925 1 ,443,fi93 1,347,850 1 .~01.058 ] ,366,063 1,349,033 -r ,}lJ0,563 '1 ,298,228 1.410,675 1.258,643 1 ,436,400 I ,219,668

.1.4G0,050 1,216,303 1,483,1110 1,221,413 1,505,2110 1,559,256 1.531,000 I ,879.438 1 ,554,8()[1 I ,lJG 1 ,650 1 ,576,250 2,194,063 1,605,000 2,221,875

3,836,4"19

$38,566,531 $46,677,0 I 0

Scrie.:; 2004- Series 200tJ-13 A Tot<ll for the

Bonds Bonds11J Senior Bonds

$ 1,267,793 $ 20,675 $ 4,524,782 1,283,118 225,544 4,80Y,758 r ,292,J9S 225,544 4,SG4,4ll0 I ,305,800 225,544 -!,909,552 I ,318,1145 225,544 4,'155.417 I ,334,073 225,544 5,011,703 1,343,573 225,544 5,062,668 1,357,073 225,544 5,113,041 I ,374,11GS 225,544 5,157,h16 I ,384,248 225,5~4 5,215,689 1 ,397,818 225,544 5,271.484 I ,414,451) 225,544 5,333,666 1,423,833 225,544 5,387,1 OR I .441,558 225,544 5,4-l6,-HJ6 1 ,456,638 225,544 5,450,640 I ,46Y,235 225,544 5,512,762 I ,483,523 225,544 5,577,443 1.500,178 225,544 5,6'15,088 1,513,ll08 225,544 5,G I 0,870 1,529,7"1 3 225,544 5,597,270 1 ,542,300 225,544 5,584,64() I ,555,500 225,544 5,586,135 I ,575,1 DO 225;544 5,601,255 1 ,5'10 ,5110 225,5~4 5,646,387 I ,GO 1,7110 515,544 5,780,537 I ,G18,700 510,531 5,511.0110 1,635,900 513,794 5,R74,558 1 ,(153,000 514,469 5,929,444 I ,66~,700 512,556 5,947,5()9 I ,681.(100 513,056 6,020,LJ.:n I ,701,300 510,538 6,1148,257

$45,710,751 $8,798,675 s 167,958,076

(1) For 2004, debt service befnre redemptions of Bonds to occur on September 1, 2009 from Specinl Tnx prepn ymcnts recl'i ved by June 15, 2009.

(2) A portion of the debt service on the Series 2009-A Bonds shown will be paid from ilmounts in the Ci1pitt~lizL'd Interest Aconmt. See "SECURITY FOR THE SERIES 2009-A BONDS-Bond Fund."

S(Hirce: \Vulff, I-lilnscn &0).

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Redemption

Optional Redemption. The Series 2009-A Bonds are subject to optiona I redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, 20"14, as a \Vhole, or in part ainong tnaturities so as to tnaintain the sarnc debt service profile for the Bonds as in effect on the Closing Date, and by lot within a maturity, at the following redemption prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date fixed for redemption:

Redemption DMes

September -l, 2014 to and including Scptember1,2019

Mftrch 1, 2020 and any Interest PC~yment Date thereafter

Redemption Prices 1 05(:1.,

100

Mandatory Sinking Payment Redem12tion. The Series 2009-A Bonds are subject to mandatory sinking P"yment redemption in pilrt on September 1, 2033, ilnd on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without pren1iurn, from sillking p<lyn1cnts as follows:_

Redemption Date · (September 1)

2033 2034 2035 2036 2037 2038 2039 (maturity)

Sinking Payments $290,1JIJO

310,000 340,000 :'.70,000 400,0()0 435,000 470,000

The amounts in the foregoing table will be reduced to the extent practicable so as to maintain the same debt service profile for the Bonds as in effect on the Closing Date as il result of any prior partial redemption of the Series 2009-A Bonds pursuant to the optional redemption provisions described above or by reason of any redemption from special tax prepayments described below.

Redm]2tion From Special Tax Pre12ayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Fiscal Agent Agreement will be used to redeem Series 2009-A Bonds, on any Interest Payment Date following the date of issuance of the Series 2009-A Bonds, as follows: (a) so long as any Series 2002-A Bonds maturing on Septemberl, 2035 or any Series 2003-A Bonds maturing on September 1, 2036 are Outstanding, pro rata to the redemption of Series 2002-A Bonds maturing on September 1, 2035 and Series 2003-A Bonds maturing on September 1, 2036, in each case selected by lot and allocated among sinking fund payments for the Series 2002-A Bonds and Series 2003-A Bonds, as applicable, so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption, at a redemption price equal to the principal thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium; and (b) pro rata to the redemption of any other Series 2002-A Bonds or Series 2003-A Bonds, and any Series 2003-B Bonds, any Series 2004-A Bonds, any Series 2004-B Bonds, any Series 2009-A Bonds or any other Parity Bonds then Outstanding, among mtlturities so as to maintain substantially the sa1ne respective debt service profile for the Bonds as in effect prior to such redemption and by lot within a maturity, at a redemption price equal to the principal amount of the Series 2009-A Bonds to be redeemed, -together with accrued interest to the date fixed for redemption, without premium.

_q_

As of june 30, 2008, a total of 27 parcels in the Comnninity Facilities District had prepaid their Special Tax obligation in full, and 2 parcels in the Community Facilities District have prepaid their Special Tax obligation in part. Since then, as of June 15, 2009 an additional 7 parcels in the Community Facilities District have prepaid their Special Tax obligation in full (for a total of 34 fully prepaid parcels), and an additional parcel has partially prepaid its Special Tax obligation (for a total of 3 partially prepaid parcels), which additional prepayments will result in the redemption of $85,000 additional Series 2002-A Bonds and Series 20ll3-A Bonds on September 1, 2009. Further Special Tax prepayments and corresponding Bond redemptions are expected to occur, and as of September 1, 2009 there were a total of $3,835,000 principal amount of Series 2002-A Bonds and Series 2003-A Bonds outstanding that will be the first Bonds called with any such prepayments in accordance with the requirements of the Fiscal Agent Agreement described in the preceding paragraph. See "SECURITY FOR THE SERIES 2009-A BONDS-Prepayment and Satisfaction of Special Tax."

Purchase In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Series 2009-A Bonds, at public or private sale, but in no event may Series 2009-A Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Series 2009-A Bonds \Vere to be redeen1ed in accordance \vith the FiscClf Agent Agreen1ent.

Notice of Redemption. The Fiscal Agent will cause notice of any redemption of Series 2009-A Bonds to be mailed by first class mail, postage prepaid, at least 30 days but not more than nO days prior to the date fixed for redemption, to the Securities Depositories, to one or n1ore lnfornlCltion Services, and to the respective registered Owners of any Series 2009-A Bonds designClted for redetnption, at their addresses appearing on the Bond registration bookS in the Principal Office of the Fiscal Agent; however, mailing of the notice by the Fiscal Agent is not a condition precedent to rede1nption and failure to 1nail or to receive any such notice, or any defect in the notice, will not affect the validity of the proceedings for the redemption of the Series 2009-A Bonds.

Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Series 2009-A Bonds of any maturity or any given portion thereof, the Fiscal Agent will select the Series 2009-A Bonds to be redeemed, from all Bonds or such given portion thereof not previously ca lied for reden1ption, an1ong n1a turities as directed in writing by the Authority Treasurer (who shall specify Series 2009-A Bonds to be redeemed so as to maintain, as much as practicable, the san1e debt service profile for the Bonds as in effect prior to such' redemption, unless· otherwise specified herein), and by lot within a n1aturity in any 1nanner which the Fiscal Agent deen1s appropriate.

Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any pre1nium on, the Series 2009-A Bonds so called for redemption are deposited in the Bond Fund, the Series 2009-A Bonds called for redemption will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in the redemption notice.

Registration, Transfer and Exchange

Registration. The Fiscal Agent will keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Series 2009-A Bonds. The Authority and the Fiscal Agent will treat the Owner of any Series 2009-A Bond whose name appears on

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tile Bond register maintained by the Fiscal Agent as the absolute Owner of such Series 2009-A Bond for any and all purposes, and the Authority and the Fiscal Agent shall not be affected by any notice to the contrary. The Authority and the Fiscal Agent may rely on the address of the Series 2009-A Bondowncr as it appears in the Bond register n1aintaincd by the Fiscal Agent for any and all purposes.

Transfers of Series 2009-A Bonds. Any Series 2009-A Bond m~y, in accordance with its terms, be transferred, upon the Bond register maintained by the Fiscal Agent by the person in whose nan1e it is registered, in person or by his duly c1uthorizcd attorney, upon surrender to the Fisc a I A gent at its Principa I Office of such Series 2009- A Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the Authority. The Fiscal Agent shall collect from the Owner of the Series 2009-A Bond requesting such transfer any tax or other governmental charge required to be po id with respect to such transfer.

Whenever any Series 2009-A . Bond is surrendered for transfer, the Authority will execute and the Fiscal Agent will authenticate and deliver a new Series 2009-A Bond or Series 2009-A Bonds, for a like aggregate principal amount of authorized denomination(s).

No transfers of Series 2009-A Bonds will be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Series 2009-A Bond after such Series 2009-A Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest P<~yment Date.

Exchange of Series 2009-A Bonds. Series 2009-A Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Series 2009-A Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in com1ection with any such exchange shall be paid by the Authority. The Fiscal Agent will collect from the Owner of the Series 2009-A Bonds requesting such exchange any tax or other govenunental charge required to be paid with respect to such exchange.

No exchanges of Series 2009-A Bonds may be required to be made (i) fifteen days prior tu the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Series 2009-A Bond after such Series 2009-A Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date.

Parity Bonds

Additional Bonds ("I'Mity Bonds") may be issued by means of a Supplemental Fiscal Agent Agreement and without the consent of any Bondowners, upon compliance with the provisions of the Fiscal Agent Agreement. Any such Parity Bonds will be securL'<.i by a pledge of and lien on the Pledged Collateral under the Fiscal Agent Agreement on a parity with all other Outstanding Bonds (including the Series 2009-A Bonds). However, Parity Bonds may only be issued if they arc Refunding Bonds. Refunding Bonds are.defined in the Fiscal Agent Agreement as bonds issued by the Authority for the Community facilities District the net ptoceeds of which are used to refund all or a portion of the then Outstanding Bonds or all or a portion of the then outstanding Subordinate Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds and/or Subordimite Bonds bei1ig refunded and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds and/or Subordinate Bonds being refunded. See "APPENDIX B-Summary of the Fiscal Agent Agreement- Parity Bonds."

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No provision of the Fiscal Agent Agreement restricts the Authority from incurring indebtedness, such as the Subordinate Bonds, secured by a pledge of Special Taxes that is subordinate to the pledge of Special Taxes under the Fiscal Agent Agreement.

SECURITY FOR THE SERIES 2009-A BONDS

General

The Authority's obligation to pay the principal of, and interest and any premium on, the Bonds (including the Series 2009-A Bonds) is secured by a first pledge of the following (collectively referred to in this Official Statement as the "Pledged Collateral"):

• the Special Tax Revenues; and

• funds on deposit in the Bond Fund, the Reserve Fund and the Special Tax Fund, other than amounts on deposit in the Special Tax Fund required by the Fiscal Agent. Agreement to be transferred to the Subordinate Fiscal Agent (see "SECURITY FOR THE SERIES 2009-A BONDS-Special Tax Fund").

"Specia I Tax Revenues" is defined in the Fisc a I Agent Agreement as the proceeds of the Special Taxes received by the Authority, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon, but it excludes any penalties collected in c01mection with delinquent Special Taxes. In addition, Special Tax Revenues do not include: (i) amounts to .be transferred to the Subordinate Fiscal Agent under the Special Tax Fund provisions of the Fiscal Agent Agreement which include (a) certain amounts received in respect of the collection of delinquent Special Taxes not needed to pay past due amounts on the Bonds (including the Series 2009-A Bonds) or to bring the amount in the Reserve Fund up to the amount of the then Reserve Requirement, (b) a portion of the proceeds of prepayments of Special Taxes that are attributable to the Subordinate Bonds, and (c) each Bond Year, Special Tax Revenues in excess of the amount thereof needed to pay the scheduled debt service on the Bonds (including the Series 2009-A Bonds) in such Bond Year; and (ii) the portion of the Special Tax levy to be used to pay Administrative Expenses. See "SECURITY FOR THE SERIES 2009-A BONDS-Special Tax Fund."

A1nounts in the Administriltivc Expense Fund, the Costs nf Tssuance Fund and the Improvement Fund established under the Fiscal Agent Agreement are not pledged to. the repayment of the Bonds. The Facilities financed with the proceeds of the Bonds are not in any way pledged to pay debt service on the Bonds. Any proceeds of condemnation or destruction of any of the Facilities financed with the proceeds of the Bonds are not pledged to pay debt service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.

l'arity Lien on I'! edged Collateral

In order to provide financing for the Facilities, the Authority has issued, for 8nd on behalf of the Community Facilities District, under the provisions of the Fiscal Agent Agreement and various supplements thereto, five series of special tax bonds (collectively, referred to in this Official Statement as the "Prior Bonds") consisting of the following: $3,865,000 initial principal amount of Series 2002-A Bonds issued on january 30, 2002, $11,100,000 initial principal amount of Series 2003-A Bonds issued on February 6, 2003, $15,040,000 initial principal amount of Series 2003-B Bonds i;;sued on September 16, 2003,

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$19,100,000 initial principal amount of Series 2004-A Bonds issued on March 9, 2004, and $19,890,000 initial principal amount of Series 2004-B Bonds issued on October 20, 2004. See "THE COMMUNITY FACILITIES DISTRICT -Community Facilities District Proceedings." As of June 1, 2009, $67,415,000 of the l~rior Bonds ore outstanding under the Fiscal Agent Agreement. The Fiscill Agent Agreement aliO\VS for the issuance of Parity Bonds, in order to refund all or a portion of the Outstanding Bonds. See "THE SERIES 2009-A BONDS-Parity Bonds." The Prior Bonds and any future Parity Bonds are secured by a lien on a pledge of the Pledged Collateral under the Fiscal Agent Agreement on a parity with the lien on and pledge of the Pledged Collateral thereunder for the benefit of the Series 2009-A Bonds. See "SECURITY FOR THE SERIES 2009-A BONDS-Speciol Tax Fund," "-Bond Fund" and "-Reserve fund."

Special Taxes

Levy of Speciol Taxes. The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the levy of the Speciol Toxes each Fiscal Year so long as the Bonds are outstanding, and the enforceinent of delinquent Special Toxes. The Special To xes were first levied in the Community Facilities District in Fiscal Year 2003-2004, and hove been levied in the Community Facilities District each Fiscal Year thereafter. See "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method- A1mual Special Tax Levies."

Under the Fiscal Agent Agreement, the Treasurer of the Authority is obligated to effect the levy of. the Special Taxes each Fiscal Year in accordance with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such thilt the computation of the levy is complete before the final date on which the auditor-controller of the County will accept the transmission of the Special Tax amount:; for the parcels within the Community Facilities District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Treasurer is obligated to prepare or Couse to be prepared, and to trilnsmit to the auditor-controller of the County, such data as the auditor-controller requires to include the levy of the Special Taxes on the next real property tax roll.

The Treasurer is obligated to fix and levy the amount of Special Taxes witlun the Commtuuty Facilities District in an omount at least equal to the amount required for the pilyment of principal of and interest on any outstnnding Bonds Ctnd any Subordinate Bonds of the Con1nntiUty Facilities District becon1ing due and payable during the ensuing yern, including ony necessary replenishment or expenditure of the Reserve Fund for the Bonds or the reserve fund for the Subordinate Bonds, <'~nd r:~n <~m_ount eshnu,ted to be sufficient to p21y the Administrative Expenses (including ony rebate requirement imposed by federal tax law) during such year, taking into nccount the balances in such funds and in the Special Tax Fund. The Special Taxes so levied may not exceed the iluthorized amounts as provided in the proceedings pursuant to the Resolution of Formation. See "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method- Maximum Special Taxes."

No Reduction of Maximum Sf1ccial Toxes. The Authority has covenanted in the Fiscal Agent Agreement not to consent to or conduct proceedings with respect to a reduction in the maximum Special Taxes that mav be levied in the Communitv Facilities District below an an1ount, for any Fiscal Year, equa-'1 to 1101Yrl of the aggregate of the debt service due on the Bonds in such Fiscal Year, plus il reasonable estimate of Admi1ustrative Expenses for such Fiscal Year.

Manner of Collection. The Fiscill Agent Agreement provides that the Special Taxes are payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority,

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becon1e delinquent at the same tin1e ilnd in the s0me proportionilte an1ounts and beilr the same proportionate penalties and interest after delinquency as do the ad valore1n taxes on real property; provided that, pursuant to and in accordance with the Ordinance, the Special Taxes may be collected by means of direct billing of the property owners within the Community Facilities District, in which event the Special Taxes will become delinquent if not paid when due pursltant to said billing.

Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special T<1xes will, in fact, be collected in sufficient amounts in any given year to pay the scheduled debt service on the Bonds. See "BOND OWNERS' RISKS," including the subsection entitled "Other Possible Claims Upon the Value of Taxable Property," for a discussion of factors that could impact the amount of Special Taxes collected by the Authority and the amount, if anv, to be realized bv Bond ovvners as a result of a foreclosure action in respect of" delinquency in the payment of Special Taxes.

Teeter Plan Not Al2J2licable to S12ecial Taxes. The County has adopted a Teeter Plan as provided for in Section 4701 ct seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies Within the County on the basis of the tax levy, rather than on the basis of actual tax collections. By policy, the County docs not include assessments, reassessments and special taxes, including the Special Taxes of the Community Facilities District, in its Teeter program.

Rate and Method

Gc,neral. The following is a summary of certain provisions of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method included in Appendix A. The meaning of the capitalized terms u·sed in this section that are not defined below hove the n1eanings given to such terms in the Rate and Method, as set forth in Appendix A. ~

S.pecial Tax Requirement. The Rate and Method provides that the Specia I Tax levy each fiscal year is calculated by first determining the "Special Tax Requirement" for the fiscal year. The Special Tax Requirement is defined in the Rate and Method to be the amount necessary in any fiscal year: (i) to pay princi~ial and interest on Bonds and the Subordinate Bonds which is due in the calendar year which begins in such fiscal year, (ii) to create or replenish reserve funds, (iii) to cure any delinquencies in the payment of principal or interest on Bonds and the Subordinate Bonds which have occurred in the prior fiscal yeilr or, based on delinquencies in the payment of Special Taxes which have already taken place, are expected to occur in the fiscal year in which the tax will be collected, (iv) to pay Administrative Expenses, (v) to satisfy any unfunded obligations of the Community Facilities District to the Patterson Unified School District under Section 2 of the joint Community Facilities Agreement- School Facilities, dated <>s of December '18, 200'1 among the Authority, the City, the District and the Patterson Unified School District (all of which were satisfied prior to the issuance of the Series 2009-A Bonds), and (vi) to pay the costs of public improvements and public infrastructure authorized to be financed by the Community Facilities District. The amounts referred to in clauses (i) and (ii) of the preceding sentence may be reduced in any fiscal year by (i) interest eamings on or surplus balances in funds and accounts for the Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to the Fiscal Agent Agreement, (ii) proceeds from the collection of penalties associated with delinquent Specia I Taxes, and (iii) any other revenues available to pay debt service on the Bonds and the Subordinate Bonds as determined by the Administrator.

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Pursuant to the Rate and Method, a Maximum Special Tax, calculated as more fully described below, will be assigned to each taxable parcel. No Special Tax will be assigned to p8rcels classified as tax-exempt parcels, i.e. (i) parcels that have been conveyed to a J>ublic Agency, except as otherwise provided in the Act ilnd, until certain conditions arc met, and (ii) certain parcels classified as Williamson Act Property (i.e., parcels which remain subject to contracts set in place pursuant to the California Land Conservation Act). Such Williamson Act Property will be considered taxable property and will be taxed at the same rates as the P<1rcels within Zone 2 (comprised of all Parcels in the Community Facilities District not constituting Williamson Act Property) in the first fiscal year after Williamson Act Property is no longer classified as such. No property in the Community Facilities District is subject to the Williamson Act. (Note that the Rate and Method provides that the Walker Ranch II property is exempt from the Special Tax until the owner of the property files a written request with the Authority requesting that it be subject to the Special Tax, and such written request was filed by the owner of the Walker Ranch II property on November 2, 2002.)

Method of Apr-ortionment of Special Tax. On or about July 1 of each fiscal year, the District Administrator will identify the current assessor's parcel numbers for taxable property within the District. The District Administrator will also determine, (i) whether each parcel is located within Zone 1 or Zone 2, (ii) whether each parcel is Developed Property or Undeveloped l'rnpcrty, (iii) for Developed Property, whether each parcel is Residential Property, Senior Housing Property or Other Property, and (iv) whether any property that had been Williamson Act Property in prior fiscal years has become Taxable Property for the then current fiscal year.

The Rate and Method provides that, commencing with fiscal year 2002-03 and for each following fiscal year as long as there are outstanding Bonds or Subordinate Bonds, the Authority's designee will determine the Special Tax Requirement to be collected in that fiscal year. The Special Tax then will be levied as follows:

First:

Second:

Third:

The Special Tax will be levied proportionately on each parcel of Developed Property up to 100% of the Maximum Special Tax for each parcel for such fisca I year;

If additional revenues are needed after applying the above step, and after applying capitalized interest to the Special Tax Requirement, the Specia I Tax will be levied proportionately on each assessor's pa reel of Undeveloped Property up to ]()()'X, of the Maximum Special Tax for Undeveloped Property for such fiscal year;

If additional revenues arc needed after a·pplying the first two steps, the Special Tax will be levied proportionately on each parcel of Public Property within the Community Facilities District, exclusive of property exempt from the Special Tax, up to 100% of the Maximum Special Tax for Undeveloped Property for such fiscal year.

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Maxitnum Special T<1xes. The annu<1l Maxinn1n1 Special Tax amounts for Fiscal Year 2009-2()] 0 are shown in the following table:

Table No.3 Maximum Sf1ecial Taxes

Type of Property

Residenti<1l

Senior Housing

Other

Undeveloped

Maximum Special Tax for Fiscal Year 2om;:o9111

$2,108.98/Residcntial Unit

$2,2.97.38/ Acre

$18,074.56/ Acre

$18,074.56/ Acre

(I) On July 1, 2o-l 0 <1 11d l m each July 1 there<1 fter, a II figures shtlwn above w iII be i ncret~sed by a 11 a mount equa I to 2 .()';i, of the <l mount i 11 effect for the prior fisc<1l year.

The annual Special Tax pny~1ent for each Taxable Parcel may not exceed the Maxinn1m Special Tax for the applicable property classification. Under no circumstances will the Special Tax levied against any assessor's parcel used for private residential purposes be increased by more than ten percent per fiscal year as a consequence of delinquency or default by the owner of any other parcel within the Community Facilities District.

Annual Special Tax Levies. The District Administrator is to establish tax rates, up to the Maximum Special Tax rates described above, to be used to levy and apportion the Special T<1x within the Comtnunity Facilities District on an annual b<1sis. The Special Tax V\rill be levied until debt service on the Bonds and on the Subordinate Bonds has been paid. However, in no event will the Special Tax be levied after fiscal year 2049-2050.

The actual amount of the Special Tax that may be levied and collected during any Fiscal Year will depend upon the Special Tax rates imposed and the level of delinquent Special Tax installments. See "BONDOWNERS' RISKS-Levy and Collection of the Special Tax." The Special Tax was· first levied in the Community Facilities District in Fiscal Year 2003-2004 and was for an aggregate of $210,287, as the Au'thority had funded capitalized interest on the then Outstanding Bonds to pay debt service prior tu such Fiscal Year. The Special Tax levy was $1,062,31:\3 for Fiscal Year 2004-2005, $3,266,137 for Fiscal Year 2005-2006, $4,453,824 for Fiscal Year 2006-2007, 54,440,102 for Fiscal Year 2007-.2008, and $4,553,303 for Fiscal Year 2008-2009. There have been significant delinquencies in the payment of Special Taxes in recent years. See "THE COMMUNITY FACILITIES DISTRICT-Special T<>x Delinquencies."

The Special Tax levy for Fisca I Year 2008-2009 was based on the .Special Tax Requirement for such Fiscal Year and the status of the property in the Community Facilities District as of june 1, 2008. As of that date, the Community Facilities District contained 2.154 developed residential lots (taxed at their then maximum rate of $2,067.64 per Jot), 36 lots or 5.55 acres classified as Senior Housing Property (taxed at their then maximum rate of $2,252.32 per <1Cre), and 39.51 taxable acres of Undeveloped Property (taxed at a rate of $2,181.10 per acre, or approximately 12% of their maximum rate of $17,720.16 per ocre). The remaining portion of the 2008-2009 Special Tax levy ($919.06) was funded by partial prepayments of Special Taxes for two of the parcels in the Community Facilities District. Future Special Tax levies \viii increase over those in recent prior years to <1ccomn1odate the payment of debt service on the Series 2009-A Bonds and the Subordinate Bonds. The Special Tax levy for Fiscal Year 2009-2010 is expected to be approximately $5,004,864.

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Expected Special Tax Revenues and Debt Service Coverage

·The following table compares the gross debt service for the Prior Bonds and the Series 2009-A Bonds, with the projected Special Tax Revenues. To project the Special Tax Revenues, the Special Tax Consultant has applied the appropriate Special Tax rates to the estimated "fast scenario" devclopn1ent schedule for remaining unin1proved lots \Nithin the Community Facilities District, as estimated by the Absorption Consultant. See "THE COMMUNITY FACI UTIES DISTRICT -Status of Development; Projected Absorption of Undeveloped Property" and" APPENDIX C-Absorption Analysis."

Bond Year Ending

September 1 2010 2011 2012 2013 20'14 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 202Sl 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039

Table No.4 Comparison of Maximum Annual Special Tax Revenues to

Gross Debt Service on the Bonds

Mt~ximum

Special T<1x Prior Series 2009-A Revenues Based

B(mds Debt Bonds Debt Tot<1l Bonds on Assumed Servin,< I! Servin_,~~~ Debt Service Absorptitm(.l)

S4,58.\.213 $225,544 $4,809,757 $5,236,]66 4,638,855 225,344 4,864,399 5,341,094 4,h84,008 225,544 4,90'-),552 5,447,916 4,729,873 225,544 -l,tJ55,417 5,49L .. i02 4,7so,l58 225,544 5,1111,702 5,535,743 4,837,123 225,54-l 5,062,6fi7 5,577,272 4,887,495 225,544 5,113,039 5,<i88.817 -l,Y32,070 225,544 5,157,614 5,802,593 4,990,143 225,544 5,215,687 5,918 ,tl45 5,045,938 225,544 5,271,482 tl,037,018 5,108,120 225,544 5,333,tl04 6,157,758 5;1 n t ,563 225,544 5,387,107 6,280,914 5,220,860 225,544 5,446,4()4 tl,406,532 5,225,095 225,544 5,450,G39 6,534,663 5,287,218 225,544 5,5"12,7fi2 6,665,356 5,351,898 225,544 5,577,442 6,798,G63 5,389,543 225,544 5,til5,087 6,934,fi36 5,385,325 225,544 5,()"10,86l) 7,073,329 5,37"1.730 225,544 5,597,274 7,214,795 5,359,100 225,544 5,584,644 7,35Y,!lY1 5 ,3ti0 ,590 225,544 5,586,134 7,506,273 5.,375,71 0 225',544 S,<iO I ,254 7,656,399 5,420,843 225.544 5,646,387 7,80Y,527 5,264,993 515,544 5,780,537 7,965,717 5,000,469 5"10,531 5,511,000 8,125,031 5,360,763 5"\3,794- 5,874.557 8,237,532 5,414,975 5'14,4o9 5,l)29,444 8,453,283 5,-!35,0'13 5"12,55h 5,1::J47,5GY 8,h22,..i48

·5,507,875 513,05ti t\,020,931 8,794,795 5,537,71 y 510,538 6,048,257 8,970M1

(I) Approximateannu<tl average.

Ma:>:imum Speci<ll Tax

Revenue a~ 'Y,, of Toted Debt Servin' 1'11

1111.03% 110.04 110.97 110.81 1 10.46 110.16 11"1.26 112.51 113.48 114.52 115.45. 116.59 117.63 1'19.89 120.91 121.90 123.50 126.06 128.90 131.77 134.37 13G.69 138.31 137.80 147.43 141.08 ] 42.56 144.97 146.07 14,.32

(2) Does not include portinn td interest on Series 2009-A Bonds to be paid from Capitalized Interest Account, being $20,675 on September 1, 200Y, $25,272 on ivtarch 1, 2010,$25,272 tm September 1, 2010, nnd $10,544 on March I, 2011. See "SECUIWY FOR THE SERIES 2009-A BONDS-Bond Fund."

(3) The et>tima te of mnximum Specia I T<lx Re\'enucs is based on the" fast scenario" absorption sclwd ule pnwided by th~ Absorption Con~ultant, and assumes full wllection of nil Special T<txes levied in the Community Fncilities District and nu dcduction for administrative expenses. SL>e "THE COMMUNITY FACILITIES DISTI\ICT -Stotus nf Develupmcnt; Projected AbSllrption of Undeveloped Property" and "-SP-'cial Tax Delinquencies."

(4} Coverage is based upon Mc.ximum S)-.X>Ci<tl Tax Revenul:':> ond <'lmnunts in tbcCapit<"llized lnlcrcsl Accm.mt {se<> footm1te 2 <1bove) ilVnilable to pay debt service on the Bonds.

S1JUrce: Wulff Hnnsen & Co. <1 nd CIH)d win Consulting Cr1mp, Inc.

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If the current 244 undeveloped lots in the Community Facilities District arc developed at a rate that is faster than the "fast scenario" indicated in the Absorption Analysis in Appendix G, the Maximum Special Tax Revenues will be less than as indicated in the foregoing table, because the authorized maxirnun1 Special Tax rate for Undeveloped Property is in excess, on a per lot basis (based on the acreage of the undeveloped lots), than the Special Tax rate for Residential Property (see "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method - Maximum Special Tax Rates" and "BONDOWNERS' RISKS-Absorption of Undeveloped Property"). However, if development of the remaining undeveloped lots is slower than the "fast scenario" in the Absorption Analysis, the Maximum Special Tax Revenues may be in excess of what is shovvn in the foregoing table. See "APPENDIX C­Absorption Analysis" and "BONDOWNERS' RISKS-Absorption of Undeveloped Property." Also, the foregoing table, in projecting the Maxin1un1 Special Tax Revenues, assumes that all Special Taxes levied in the Community Facilities District will be timely paid. However, there have been significant delinquencies in the payrnent of Special Tax levies in recent Fiscal Years. See "THE COMMUNITY FACILITIES DISTRICT-Special Tax Delinquencies" and "BONDOWNERS' RISKS-Special Tax Delinquencies."

In addition to payment of the Special Tax, the property owners within the Community Facilities District also are obligated to pay ad valorem property taxes levied against such property, certain other taxes and assessments, and taxes and assessn1ents to pay existing Clnd any additional overlapping debt for which the property within the Community Facilities District may become obligated (See "THE COMMUNITY FACILITIES DISTRICT­Overlapping Government Obligations"). The actual an1ount of these taxes and assessments, which may be levied or assessed in the future, will vary depending upon a number of factors, including the assessed value of the property withinthe Community Facilities District at such time, the actual amount of the Special Tax that is levied mmually in the future and the existence of additional taxes and assessments levied in the future. For information conceming existing and contemplated districts and authorities which impose or may impose special taxes and assessments on property within the Community Facilities District, see "THE COMMUNITY FACILITIES DISTRICT -Overlapping Govemment Obligations."

Prepayment and Satisfaction of Special Tax

Property owners n1ay pcnnancntly satisfy all or nny portion of the Speci<1l Tax obligation of a parcel on any Interest Payment Date by a cosh payment to the Authority as permitted under Govemment Code Section 53344. The' procedure for pcm1anently satisfying the·Special Tax obligation is set forth in the Rate and Method set forth in APPENDIX A hereto. To date, the Authority reports that Special Taxes have been prepaid in full for 34 parcels in the Community Facilities District and have been prepaid in part for 3 parcels in the Community Facilities District. The Authority has no means to estimate future prep<1yments of Special Tuxes.

Pursuant to the Fiscal Agent Agreement, the Authority is required to transfer any amounts received as prepayments of the Special Tax to the Fiscal Agent in order to redeem Bonds and Subordinate Bonds or portions thereof in authorized denominations on any Jnterest Payment Date as more fully described herein under "THE SERIES 2009-A BONDS­Redemption - Redemption From Special Tax Prepayments." See "SECURITY FOR THE SERJES 2009-A BONDS-Special Tax Fund." As of September 1, 2009, $960,000 principal amount of the Prior Bonds will have been redeemed with Special Tax prepayments.

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Covenant to Foreclose

Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes arc collected and, except as provided in the special covenant for foreclosure described below and in the Act, is to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. The Fiscal Agent Agreement also allows the Authority to collect the Special Taxes by directly billing the property owners in the Community Facilities District, in which event the Special Taxes will become delinquent if they are not paid when due pursuant to the direct billing.

Foreclosure Under the Mello Roos Law. Under Section 53356.1 of the Act, if anv delinquency occurs in the poymcnt of the Special Tax, the Authority may order the institutio;1 of <1 Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sole.

Such judicial foreclosure action is not mandatory. However, the Authority has covenanted in the Fiscal Agent Agreement thot, on or about February 15 <1nd june 15 of each Fiscal Year, the Authority Treasurer will compare the amount of Special Taxes levied in the District to the amount of Speciol Tax Revenues received by the Authority, and:

(a) Individual Delin(juencies. If the Authority Treasurer detennines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate <1mount of $2,500 or more, then the Authority Treasurer \'\7 ill send or cause to be sent a notice of delinquency, and demand imn1ediate payment thereof, to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Authority within 90 days of such detcm1ination. Notwithstanding the foregoing, the Authority Treasurer may defer such action if the amount then on deposit in the Reserve Fund is at least equol to the Reserve Requirement.

(b) Aggr£gatc Delinquencies. If the Authority Treasurer determines that (i) the total amount of delinquent Special Tax for the prior fiscal year for the entire District, including the total of delinquencies under paragraph (a) above, exceeds 5% of the total Special Tax due and payable for the prior fiscal year, or (ii) there are ten or fewer owners of reo I property within the District, determined by reference to the latest available secured property tax roll of the County, the Authority Treasurer will notify or cause to be notified property owners who are then delinquent in the pnyn1ent of Special Toxes and demand immediate poyment of the delinquency within 45 days of such determination, and the Authority will commence foreclosure proceedings within 90 doys of such determination against each parcel of land in the District with a Special Tax delinquency.·

In recent years, there have been significant delinquencies in the payment of Special Taxes levied in the Community Facilities District. The Authority has taken various meosures to collect delinquent Special Taxes, and recently has had success in collecting delinquent Special Taxes. No assurance can be given with respect to the Authority's ability to collect future delinquent Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT-Special Tax Delinquencies."

Sufficiency of Foreclosure Sale Proceeds: Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax

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installment. The Act does not require the Authority to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post­judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds and Subordinate Bonds is obtained. However, under Section 53356.6 of the Act, the Authority, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the Authority could submit a bid crediting all or part of· the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the Authority becomes the purchilser under a credit bid, the Authority must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure SElle. The Authority is not obligated to make any such credit bid.

Foreclosure by court action is subject to normal litigiltion delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the Authority to foreclose the lien of delinquent unpaid Special Taxes nlil)' be litnited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Fed era I Deposit Insurance Corporation (the "FDIC"). Sec "BOND OWNERS' RISKS-Bankruptcy and Foreclosure Delays."

Special Tax Fund

There is established under the Fiscal Agent Agreement a separate fund held by the Fiscal Agent, to the credit of ,,vhich the Fiscal Agent is required to deposit an1ounts received from or on behalf of the Authority consisting of the Special Tax Revenues and any arnounts required by the Fiscal Agent Agreement to be transferred from the Administrative Expense Fund to the Special Tax Fund. The Authority will promptly remit any such amounts received by it to the Fiscal Agent for deposit in the Special Tax Fund .

. Notwithstanding the foregoing:

(i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses will be deposited by the Authority Treasurer in the Administ-rative Expense Fund;

(ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Authority Treasurer and shall be disposed of by the Fiscal Agent first, for transfer to the Bond Fund to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund to the amount of the then Reserve Requirement; third, if the amount then on deposit in the Special Tax Fund is not sufficient to pay the scheduled debt service due and unpaid on the Bonds in the then current Bond Year, an an1ount equal to any such insufficiency shall remain on deposit in the Special Tax Fund; and fourth, for transfer to the fiscill agent for the Subordinate Bonds for deposit in the special tax fund established under the.fiscal agent agreement for the Subordinate Bonds; ·

(iii) any proceeds of Special Tax Prepayments shall be separately identified by the Authority Treasurer and shall be disposed of by the Fiscal Agent as follows: (x) that portion of the proceeds of any Special Tax Prepayment attributable to the Bonds shall be deposited by the Fiscal Agent in the Special Tax Prepayments Account

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established pursuant to the Fiscal Agent Agreement, and (y) that portion of the proceeds of any Special Tax Prepayment attributable to the Subordinate Bonds shall be transferred by the Fiscal Agent to the fiscal agent for the Subordinate Bonds for deposit in the special tax prepayments account established for the Subordinate Bonds; and

(iv) at such time in any Bond Year as the amount on deposit in the Special Tax Fund is equal to the scheduled debt service due and unpaid on the Bonds in such Bond Year, the Fiscal Agent shall transfer all Special Tax Revenues thereafter received in such Bond Year, free and clear of any pledge of or lien thereon under the Fiscal Agent Agreement, to the fiscal agent for the Subordinate Bonds.

Moneys in the Special Tax Fund are held by the ·Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, will be disbursed as described below and, pending disbursement, will be subject to a lien in favor of the Owners of the Bonds and the Authority.

On each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer: (i) first, to the Bond Fund, an an1ount, taking into account any an1ounts then on deposit in the Bond Fund and any expected transfers from other funds as provided in the Fiscal Agent Agreement, such that the amount in the Bond Fund equals the principal (incl~tding any tnandatory sinking payments), pretnium, if any, and interest due on the Bonds on such Interest Payment Date; and (ii) then, to the Reserve Fund an amount, taking into account an1ounts then on deposit in the Reserve Fund, so that the an1ount in the Reserve Fund equHls the Reserve Requirement.

Moneys in. the Special Tax Fund will be invested as described under the subheading "im'estment of Moneys in Funds" below.

Bond Fund

Moneys in the Bond Fund established pursuant to the Fiscal Agent Agreement are held by the Fiscal Agent for the benefit of the Owners of the Bonds. On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners of the Bonds the principal and interest, and any premium, due and payable on the Bonds, including any amounts due on the Bonds by reason of sinking payments or redemption pursuant to the Fisc a I Agent Agreement.

In the event that amounts in the Bond Fund are insufficient to pay debt service on the Bonds on any Interest Payn1ent Date, the Fiscal Agent \Viii withdravv from the Reserve Fund, as described below, to the extent of any funds therein, amounts to cover the amount of such Bond Fund insufficiency. If there still are insufficient funds in the Bond Fund to pay debt service on the Bonds, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments.

Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds and notice to the Fiso1l Agent can timely be given under the Fiscal Agent Agreement, and shall be used (together with any amounts transferred from the Reserve Fund pursuant to the Fiscal Agent Agreement) to redeem Bonds on the redemption date selected in accordance with the Fiscal Agent Agreen1ent.

Moneys in the Capitalized Interest Account of the Bond Fund will be transferred to the Bond Fund on the business day prior to each Interest Payment Date, in the respective amounts

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specified below, to be used for the payment oi a portion oi the interest on the Series 2009-A Bonds due on the respective Interest Payment Dates set forth below:

Interest Payment Date September 1, 2009 March 1, 2010 September 1, 2010 March 1, 2011 September 1, 2011

Amount of Funds to be Transferred $20,675.00 25,272.00 25,272.00 10,544.00

any remaining on1ount on deposit in the Capitalized Interest Account

When no amounts retnain on deposit in such account, the Capitalized Interest Account vvill be Closed.

Moneys in the Bond Fund, the Capitalized Interest Account and the Special Tax PrepZlyments Account will be invested as described in "lnvesttnent of Moneys in Funds" below.

Reserve Fund

In order to further secure the payment of principal of and interest on the Bonds, the Fiscal Asent Asreement provides for the establislunent of the Reserve Fund. Moneys in the Reserve Fund are held in trust by the Fiscal Asent as a reserve for the payment of the principal of, and interest and any pren1ium on, the Bonds and are sltbject to a lien in favor of the Owners oi. the Bonds.

The Fiscal Agent Asreement requires that the amount in the Reserve Fund be maintained in an amount equal to the Reserve Requirement in effect from tin1e to time. The Reserve Fund is held by the Fiscal Asent for the benefit of the owners of the Bonds. The Reserve Require1nent is defined in the Fiscal Agent Agreement to mean an amount equ<il to the least of (i) Maximum Annual Debt Service on the.Outstanding Bonds, (ii) 125 percent of averase Annual Debt Service on the Outstandins Bonds, and (iii) 10 percent of the then Outstanding principal an1ount of the Bonds.

At present, the balnnce on deposit in the Reserve Pund is in excess of the an1ount of the Reserve Requirement to be in effect following the issuance of the Series 2009-A Bonds, so no deposit to the Reserve Fund from proceeds of the Series 2009-A Bonds is needed for the Series 2009-A Bonds to satisfy the Parity Bond Heserve Fund Deposit requirement (see subp<Hagraph (c) under the heading "Parity Bonds" in APPEND! X B). Funds in the Reserve Fund in excess of the Reserve Requirement to be in effect following the issuance of the Series 2009-A Bonds (such excess is estimated to be approximately $1.82,299), will be transferred by the Fiscal Agent to the Bond Fund and will be used, together with amounts in the. Capitalized Interest Account, to pay debt service nn the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS."

Except as othenvise provided in the Fiscnl Agent Agreen1ent, all an1ounts deposited 111

the Reserve Fund are to be used and withdrawn by the Fiscal Asent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any pren1ium on, the Bonds or, in accordance with the provisions of the Fiscal Agent Agreement, for the purpose of redeem ins Bonds .from the Bond Fund.

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Whenever, on the Business Day prior to any lnterest.Paynlent Date, or on any other dnte nt the request of the Authority Treasurer, the amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent will transfer an amount equal to the excess from the Reserve Fund to the Bond Fund to be used for the payment of interest on the Bonds on the next Interest Payment Date.

Whenever the balance in the Reserve Fund equals or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent will transfer the a mount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in occordance with the Fiscal Agent Agreement, as applicable, of all of the Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred to the Authority to be used for ony lawful purpose of the Authority.

Whenever Special Toxes are prepaid and Bonds arc to be redeemed with the proceeds of such prepayment pursuant to the Fiscal Agent Agreement, a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed, and the origiml principal of the Bonds) may be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursu8nt to the Fiscal Agent Agreement.

Amounts in the Reserve Fund may at any time be used, at the written direction of an Authorized Officer, for purposes of paying any federal tax rebate liability applicable to the Bonds. Moneys in the Reserve Fund shall be invested as described in "Investment of Moneys in Funds" below.

The Authority has the right at any time to release funds from the Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (i) a Qualified Reserve Fund Credit Instrument (<ls defined below) and (ii) an opinion of Bond Counsel stating thot neither the release of such funds nor the acceptance of such Qualified Reserve Fund Credit Instrument will cause interest on the Bonds to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Fiscal Agent,.and upon delivery by the Authority to the Fiscal Agent of a written calcu!a"tion of the amount permitted to be released from the Reserve Fund, the Fiscal Agent shall transfer such funds from the Reserve Fund to the Authority free and dear of the lien of the Fiscal Agent Agreement.

The Fiscal Agent Agreement defines "Qualified Reserve Fund Credit Instrument" to n1ean an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company and deposited with the Fiscal Agent pursuant to the Fiscal Agent Agreement, provided that all of the following requirements Me met: (a) the long­term credit rating or claims paying ability of such bank or insurance company is in one of the two highest rnting c<>tegories by S&P and Moody's; (b) such letter of credit or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursu<dlt to the l'iscal Agent Agreement; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder for the purpose of making Reserve Fund payments pursuant to the Fiscal Agent Agreement.

Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, as

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directed pursuant to an Officer's Certificate filed with the Fiscal Agent at least two Business Days in advance of the making of such investments. In the absence of any direction from the Authority, the Fiscal Agent will invest, to the extent reasonably practicable, any such moneys in n1oney n1arket funds vvhich are rated in the highest rating category by Moody's Investors Service or Standard & Poor's Ratings Service and which, by their terms, n1ature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement and if such investments can not be made shall hold such funds uninvested. Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Authority Treasurer will be invested by the Authority Treasurer in Permitted Investments that mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. See "APPENDIX B-SUMMARY OF FISCAL AGENT AGREEMENT­Definitions" for the definition of "Permitted Investments."

Limited Obligation

All obligations of the Authority under the Fiscal Agent Agreement and the Bonds are limited obligations of the Authority, payable solely from the Special Tax Revenues ond amounts in the Bond Fund, the Reserve Fund and the Special Tax Fund. See "THE AUTHORITY."

No Acceleration

The principal of the Bonds is not subject to acceleration iiS a result of a default by the Authority or the Fiscal Agent under the terms of the Fiscal Agent Agreement or the Bonds.

THE AUTHORITY

Tile following inforlllntion relating to tile Aut/10rity is included only for tile purpose of supplyiug gel/ern/ i11fonnntio11 regarding tile Ant/10ril!;. Tile Bo11ds nrc 11ot pmtnhlc jro111 Ill/If of the A11tfwritt/s rcuc/11/CS or assets ot!tcr tfta11 tile 1'/cdscd Collatcml.

The Authority .was established as a joint exercise of.powers authority pursuant to Section 6500, et seq., of the California Government Code (the "joint Powers Act") and a Joint Exercise of Powers Agreement, by and between the City and the Redevelopment Agency of the City (the "Agency"), dated June 5, 2001 (the "Joint Powers Agreement"). The joint Powers Agreement authorizes the Authority, among other things, to provide financing for public capital improvetnents and vvorking capital for the City and the Agency, and to purchase obligations of local agencies, all as authorized by the joint Powers Act. The Authority is governed by il Board of Directors comprised of the individuals who illso act as members of the City Council and as members of the governing body of the Agency.

THE SERIES 2009-A BONDS ARE PAYABLE SOLELY FROM THE PROCEEDS OF THE SPECIAL TAX TO BE LEVIED ANNUALLY ON TAXABLE PROPERTY IN THE DISTRICT AND AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE FISCAL AGENT AGREEMENT, ON A PARITY WITH THE PRIOR BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE STATE OF CALIFORNIA OR ANY OTHER POLITICAL SUBDIVISION THEREOF (OTHER THAN OF THE AUTHORITY FOR THE DISTRICT, TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2009-A BONDS. THE SERIES 2009-A BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF OR CHARGE, LIEN OR ENCUMBRANCE UPON ANY OF THE PROPERTY OF THE AUTHORITY, OR ANY OF ITS INCOME OR RECEIPTS EXCEPT CERTAIN AMOUNTS IN THE SPECIAL

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TAX FUND, AND AMOUNTS IN THE BOND FUND AND THE RESERVE FUND CREATED UNDER THE FISCAL AGENT AGREEMENT; AND THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF OR REDEMPTION PREMIUMS, IF ANY, ON THE SERIES 2009-A BONDS IS NOT A GENERAL DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY. THE CITY AND THE AGENCY HAVE NO OBLIGATION WHATSOEVER WITH RESPECT TO THE SERIES 2009-A BONDS OR THE COMMUNITY FACILITIES DISTRICT.

THE COMMUNITY FACILITIES DISTRICT

General

The Community Facilities District was formed by the Board of Directors of the Authority on December 18, 2001 in accordance with the Act. See "THE COMMUNITY FACILITIES DISTRICT -Community Facilities District Proceedings." The Community Facilities District (other than the portion that includes Sutter Point described below) is located in the northwest section of the City, north and south of Sperry Avenue, east of Baldwin Road and west of Ward Avenue. Walker Ranch I and II and Creekside Meadows comprise a portion of the area covered by the Creekside Concept Plan adopted by the City Council.

The property within the District which is currently subject to the levy of the special tax securing the Bonds has been developed into a total of 2,472 finished single-family residential lots in six separate developments known as Walker Ranch I (501 lots), Walker Ranch II (312 lots) and Creekside Meadows (512 lots, and collectively with Walker Ranch I and II referred to below as Walker Ranch/Creekside), Miraggio (25 lots, and formerly known as Shire Place), Patterson Gardens (985 lots) and Sutter Point (137 lots, and formerly known as Wilding Ranch). As of June 8, 2009, all but 244 of the lots located in the Community Facilities District had been improved with single-family dwelling units.

The next three pages set forth the original site plans for (i) Walker Ranch/Creekside, (ii) / Patterson. Gardens, and (iii) Sutter Point (formerly Wilding Ranch). The 25 lot Miraggio development is not depicted. While the configuration of each development remains the same, the builders depicted, and the street and neighborhood names have changed.

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Community Facilities District Proceedings

Authority Actions. As required by the Act, the Board of Directors has taken the following actions with respect to establishing the Community Facilities District and providing for the issuilnce of the Prior Bonds, the 2005 Notes, the 2007 Notes ilnd the Series 2009-A Bonds:

Rcsolutioll of_lll!CIItioll: On june 5, 2001, the Board of Directors adopted Resolution No. 01-3 and Resolution No. 01-4 (collectively the "Resolutions of Intention"), stating its intention to form the Community Facilities District, to authorize the levy of a special tax and to incur bonded indebtedness in iln amount not to exceed $110,000,000 within the Community Facilities District for the purpose of financing certain public improvements. See APPENDIX A-AUTHORIZED FACILITIES AND THE SPECIAL TAX FORMULA. On July 17, 2001, the Board of Directors a mended the Resolutions of Intention to a How for financing of school facilities and to change the date of public hearings referred to in the Resolutions of Intention. On September 18, 2001, the Board of Directors continued the date of those public hearings in a resolution making a finding of complexity with regilrd to the proposed Community Facilities District. On December 18, 20lll, the Board of Directors further amended Resolution No. 01-3 to modify the list of authorized Facilities and the Rate and Method of Apportionment of the Special Tax. The Resolutions of Intention, as so amended, are referred to herein as the "gesolu lions of Intention."

Rcsolutioll o[Fonllaliow Subsequent to" noticed public hearing on December 18,2001, the Board of Directors adopted Resolution No. 01-8 (the "Resolution of Formation") which established the Community Facilities District and iluthorized the levy of a special tax within the Community Facilities District, and Resolution No. 01-9, which determined the necessity to incur bonded indebtedness in an amount not to exceed $110,000,000 within the Communi tv Fa~ti~D~t~. . •

Lnmiow11er Elcctioll a11d Dcc/aratio11 of R.esu/ts: On December ·1s, 2001, the Board of Directors adopted I<esolution No. 01-10, pursuant to which it called an election for December 18, 2001 on the issues of the levy of the Special Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit for the Community Focilities District. Also on December 18, 2001, an election was held within the Community Facilities District in which the then landowners eligible to vote, being the qualified eleCtors vvithin the Community Facilities District, approved a ·ba Hot proposition by a ] 00 percent "yes" vote authorizing the issuance of up to $110,000,000 in bonds to iinilnce the acquisition and construction of the Facilities, the levy of a special tax within the Community Facilities District and the establishment of an appropriations limit for the District. Under the provisions of the Act, since there were fewer than 12 registered voters residing within the Community Facilities District for each oi the 90 di1 ys preceding the then close of the sto tutory protest hearing, the qua Iified electors for such election were the then owners of land in the Community Facilities District, each of whom was entitled to cast one vote for each acre or portion of an acre of land they owned within the Community Facilities District. On December 18, 2001, following the election, the Board of Directors adopted Resolution No. 01-11, pursuant to which the Board of Directors approved the canvi\sS of the votes and declared the Community Facilities District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established a ppropria lions limit.

Ordilla/lcc Levyi11g Sl'ecinl Taxes: On December 18, 2001, the Board of Directors introduced Ordinance No. 01-1 entitled "An Ordinance of the West Piltterson Financing Authority Levying Special Taxes Within West Petterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements)" (the "Ordinance"). The Ordinance was

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adopted by the Board of Directors on January 15, 2002. A Notice of Special Tax Lien for the Community Facilities District was recorded in the Office of the County Recorder on December 27, 2001.

Issun11cc of Series 2002-A B01n?s. On December 18,2001, the Board of Directors adopted Resolution No. 01-12 approving the issuance and sale by the Authority of the Series 2002-A Bonds, and authorizing the execution and delivery of the Fiscal Agent Agreement. On january 30, 2002, the Authority, for and on behalf of the Community Facilities District, issued the Series 2002-A Bonds in the initial principal amount of $3,865,000.

Altemlio11 Procccdin;<s: On October 15, 2002, the Board of Directors adopted Resolution No. 2002-01 amending the description of the Facilities and the rate and method of apportiomnent of the Special Tax to accommodate a potential funding source for some of the Facilities and to better allow for annexations to the Community Facilities District. On November 19, 2002, the Board of Directors adopted Resolution No. 2002-02 calling for a special election of the then landowners in the Community Facilities District regarding the amendments, the election was held and canvassed, and the Board of Directors of the Authority adopted Resolution No. 2002-03 determining that the alterations to the Facilities and the rate and method of apportionment of the Special Tax were lawfully authorized, and directing the recordation of an Amended Notice of Special Tax Lien. The Amended Notice of Special Tax Lien was recorded on December 4, 2002 in the Office of the County Recorder.

Issuance of Series 2003-A Bowls. On December 5, 2002, the Board of Directors adopted Resolution No. 02-04 approving the issuance by the Authority of the Series 2003-A Bonds, and authorizing the execution and delivery of a Supplemental Agreement No. 1 to Fiscal Agent Agreement. On February 6, 2003, the Authority, for and on behalf of the Community Facilities District, issued the Series 2003-A Bonds in the initial principal amount of $11,100,000.

A111zcxnlion Procecdilli;J!.: On May 6, 2003, the Board of Directors adopted Resolution No. 03-01 expressing its intent to annex the land within the residential portion of the Patters<111 Gardens development and the Wilding Ranch development to the Community Facilities District. On june 17, 2003, the Board of Directors adopted Resolution No. 03-02 am1exing the developments to the Community Facilities District and calling for an election by the owners of the property to be annexed. On June 17, 2003, the then two landowners voted in favor of the a1mexation, and the Board of Directors adopted Resolution No. 03-03 declaring the results of election. On july 1, 2003, the Authority recorded in the Office of the County Recorder a First Amendment to Amended and Restated Notice of Special Tax Lien imposing the lien of the Special Taxes on the property annexed to the Community-Facilities District.

lssumzcc of Series 2003-13 Bonds. On June 17, 2003, the Board of Directors adopted Resolution No. 03-04 approving the issuance by the Authority of the Series 2003-B Bond, and authorizing the execution and delivery of a Supplemental Agreement No. 2 to Fiscal Agent Agreement. On September 16, 2003, the Authority, for and on behalf of the Community Facilities District, issued the Series 2003-B Bonds in the initial principal amount of $15,040,000.

Issunuce of Series 2004-A Bo11ds. On January 6, 2004, the Board of Directors adopted Resolution No. 04-01 approving the issuance by the Authority of the Series 2004-A Bonds, and authorizing the execution and delivery of a Supplemental Agreement No. 3 to Fiscal Agent Agreement which, among other matters reduced the maximum bonded indebtedness limit of the Community Facilities District to $80,000,000. On March 9, 2004, the Authority, for and on behalf of the Communitv Facilities District, issued the Series 2004-A Bonds in the initial principal amount of $19,t'OO,OOO.

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lssuoncc of_ Series 2004-B Bonds. On September 21, 2004, the Board of Directors adopted Resolution No. 04-02 approving the issuance by the Authority of the Series 2004-B Bonds, and authorizing the execution and delivery of a Supplemental Agreement No. 4 to Fiscal Agent Agreement. On October 20, 2004, the Authority, for and on behalf of the Community Facilities District, issued the Series 2004-B Bonds in the initial principal amount of $19,890,000.

Issuoucc of the 2005 Notes. On July 19, 2005, the Board of Directors adopted Resolution No. 05-01 approving the issuance by the Authority of the 2005 Notes. On September 29, 2005, the Authority, for and on behalf of the Community Facilities District, issued the 2005 Notes in the initial principal amount of $4,100,000.

lssunucco{the2007 Notes. On July 17,2007, the Board of Directors adopted Resolution No. 2007-0"1 approving the issuance by the Authority of the 2007 Notes. On August ·1, 2007, the Authority, for and on behalf of the Community Facilities District, issued the 2007 Notes in the initial principal amount of $4,810,000, and used the net proceeds of the 2007 Notes to pay, on August 1, 2007, the principal of and interest due on the 20[)5 Notes.

R.csolutioullulhoriziny lssunucc of the Series 2009-11 /3ouds: On June 16, 2009, the Board of Directors adopted Resolution No. 2009-01 (the "Bond Resolution") approving issuance and sale by the Authority of the Series 2009-A Bonds and of the Subordinate Bonds, and authorizing the execution and delivery of a Supplen1ental Agrcen1ent No. 5 to Fiscal Agent Agreement, as well as a new fiscal agent agreement pertaining to the Subordinate Bonds.

Cit)' Finding~. On June 16, 2009, in order to satisfy certain requirements of the California Government Code, the City Council of the City held a public hearing and adopted Resolution No. 2009-49 finding that significant public benefits .will arise from the issuance of the Series 2009-A Bonds and the Subordinate Bonds, and approved the issliaiKe of the Series 2009-A Bonds and the Subordinate Bonds and the repayment of the 2007 Notes by the Authority with proceeds of the Series 2009-A Bonds and the Subordinate Bonds.

Authority's Coals and Policies. The Authority adopted "Local Coals and Policies for Community Facilities Districts" (the "Coals and Policies") on June 5, 2001. The Coals and Policies establish an order of priority for financing by community facilities districts and certain credit quality requirements for bonds issued by the Authority for a community facilities district established by it under the Act. The Coals and Policies also provide for disclosure of the special tax obligation to purchasers of property in the Community Facilities District. The Authority has detennined in the Bond Resolution that issuance of the Series 2009-A Bonds and of the Subordinate Bonds conforms with the Coals and Policies.

Status of Expenditure of Proceeds of Prior Financings

The Authority reports that all of the net proceeds of the Outstanding Bonds and of the 2005 Notes have been expended or are othenvise committed to pay costs of the Facilities. The Authority currently estimates that amounts to be transferred from the 2007 Notes Project Fund to the Improvement Fund on the Closing Date ($1 ,776,850) will be sufficient to complete all public infrastructure improvements authorized to be financed by the Community Facilities District. The net proceeds of any Parity Bonds that may be issued will only be used to refund Outstanding Bonds or outstanding Subordinate Bonds. See "THE SERIES 2009-A BONDS­Parity Bonds."

The Facilities financed with proceeds of the Outstanding Bonds and the 2005 Notes are not pledged as security for the Bonds. The levy and collection of the Special Tax is not. dependent in any way on the conipletion of the Facilities.

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Staius of Development; Projected Absorption of Undeveloped Property

As previously stated in this Official Statement, all but 244 of the 2,472 lots in the Community Facilities Distrid have been developed with single family homes. Of the undeveloped lots, 193 are located in the Patterson Cord ens development (including 11 lots to be developed with senior housing), 49 are located in Sutter Point (formerly known as Wilding Ranch) and 2 are loc;1ted in Miraggio (formerly known as Shire Place). The undeveloped lots, other than those in Sutter Point, were sold by the initial developers of the property in the Community Facilities District, and are now owned by 6 different entities.

The City has engaged Stephen H.. Clark, Appraiser and Consultant, Inc. (the "Absorption Consultant") to review the undeveloped lots in the Community Facilities District and to provide an analysis of the expected time period in which such lots will be developed. The Absorption Consultant's Report, dated June 9, 2009 (the" Absorption Analysis"), which is set forth in its entirety in Appendix C, identifies the locations and current owners of the undeveloped lots. The Absorption Consultant had determined that, as of May 31,2009, and taking into account the current status of the real estate market in the City and the homes available for sale in the City, as well as interviews with owners of the majority of the undeveloped lots, thi\tunder a "slow scenario" it is expected that the owners of the lots will commence development after June 1, 2012, and will complete the development of the lots by June 1, 2016. Under a "fast scenario," the Absorption Consultant has determined that the owners of the lots will commence development after June 1, 201"1, and will complete the development of the lots by June "1, 2014. See" APPENDIX C-Absorption Analysis."

While undeveloped, the lots are subject to the maximum <1uthorized undeveloped l<1mi tilx of the Community Facilities District that, for Fiscal Year 2009-10 is $18,074.56 per <1cre of undeveloped land, and Me subject to a Special Tax levy only when the Special Taxes on Developed Property <1re insufficient to satisfy the a1mual "Special Tax Requirement." See "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method." In Fiscal Year 2008-09, the then 39.51 acres of undeveloped property in the Community Facilities District were subject to " Special Tax levy of $2,18"1.10 per acre (aggregating approximately $86,175). As a consequence of the issuance of the Series 2009-A Bonds and the Series 2009-B Bonds, it can be expected that the per acre Special Tax levy on undeveloped property will, initially, increase to an amount equal to npproximatdy $11,948 per acre, (aggregating approximately $456,345, or approximately 9.10% of the aggregate expected Fiscal Year 2009-10 Special Tax levy), in order to provide sufficient Special Tax Revenues to pay most of the debt service on the Series2009-A Bonds and the Series. 2009-13 Bonds. ·

Based on the foregoing, <1nd assun1ing that all of the undeveloped lots are approximately equal in size, the average Special Tax levy on an undeveloped lot for Fiscal Year 2008-09 was approximately $354 per lot, and that amount can be expected to increase to approximately $1,870 per undeveloped lot in Fiscal Year 2009-10 (and to a higher amount in subsequent Fisc a I Years as capitalized interest for the Series 2009-A 13onds and the Subordinate Bonds is exhausted). The foregoing indicates that the owners of most of the undeveloped lots can be expected to h<1ve Fiscal Year 2009-10 Special Tax levies as follows: (i) KDH Group, LP, 47 lots, approximately $88,000 (being approximately 1.76% of the Fiscal Year 2009-10 Special Tax levy); (ii) Ethan Conrad, 61 lots, approximiltely $114,100 (being approximately 2.28% of the Fiscal Yeilr 2009-10 Special T<1x levy); (iii) MSCP Pacific Union Patterson G<1rdens, LLC, 74 lots, approximately $138,500 (being approximiltely 2.76'1,, of the Fiscal Year 2009-10 Special Tax levy); and (iv) 13right Development, 49 lots, approximately $92,000 (being approxim<1tely 1.84% of the Fiscal Year 2009-10 Special Tax levy). While the Authority is not aware of any current delinquency in payment of Special Taxes by any of the foregoing property owners, no assurance can be given with respect to the timely payment by

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them of future Special Tax levies. See "BONDOWNERS' RISKS-Concentration of Ownership." All of the undeveloped lots have assessed value to bond lien ratios of less than 3:1. See "THE COMMUNITY FACILITIES OlSTRlCT-Property Value and Value to Burden Ratio" and "BONDOWNERS' RISKS-Property Values." In the event of a failure to pay Special Taxes, the Authority's only remedy is to bring a foreclosure action against the delinquent property to enforce the payment of the Special Taxes. See "SECURITY FOR THE SERIES 2009-A BONDS-Covenant to Foreclose."

Because the maximun1 Special Tax levy, on <1 per lot basis, is substantiolly greater for undeveloped property ($18,074.56 per acre for Fiscal Year 2009-10, or approximately $2,829 for a 0.1565 acre lot) than it is for developed residential property ($2,108.98 per unit for Fiscal Year 2009-Hl) or for senior housing ($2,297.38 per acre for Fiscal Year .2009-HJ), as the undeveloped lots become developed, the maximum Special Tax capacity of the Community Facilities District decreases. Hov.'ever, because the maxinntnl annual Special Tax levy for developed residential property and for senior housing increases by two percent each year (see "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method"), the longer it takes for the undeveloped lots to become developed residential property or senior housing, the lower the loss in the overall maximum Special Taxes that can be levied in the Community Facilities District.

The Special Tax Consultant has projected that, even if all of the undeveloped lots become developed property in Fiscal Year 2009-10, there would be sufficient Special Tax Revenues, assuming no delinquency in the payment of Special Taxes, to satisfy the Special Tax Requirement under the Rate and Method. The projected maximum Special Taxes for Fiscal Year 2009-2010, as a percentage of the aggregate debt service on the Bonds (excluding debt service paid from the Capitalized Interest Account), is estimated to exceed 110%. Table 4 under the heading "SECUEJTY FOR THE SERIES 2009-A BONDS-Expected Special Tax Revenues and Debt Service Coverage" contains an estimate of the maxiJnum Special Te1xes thilt can be levied in the Community Facilities District under the "fast scenario" for development in the Absorption Analysis, so that if the actual development of the undeveloped lots occurs at a greater rate than the 'I fast scenario," the n1aximun1 Special Tax Revenues that can be levied in the Community Facilities District will be less than as shown in Table 4. Development at the "slow scenario" pace identified in the Absorption Analysis will result in m;lximum Special Tax Revenues in excess of what is projected in Table 4. The Authority makes no representation as to the expected absorption of the undeveloped Jots, or the accuracy of the Absorption Analysis.

Property Value and Value to Burden Ratio

Assessed Value of Parcels in the Community Facilities District. The Authority has obtained the "full cash" assessed values of all of the taxable property in the Community Facilities District, as established by the County Assessor for Fiscal Year 2008-09. Article Xli!A of the California Constitution (Proposition 13) defines "full cash value" to mean "the county assessor's valuation of real property as shown on the 1975-76 bill under 'full cash value, or, thereafter, the approised value of real property when purchased or newly constructed or when a change in ownership has occurred after the 1975 assessment," subject to exemptions in certain circumstances of property transfer or reconstruction. The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2(X) for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

In discussions between the Special Tax Consultant for the Community Facilities District and the Stanislaus County Auditor's Office, the County Auditor's Staff has advised that of the 116,000 to 120,000 residential parcels within the County, the County is expected to

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lower, on its own, the assessed values of 60,000 to 80,000 of those parcels, with a County­wide decrease of between 13% and 15%. The decrease can be expected to pertain to homes sold within the last five years, including virtually all of the homes in the Community Facilities District, as it appears that recent sales of homes in the Community Facilities District have been at prices substantially below sales prices for comparable homes that occurred in prior years. See "BONDOWNERS' RISKS-Risks Related to Adjustable Rate Mortgages, Creative Mortgage Financing Tools and Beeline in Real Estate Prices." Also, because of the general limitation to 21X) per year in increases in full cosh value of properties v.rhich remain in the san1e ownership, the County tax roll does not reflect values uniformly proportional to actual market values.

Value-to-Lien Ratios. The value of individual parcels and the direct and overlapping secured bonded indebtedness on individual parcels vary among parcels with the Community· Facilities District. The value of individual parcels is significant because in the event of a delinquency in the payment of Special Taxes, the Authority ·may foreclose only against delinquent parcels. The assessed value of property in the Community Facilities District for Fisc a I Year 2008-09, as of the January 1, 2008 lien date, as reported by the Special Tax Consultant was $584,400,786. The estimated aggregate assessed valuc~to-Bond lien ratio of the property within the Community Facilities District, following the issuance of the Series 2009-A Bonds and the Subordinate Bonds, will be approximately 8 to 1. However, should a parcel be foreclosed upon by reason of efforts to collect delinquent Special Taxes, the minimum bid at a foreclosure sale would only involve payment by a prospective purchaser of an amount sufficient to pay the delinquent Special Taxes owing on the parcel and related penalties and costs, and the parcel would be subject to future Special Tax levies.

Table 5 below sets forth the estimi1ted value-to-Bond lien ratios for parcels within the Community Facilities District subject to Special Taxes upon th<e issuance of the Series 2009-A Bonds based upon the assessed values for Fiscal Year 2008-09 and the projeCted Special Tax levy (including the levy to pay the Bonds and the Subordinate Bonds) for Fiscal Year 2009-2010. The Fiscal Year 2008-2009 assessed values are based on the parcels existing as of the January 1, 2008 lien date. The estimated value-to-lien ratios do not include estimated $14,566,290 in overlapping tax and assessment debt shown in Table 6 below, which, if included, \vould decrease the estimated value-to-lien ratios.

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Estimated Value to Bonded

1I1deb ted ness Ratid 11

20:1 cmd above(·lJ 10:1 to 19.99:1 5:1 to 9.99:1 3:1 to 4.99:1 Less th(ln 3:l (5)

Totals

Table 5 Estimated Assessed Value-To-Lien Ratios

For Taxable Property in the Community Facilities District

Percentage of 2008-2009 Projected 2009-2010

Number of Assessed 2009-201 () Special Tax P<~rccls Value(21 --.?£ecial Tax Levv

42 $11,181,112 $ 18,535 037% 269 99,840,660 567,251 1133

1,879 461,987,229 3,962,673 79.18 32 2,679,657 56,173 1.12

216 8,712,128 400,232 8.00 2,438 $584,400,786 $5,004,864 100.00%

Estimated Total

Community Facilities

District Bond Deb t131

$ 269,897 8,260,213

57,703,796 817,985

5,828,109 $72,880,000

(1) 2008-09 Assessed V<1luedivided bv Estim<ltt't.i Total Communi tv Facilities District Bond Debt. (2) As of the Januarv I, 2008 lien date for Countv Assessor's 200S<W09 <1d valorem tnx. roll. The diltn for the

Janun ry 1, 2009 lien d<1 te is not yet av<1 i I able fn;m tlw County. (3) Total nutst<1nding bonded indebtedness of the Community Facilities District (including the principal of the

Outst<1nding Bonds and the principal of the 200Y Series A Bonds and the 2009 Series B Bonds), multiplied by the Percent11gc of 2009-2010 Specicd Ttlx Levy.

(4) Includes 38 pa reels of Se11ior Property that have <1 lower Maxi mum Specia I Tax th<l n other pa reels of Developed Property, but similar assessed values.

(5) Includes p<~ rt of the 244 undeveloped p<t reels. Source: GO<ld win Consulting Croup, Inc.

When revieV\'ing the foregoing information regarding value-to-lien ratios for parcels in the Community Facilities District, it should be noted that (i) parcels in the Community Facilities District are subject to various other governmental liens that are secured by liens on the parcels that are on a pMity with the lien securing the payment of the Special Taxes (see "THE COMMUNITY FACILITIES DISTRICT-Overlapping Govermnental Obligations"); and (ii) there have been substantial declines in the sales prices of homes in the Community Facilities District since january 1, 2008. In light of the foregoing, all of the value-to-lien information expressed above with respect to individual parcels in the Community Facilities District is only an approximation of the actual value-to-lien ratios for parcels in the Community Facilities District. See also "BONDOWNER'S RISKS" for various factors that could also adverselv affect the value of the individual parcels in the Community Facilities District. '

Overlapping Governmental Obligations

The Special Tax and any penalties thereon will constitute a lien against the taxable la.nd on which they will be mmually imposed until they are paid. Such lien is on a parity with the lien of other special taxes and special assessments and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property.

The imposition of additional special taxes, special assessments and general property taxes will increase the amount of parity and co-equal liens which must be satisfied in foreclosure. Any of such liens, except liens for the Special Tax imposed by the Authority, may be created without satisfying any of the requirements for issuance of Additional Bonds under the Fiscal Agent Agreement.

The City has formed a p.ublic safety/fire protection community facilities district with boundaries that are coterminous with the boundaries of the District and a corresponding fire

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protection assessrnent district. Parcels in the Comn1unity Facilities District are included in one of such districts (but not in both). The City also has formed overlapping benefit assessment districts for lighting, landscaping, drainage and park improvements, the boundaries of which also arc the same as the boundaries for the Community Facilities District.

The public safety/fire protection community facilities district initially was authorized to levy special taxes on property for which building permits have been issued at a rate of $405.20 per single family residential unit. The foregoing special tax rates are subject to annual consumer price index increases, so that the rates are currently (fiscal year 2008-09) $405.20 per single family residential unit. The fire protection assessn1ent distric_t has an annual levy on developed parcels that is similar ($391.12 per single family residential parcel) to that of the public safety I fire protection community facilities district.

The City also has included the property in the Community Facilities District in two benefit assessment districts that provide for annual levies per single family residential lot, subject ton 3% atmual increase, with the proceeds of the asscssn1ents to be used to n1aintain public lighting, landscaping, drainage and park improvements. The City has levied the following aggregate ?\mounts per single fatnily residential lot in these assessment districts in fiscal year 2008-09: $435.20 for lots in Walker Ranch I and II ;md Creekside Meadows, $420.00 for lots in Wilding Ranch, $704.8R for lots in Shire Place and $606.40 for most of the lots in Patterson Gardens (with a lower rate for certain parcels subject to a separate homeowner's association fee to maintain certain parks). No bonds are anticipated to be issued by these City-sponsored special districts. Finally, in addition to the Special Taxes and the City­sponsored districts, the property in the Community Facilities District is subject to a levy for ambulance services of $27 per lot per year. Parcels in the Community Facilities District arc also subject to increased ad valorem property taxes for debt of the Yosemite Community College District and the Patterson Unified School District, as well as certain County obligations, as shovvn in Table 6 below.

Bond owners should assume that all of the abov<:."'-mentioned taxes and assessments are secured by liens on the Taxable Property in the Community Facilities District which liens are on a parity with the lien securing payment of the Special Taxes. However, pursuant to the Act, the Special Tax lien has priority over all existing and future private liens imposed on the property within the Community Facilities District.

Set forth below is a statement of direct and overlapping public debt (the "Debt Report") prepared by Califomia Municipal Statistics, Inc. dated April 14, 2009. The Debt

·Report includes only.such information as has been reported to California Municipal Statistics, Inc. by the issuers of the debt described therein and by others. The Debt Report is included for general information<; I purposes only. The Authority makes no representation as to its completeness or acctlracy.

The first column in the table names the public agencies which have outstanding debt as of the date of the report and whose territories overlap. The second column shows assessed valuotion as a percetltage of the total assessed value of eCJch overlapping agency identified in column 1. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in column 3, which is the apportionment of each overlapping agency's outstanding debt on property.

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Table 6 Direct and Overlarring Indebtedness

2008-0S! Local SL'cured Assessed V<~luation: $587,752,217 111

DIRJoCI" AND OVERLAPPING TAX AND ASSESSMENT DEBT: Yosemi tl:' Community College District 1\lttl'rsonJoint Unified School District West P<1tterson Public I: in<~ ncing Authority Community F<1cilities District No. 2001-1 TOTAL DIRECr AND OVERLAI'PING TAX AND ASSESSMENT DEllT

OVERLAPPING GEI\.'ERAL FUND DEBT: St<t nlsl<llls County Certi fie <I tes of Pa rtici pa tiun Stanislaus County Pension Oblip;ations Sta nhl<IUS Cuunty Office of Ed uC<t tion CertifiC<"I k'S of ra rticip<Jtipn Jl,1 tterson jlli nt Unified School District Cl'r ti fic<1 tes of Pa rtici pa tion TOTAL OVERLAPPING GENERAL FUND DEBT

COMBINED TOTAL DEBT

'i':, Ar-plic<~ble 1.058%

26.75(, 100.

l.h2"J% I .!121 I .62'1

27.770

(I) Jnclud es some pa reels for \\' hich the Speci<.l Tax obi iga tion h<ls bl'en fully prepaid. (2) Excl uch~:; the Series 2009-A Bonds <1 nd the Subord i tlll te Bond::;.

Debt 4(15 /OY $ 2,423,825

9,308,411 6 7 415 000 (2)

$79,147,23(,

$1,541,652 779,215

82,752 430 435

$2,834,054

$81,981,290 (J)

(3) EXcludes t!lx and revenue anticip<1tion notes, enterprise revenue, mortgage revenue Clnd tax allocation bonds · cmd non-bonded capitnlleaseobligations. ·

Rati<1S to 2008-09 Assessed Valuation: Direct Debt ($o7,415,0110) ...................................................... 11.47% Tnt<ll Di rcct <1 nd Over\ a pping T<1 x <1ncl Assessment Debt ......... 13.47'1\, Combined Total Debt .......................................................................... 13.95'){,

Source:Californi<t Municipal St<ttistics

It should be noted that County ad valorem levies, as well as the levies set forth in the foregoing table, are secured by a statutory lien on the parcels that is on a parity with the lien securing the payment of the Specb I Taxes.

The Authority has no control over the amount of indebtedness that could be issued by other public agencies in the future, and the liens on the taxable parcels within the Community Filcilities District could greatly increase without any corresponding increase in the value of the pa reel and thereby severely reduce the ratio between the value of the property and the debt secured bv all taxes and assessments thereon which exists at the time the Bonds are issued. The impo~ition of additional indebtedness could reduce the willingness and the ability of the owners of the tc1xable parcel v-iithin the Co1nn1unity Filcilities.District to pay the Specia1 Taxes when due.

Special Tax Delinquencies

As stated under the heading "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method- Annual Special Tax Levies," Special Taxes have been levied in the Community Facilities District since Fiscal Year 2003-2004. While there were some delinquencies in payment of Special Taxes for Fiscal Years prior to Fiscal Year 2006-2007, the delinquencies were not significant and all Special Taxes levied in such Fiscal Years have, as of june 1, 2009, been collected.

However, commencing with Fiscal Year 2006-2007, there have been significant delinquencies in the payment of Special Taxes levied in the Community Facilities District. In order to ensure the collection of delinquent Special Taxes, the Authority has instituted various delinquency maintenance policies and procedures described below that include property owner

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communications and, ultimately, the institution of foreclosure proceedings in order to bring delinquencies current. The Authority continues to be proactive in resolving Special Tax delinquencies, and, as reflected in Table 7 below, has been successful in collecting delinquent <1 mounts.

Anmml Fisccd SpL'Ci<li Pil reels Yeilr Tax Levy Levied

20IIo-07 $4,453,K24 2,295 2007-118 4,440,102 2,448 2008-09 4.553,303 2,445

Table 7 Historical Special Tax Delinquencies

Delinquencies <lS of Apri\30 First Following Levy

Amtlunt #of Percent<lge Delinquent r .• reeLs ni Levy $ 731,1.)73 48~ 16.43% I ,012,070 634 22.79

577,620 364 12.6'1

Delinquencies <IS of June -16,2009

Amount # oi rer~ent<lge

Dl'linqt•ent P<Jrcels oi Levv

s 1,987 0.04% 56,759 00 1.28 _,_..,

453,355 281 11.96

As stated above, the Authority, through the City of Patterson, currently has an active delinquency maintenance program to collect delinquent Special Taxes. The City has engaged the law fim1 of Sherman & Feller to assist with any legal proceedings needed to enforce delinquent levies, and has adopted the following procedures that it employs each year: (i) on or about April 30 11

', the City determines the parcels with delinquent Special Taxes and directs the Community Facilities District Administrator to send out delinquency notice letters to delinquent property owners; (ii) on or about May 15'", the Administrator sends out the letters informing the property owners of the consequences and added costs related to their Special Tax delinquencies; (iii) on or about mid-June, the Administrator sends a second notice to delinquent property owners stating that if property taxes are not received by June 3011

', the Special Taxes will be removed from the County ad valorem tax roll and the City will move forward with the collection process for the Special Taxes; (iv) on or about july 1'1, the Administrator strips any remaining delinquent Special Taxes from the County ad valorem tax bills, and records the action with the County Recorder (so that any subsequent purchaser of the delinquent parcel will be on notice of the past-due Special Taxes); (v) on or about July '15 11

', a third notice is sent by the Administrator advisin~ the delinquent property owner that, if dehnquent SpeCial Taxes arc not paid by August '15", or other arrangements are made with the City, the matter will be referred to the City's foreclosure attorney resulting in additional costs; (vi) on or about September 15th, the City provides the foreclosure attorney with a list of ren1aining outstZ~nding delinquent Special T0xes, and the foreclosure attorney sends a notice to the delinquent property owners advising them of the additional costs of the foreclosure <~ction and, if necessary, the foreclosure attorney files il foreclosure action to collect the delinquent Special Taxes, and penalties and interest in the Superior Court. While no assurances can be made that the foregoing actions will result in the collection of all delinquent Special Taxes, it hils been successful in significantly reducing the delinquent amounts owed. Also, the Authority is only obligated to take the actions with respect to Special Tax delinquencies described under "SECURITY FOR THE SERIES 2009-A BONDS-Covenant to Foreclose," and n1ay change the foregoing procedures at any time.

The Fiscal Agent drew on the Reserve Fund on March 1, 2005 in the amount of $320,788.85 and on ·March 1, 2007 in the amount of $9,100.00. However, the amount currently in the Reserve Fund is in excess of the Reserve Requirement (see "SECURJTY FOR THE SERIES 2009-A BONDS-Reserve Fund"), and the Authority has sufficient funds in the Bond Fund and the Special Tax Fund to pay the scheduled debt service due on the Bonds (including the Series 2009-A Bonds) on September 1, 2009, without the need for any draw on amounts in the Reserve Fund.

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BONDOWNERS' RISKS

The purchase of the Bonds described in this Official Statement involves a degree of risk thot n1ay not be appropriate for son1c investors. The following indudes a discussion of so1ne of the risks \vhich should be considered before n1aking an invcstn1ent decision, in no pnrticular order of importonce.

Limited Obligation of the Authority to Pay Debt Service

The Authority has no obligation to pay principal of and interest on the Bonds if Special lax collections ore delinquent, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. The Authority is not obligated to advance its own funds to pay debt service on the Bonds. See "THE A UTHOR!TY."

Levy and Collection of the Special Tax

lhe principal source of payment of principal of and interest on the Bonds is the proceeds of the am1ual levy and collection of the Special Tax against property within the Community Facilities District. The a1mual levy of the Special Tax. is subject to the Maximum Special Tax authorized in the Rate and Method. The levy cannot be m<tde at <1 higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other <tvailable funds, will not be sufficient to pay debt service on the Bonds.

Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct relationship. See "THE COMMUNITY FAClLIIIES DISTRICT-Property Value and Value to Burden Ratio."

Except as set forth above under "SECURITY FOR THE SERIES 200~-A BONDS­Special Taxes" and "-Rate and Method," the Fiscal Agent Agreement provides that the Special Tax is to be collected in the san~e Inanner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY FOR THE SERIES 2009-A BONOS-Covenant to Foreclose" and in the Act, is subject to the same penalties and the same· procedure, snlc and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if t<txes arc unpaid for a period of five years or more, the property is subject to sale by the County.

Special Tax Delinquencies

Under provisions of the Act, the Special Taxes, from which funds necessary for the pnyment of principal of, and interest on, the Bonds arc derived, are customarily billed to the properties within the Community Facilities District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad villorem property tax installments.

As described under the heading "THE COMMUNITY FACILITIES DISTRICT­Special Tax Delinquencies," recently there have been significantdelinquencies in the

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payment of Special Taxes in the Community Facilities District. Also, as described under the heading "THE COMMUNITY FACILITIES DISTRICT-Status of Development; Projected Development of Undeveloped Property," the Special Tax on the 244 lots of undeveloped property in the Community Facilities District is expected to increase significantly. The assessed value to bond lien ratio for such undeveloped parcels is less than 3:1. See "THE COMMUNITY FACILITIES DISTRICT-Property Value and Value to Burden Ratio." If Special T<1x delinquencies persist at a level of over ten percent (lO<XJ) of the aggregate Special Tax levy in any Fiscal Year, there may be <1 draw on an1ounts in the Reserve Fund in order to make timely payment on the Bonds. If sales or foreclosures of property are necessary, there could be i1 delay in poyments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Authority of the proceeds of sale if the Reserve Fund is depleted. See "SECURITY FOR THE SERIES 2009-A BONDS-Covenant to Foreclose."

Payment of Special Tax is not a Personal Obligation of Property Owners

An owner of Taxable Property is not personally obligated to pay the Special Tox. Rother, the Special Tax is an obligation only against the parcels of Taxable Property. If, after a default in the payment of the Specia I Tax and a foreclosure sale by the Authority, the resulting proceeds are insufficient, taking into account other obligations a I so constituting a lien against the parcels of Taxable Property, the Community Facilities District has no recourse against the owner.

Absorption of Undeveloped Property

The rate at which the 244 currently undeveloped lots in the Community Facilities District become developed will have an affect on the maximum Special Taxes that can be levied in the Community Facilities District, because of the allowable annual two percent increase in the Special Tax levy on Developed Property. See the discussion under the heading "THE COMMUNITY FACILITIES DISTRICT-Status of Development; Projected Absorption of Undeveloped Property. If the undeveloped parcels are developed at a rate faster than the "fast scenario" estimated by the Absorption Consultant, there will be a lower annual maximum amount of Special Taxes that can be levied in the Community Facilities District than as shown in Table 4 under the heading."SECURITY FOR THE SERIES 2009-A BONDS­Expected Specia 1 Tax Revenues and Debt Service Coverage."

Concentration of Ownership

As of May 31, 2009, and based on the information in the Absorption Report in Appendix C, all but two of the undeveloped lots in the Community Facilities District were owned by five different owners. The receipt of the Special Taxes levied on Undeveloped Property is dependent, to a significant extent, on the willingness and the ability of the owners of the undeveloped lots to pay any Special Taxes levied on Undeveloped Property when due. The Specia I Tax on the undeveloped lots is expected to increase significantly. See "THE COMMUNITY FACILITIES DISTFUCT-Status of Development; Proposed Absorption of Undeveloped Property" and "-Property Volue and Value to Burden Ratio." Moreover, if the owners of undeveloped property fail to pay the Special Taxes levied on the property owned by them, it is possible that the penalties and interest that accrue to the delinquent Special Taxes could accumulate to the point where the amount needed to cure delinquent Special Taxes exceeds the value of the related property. See "SECURITY FOR THE SERIES 2009-A BONDS-Covenant to Foreclose - Sufficiency of Foreclosure Scle Proceeds; Foreclosure Limitations and Delays." Failure of the owners of the undeveloped lots, or any subsequent owners of such lots, to pay the Special Taxes levied on Undeveloped Property when due could result in" draw on the Reserve Fund and, if there are insufficient funds therein, a default in

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payments of the principal of, and interest on, the Series 2009-A Bonds, when due. See "BONDOWNERS' RISKS-Special Tax Delinquencies."

Property Values

The value of Taxable Property within the Community Facilities District is a critical factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the Authority's only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Property values in the Community Facilities District have declined dramatically in the recent past, and no assurance can be given that further declines will not occur. In addition to general real estate market conditions in the area, property values also could be adversely affected by other economic and other factors beyond the Authority's control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.

The following is a discussion of specific risk factors that could affect the value of property in the Community Facilities District.

Natural Disasters The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastmcture and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyn1ent of such private i1nprovemcnts.

Natural disasters could include, without limitation, earthquakes, landslides, floods, droughts or wildfires. One or more natural disasters could occur and could result in d~mage to improven1ents of varying seriousness. The dcnn(lge mny entail significant repair or replacerncnt costs e1nd that repair or rcplace1nent n1ay never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear.

Hazardous Substances. One of the most serious risks. in terms of the potential reduction in the value of Taxable Property is a clain1 vvith regard to a hazardous· substance. In generaL the ovvners and operators of Tax<1blc Property rnay be required ·by law to retnedy conditions of the parcel relating to releases or threatened releases of h<1zardous substances. The federal Comprehensive Enviromnental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely <~pplicable o.f these la\'\'S, but California lows with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property V\'hether or not the owner or operator has <1nything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.

Other Possible Claims Upon the Value of Taxable Property

While the Special Taxes are secured by the Taxable Property, the security only extends to the v81ue of such Taxable Property that is not subject to senior, priority and parity liens and

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similar cl<1ims. The section entitled "THE COMMUNITY FACILITIES DISTRICT­Overlapping Govemmental Obligations" discusses certain overlapping assessments.

Other govemmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the Bonds.

In general, the Special Tax and all other taxes, assess1nents and charges also collected on the tax roll are on a parity, that is, are of equ<1l priority. Questions of priority become signific<lnt when collection of one or n1ore of the taxes, assessrnents or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax would usually be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes would generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata basis. Althmigh the Special Taxes will generally have priority over non-govemmental liens on a parcel of Tax<1ble Property, regardless of \Vhether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See"- Bankruptcy and Foreclosure Delays" below.

Exempt Properties

Certain properties are exempt fron1 the Special Tax in accordance vvith the !{ate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the Community Facilities District acquired by <1 public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See "SECURITY FOR THE SERIES 2009-A BONDS-Rate and Method." In addition, although the Act provides thot if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to thot property is to be treilted as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. See also "SECURITY FOR THE SERJES 2009,A BONDS-Covenant to Foreclose."

The Act further provides thot "no other properties or entities arc exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or n1ethod of apportiotunent of an existing special tax.

Depletion of Reserve Fund

The Reserve Fund is to be maintoined at an amount equal to the Reserve Requirement. See "SECURITY FOR THE SERIES 2009-A BONDS-Reserve Fund." Funds in the Reserve Fund may be used to pay principal of and interest on the Bonds if insufficient funds are ilvailable from the proceeds of the levy and collection of the Special Tax against property within the Community Facilities District. If funds in the Reserve Fund are depleted, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be p<1id to the Bond holders pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the Special Tax against property within the Community F<1cilities District at the maximum Special Tax rates, together vvith other available funds, remains insufficient to pay all such amounts. Thus it is

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possible that the Reserve Fund will be depleted and not be replenished by the levy of the Special Tax.

Bankruptcy and Foreclosure Delays

Bankruptcy. The payment of the Special Tax and the ability of the Authority to foreclose the lien of a delinquent unpaid tax, as discussed in "SECURITY FOR THE SERIES 2009-A BONDS," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery ofthe Series 2009-A Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, n1oratoriun1 and 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 Special Taxes to become extinguished, bankn1ptcy of a property owner or any other person clcdming an interest in Taxable Property, could result in a delay in superior court foreclosure proceedings and could re:ndt in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of" delay or default in payment of the principal of and interest on the Series 2009-A Bonds.

Proj;>crty Owned bv FDIC. In addition, the ability of the Authority to foreclose upon the lien on property for delinquent Special Taxes may be limited for properties in which the Federal Deposit Insurance Corporation (the "FDIC") has an interest. On November 26,1996, the FDIC adopted a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "Policy Statement") (which superseded a prior statement issued by the FDIC and the Resolution Trust Corporation in 1991). The Policy Statement applies to the FDIC when it is liquidating assets in its corporate and receivership capacities. The Policy Statement provides, in part, thilt real property of the FDIC is subject to state and local real property taxes if those taxes arc assessed according to the property's value, and that the FDIC is immune from ad valorem real property taxes assessed on other bases. The Policy Statement .,[So provides that the FDIC will P"Y its proper tax obligations when they become due and will pay claims for delinquencies as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC interest in the property is appropriate. It further provides that the FDIC will pay claims for interest on delinquent property taxes owned at the rate provided under state law, but only to the extent thl' interest payment. obligation is secured by <1 valid lien. The FDIC will not p-ay for any fines or penalties and will not pay nor recognize liens for such amounts. The Policy Statement also provides that if any property taxes (including interest) on FDIC-owncd property are secured by " valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. No property of the FDIC is subject to levy, attachment, gamislunent, foreclosure or sale without the FDIC's consent. In addition, a lien for taxes and interest may ilttach, but the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent.

With respect to challenges to assessments, the Policy Statement provides: "The [FDIC] is only liable for state and local taxes which are based on the value of the property during the period for which the tax is imposed, notwithstanding the failure of any person, including prior record o\-vners, to challenge an assessment under the procedures available under state law. In the exercise of its business judgment, the [FDIC] may challenge i1Sscssments which do not conform with the stMutory provisions, and during the chi1llenge may pay tax claims based on the assessment level deemed appropriate, provided such payment will not prejudice the ch;lllenge. The !FDIC] will generally limit challenges to the current and immediately preceding

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taxable year and to the pursuit of previously filed tax protests. However, the [FDIC] may, in the exercise of its business judgment, challenge any prior taxes and assessments provided that (1) the [FDIC's] records (including appraisals, offers or bids received for the purchase of the property, etc.) indicate that the assessed value is clearly excessive, (2) a successful challenge will result in a substantial savings to the [FDIC], (3) the challenge will not unduly delay the sale of the property, and (4) there is a reasonable likelihood of a successful challenge."

The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee simple interest unless the amount of tax is fixed at the time the FDIC acquires its fee simple interest in the property, nor will the FDIC recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Bec<1use the Special Taxes are neither ad valoren1 taxes nor special assessn1ents, <1nd because they are levied under a special tax formu]o under \Vhich the an1ount of the Special Tax is determined each year, the Special Taxes appear to fall within the category of taxes the FDIC generally will not pay under the Policy Statement.

Following the County of Orange bankruptcy proceedings filed in December 1994, the FDIC filed claims against the County of Orange in the U.S. Bankruptcy Court and the Federal District Court which challenged special taxes that Orange County had levied on FDIC-owned property (and which the FDIC had paid) under the Act. The FDIC took a position similar to that outlined in the Policy Statement, to the effect that the FDIC, as a governmental entity, is exempt from special taxes under the Act. The Bankruptcy Court agreed, finding that the FDIC was not liable for post-receivership Mello-Roos taxes, and the Bankruptcy Appellate Panel affirmed. On appeal, the U.S. Court of Appeals for the Ninth Circuit, while not specifically asked to decide on the issue, stated in its decision filed on August 28, 2001, that "the FDIC, as a federal agency, is exempt from the Mello-Roos tax," and quoted Section 53340(c) of the Act in stating that '"properties or entities' of the federal government are exempt from the tax." The County of Orange did not appeal the decision.

The Authority is unable to predict what effect the application of the Policy Statement would have in case of a Special Tax delinquency on a parcel in which the FDIC has an interest. However, prohibiting the judicial foreclosure sale of an FDIC-owned parcel would likely reduce the number of or eliminate the persons willing to purchase a parcel at a foreclosure sale. Owners of the Series 2009-A Bonds should assume that the Authority will be unable to foreclose on parcels of land in the Community Facilities District owned by the FDIC. Such an outcome would cause a draw on the Reserve Fund and perhaps, idtimatcly, a default in payment of the Bonds.

Risks Related to Adjustable Rate Mortgages, Creative Mortgage Financing Tools and Declines in Real Estate Prices

During calendar years 2003 through 2007, many persons financed the purchase of new homes using mortgage loans that featured adjustable interest rates and 'creative' loan structures, such as interest only payments, negative ·amortization of principal, and introductory 'teaser' rates. Interest only payments on loans allow the borrower to pay interest only for an initial period (e.g., five years) and negative amortization of principal results in lower monthly mortgage payments, but a higher aggregate principal an1ount of the mortgage loan. Teaser ri'ltes are n1ortgage interest rates that start low and are subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions.

In the opinion of sorne econmnists, the significant increase in home prices during calendar years 2003 through 2007 was driven, in part, by the ability of home purchasers to access adjustable rate loans and creative loans; as well as loans up to the full value of the home, in smne cases vvith minimal docun1entation of purchaser incon1e qualific<1tion. These

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economists predict that by reason of the increa?ed interest rates on more conventional mortgage- loons, and resets on adjustable rate loans to higher interest rates (and payments increased), fewer borrowers will be able to qualify for mortgage loans and, as a result, home sale prices will decrease. Additionally, under such circumstances, homeowners in the Community Facilities District with adjustable loans and limited economic resources may be unable or unwilling to pay higher mortgage payments as well as Special Tax and ad valorem tax pilyn1ents vvhen due. Interest rates on ildjustable n1ortgage rate loans have, in sorne instances, previously reset to higher interest rates and some financial studies predict that, nationwide, tnortgage loans \Vith teaser rates have experienced significant resets in 2007 and 2008 and arc likely to experience significant resets through 2009, resulting in higher levels of tnortgage pa yn1ents.

Some borrowers \Vho purchased homes with adjustable rilte loans may refinance before the interest reset dnte to obtain loans '\vith fixed interest rates. Ho\vever, other borrovvers vvho purchased hon1es in recent years may not be able to access replacetnent financing for their adjust<1ble rate n1ortgage loans for a nun1ber of reasons. Recent llC'\VS accounts indicate thnt many borrowers in recent years have financed 100% of the price of their home with adjustable rate loans. ln the event there is a ·decline in hon1e value such borrcnvers mav not be able to obtain replacen1cnt financing because outstanding loan balances exceed th~ value of their homes. Additionally, according to recent articles in the financial press, there has been a tightening of undcnvriting criteria for n1ortgage loans, such that many lenders no longer offer 100% financing or other creative mortgage structures. Regulatory changes or changes in standards of practice in the mortgage lending industry could <1lso create requirernents of stricter ir1comc verification, higher incon1e to loan ratios, higher credit ratings, or son1e combination of such credit f<1ctors. In the event borrovvers experience a decline in incon1e or an increase in mortgage interest rates, or both, taxpayers may be less able to pay their special tax payments vvhen due.

Homeovvners .in the Comn1unity F<1cilities District \1\'ith adjustable rate lonns ·n1<l)' experience difficulty in making their loan payments and paying the Special Taxes levied on their property. This would resu]t·in an increase in the Special Tax delinquency rate in the Community Facilities District and possible depletion of the Reserve Fund. If the current significant delinquencies in Special Tax collections in the Community Facilities District continue and the Reserve Fund was depleted, there could be a default in the payment of principal of and interest on the Bonds. See "THE COMMUNITY FACILITIES DISTRJCT­Special Tnx Delinquencies" and "BONDOWNERS' RISKS-Special Tax Delinquencies."

Some economists Jlso report recent increases in recorded notices of default on home mortgage loans in the County and in Northern California. The filing of a notice of default reflects the failure of a homeo\vner to pay mortgage loan payn1ents in a timely manner for a certain period of time, usually three consecutive months. If home prices continue to decline, the number of notices of default may increase due to decreased home equity.

Any further decline in home values in the Community Facilities District could result in further property owner unwillingness or inability to pay mortgage payrnents, as well as ild valorem taxes and special taxes, when due. Under such circumstances, bankruptcies arc likely to increase. Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes. Sec "BONDOWNER'S RISKS-Bankruptcy and Foreclosure Delays."

Disclosure to Future Purchasers

On December 27, 2001, a Notice of Special Tax Lien was recorded in the Office of the County Recorder, and on December 4, 2002, an Amended aJ1d Restated Notice of Special Tax

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Lien was recorded in the Office of the County Recorder. On July 1, 2003, an amendment to the Amended and Restated Notice of Special Tax Lien was recorded in the Office of the County Recorder pertaining to the PClttersnn Gardens and Wilding Ranch developn1ents 8nnexcd to the District in June of 2003. See "THE COMMUNITY FACILITIES DISTRICT-Community Facilities District Proceedings:" While title companies normally refer to such notices in title reports, there can be no guarantee that such reference \Viii be n1ade or, if n1ade, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in the Community Facilities District or the lending of money secured by property in the Community Facilities District.

The Act requires the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello­Roos special tax of the existence and maximum an1ount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

No Acceleration Provisions

The Fiscal Agent Agreernent does not contain a provision allo\,ving for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreen1ent.

Loss of Tax Exemption

As discussed under the c~ption "LEGAL MATTERS-Tax Matters," interest on the Series 2009-A Bonds might become includable in gross income for ptirposes of federal income taxation retroactive to the date the Series 201J9-A Bonds were issued as a result of future acts or omissions of the Authority in violation of its covenants in the Fiscal Agent Agreement. The Fiscol Agent Agreen1ent does not contain a specia I redCmptinn feature triggered by the occurrence of an event of tax~bility. As a result, if interest on the Series 2009-A Bonds were to be includable in gross income for purposes of federal income taxation, the Series 2009-A Bonds would continue to ren1ain outstanding t~ntil maturity unless eculicr redeen1ed purs·uant to

·optional or mandatory redemption provisions of the Fiscal Agent Agreement. See "THE SERIES 2009-A BONDS-Redemption."

Voter Initiatives

Under the Califomia Constitution, the power of initiative is reserved to. the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, the most recent of which was approved as Proposition 218 in the general election held on November 5, 1996.

Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the Authority. Subject to overriding federal constitutional principles, such collection tnay be Inatericdly and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Series 2009-A Bonds.

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Proposition 218 (Voter Approval for Local Government Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment) added Articles XlllC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the in1position of new or increased t(lxes, assessments and property-related fees ond chil rges.

The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the landowner within the Community Facilities District which<:onstituted the qualified electors at the time of such voted authorization. The Authority believes, therefore, that issuance of the Series 2009-A Bonds does not require the conduct of further proceedings under the Act or Proposition 218.

Like its antecedents, Proposition 218 is likely to undergo both judicial nnd legislative scrutiny before its impact on the Authority, the Community Facilities District nnd the Bonds ·can be determined. Certain provisions of Proposition 218 may be examined by the courts for their constitu tiona litv under both State and fed era I constitu tiona! Ia w, the outcome of which cannot by predicted.~

Limitations on Remedies

Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Series 2009-A Bonds or to preserve the tax-exempt status of the Series 2009-A Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Series 2009-A Bonds and of the Fiscal Agent Agreement to the extent that enlorccability may be limited by bankruptcy, insolvency, r€organization, fraudul€nt conveyance, moratoriun1 and other laws relating to or affecting creditors' rights' to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and the limitations on legal remedies against governmental entities such as the Authority and the Community Facilities District in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Series 2009-A Bonds.

Secondary Market; Potential Reductions in Bond Values

There can be no guarantee that there will be a secondary market for the Series 2009-A Bonds of, if <'I secondary 1narket exists, that any Series 2009-A Bonds can be sold for any particular price. Prices of bond issues for \vhich a tnarket is being rnade will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. No assurance can be given that the market price for the Series 2009-A Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the lnternt~l Revenue Code, or any <1ction of the Intern«! Revenue Service, including but not lin1ited to the publication of proposed or final regulations, the issuCtnce of rulings, the selection of the Series 2009-A Bonds for audit examination, or the course or result of anv Internal Revenue Service audit or examination of the Series 2009-A Bonds or obligations th~t present similar tilX issues as the Series 2009-A Bonds.

Although the Authority has con1mitted to provide certCtin financial Ctnd operating itlfornli'ltion on an annual basis, there can be no ilssurance that such infonnation 'viii be available to Bond Owners on a timely basis. See "CONTINUING DISCLOSURE." The failure to provide the required annual financial information does not give rise to monetary dan1ages but n1erdy an action for specific pcrfonnance. Occasionally, because of general market

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conditions, lack of current information, or because of adverse history or econotnic prospects connected with a. particular issue, secondary tnarketing prnctices in cormection with a particular issue are suspended or tem1in<1ted.

Currently, ther~ is a great deal of turmoil and volatility in the securities markets. The financial crisis has led to failures of major firms and significant government assistance for others, both in the United States and abroad. As investors worldwide become more risk adverse, there have been substantial declines· in the value of municipal bonds in the secondary market. The current environment of uncertainty in the financial markets may continue for some time. No one can predict whether, or to what extent, these conditions might affect the marketability of the Series 2009-A Bonds or result in reductions in the price at which the Series 2009-A Bonds might be sold in the secondary market.

CONTINUING DISCLOSURE

The Authority, for and on behalf of the.Community Facilities District, will covenant in a continuing disclosure certificate, the form of which is set forth in "APPENDIX D-Form of Continuing Disclosure Certificate" (the "Continuing Disclosure Certificate"), for the benefit of holders and beneficial owners of the Series 2009-A Bonds, to provide certain financial information and operating data relating to the Con11nunity Facilities District and the Series 2009-A Bonds (the "Authority Annual Report") by not later than February 28 of each year. The Continuing Disclosure Certificate also requires the Authority to provide notices of the occurrence of certain enumerated events, if milteriaL

The covenants of the Authority in the Continuing Disclosure Certificate are being made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). The Authority has complied, in all material respects, with all of its prior continuing disc·losure obligations undertaken pursuant to the Rule.

A default under the Continuing Disclosure Certificate would not constitute a default on the Bonds, and the sole remedy under the Continuing Disclosure Certificate in the event of illlj' failure of the Authority or the Dissemination Agent to comply with the requirernents of the Continuing Disclosure Certificate would be <1n action to con1pel specific perforn1ance. Goodwin C(nlsulting Group \Viii act as the initial dissernination agent for the Authority under the Continuing. Disclost..1rc Certifica tc.

LEGAL MATTERS

Legal Opinions

The legal opinion of Quint & Thimmig LLP, San Francisco, Ca!ifomia, Bond Counsel, approving the validity of the Series 2009-A Bonds will be made available to purchasers at the time of original delivery and is attached as APPENDIX E. Quint & Thimmig LLP is also acting as Disclosure· Counsel to the Authority for the Series 2009-A Bonds. See "PROFESSIONAL FEES" below.

George Logan, the City Attorney for the City, will pass upon certain legal matters for the Authority, acting <1s General Counsel to the Authority.

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Tax Matters

Federal tax l8vv cont(lins a number of requirements and restrictions which apply to the Series 2009-A Bonds, including investment restrictions, periodic payrnents of arbitrage profits to the United States, requirernents regarding the proper use of bond proceeds and the facilities refinanced therewith, and certain other matters. The Authority has covenanted to comply with all requirements that must be satisfied in order for the interest on the Series 2009-A 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 Series 2009-A Bonds to become includable in gros~ incorne for federal income tax purposes retroactively to the dnte of issuance of the Series 2009-A Bonds.

Subject to the Authority's compliance with the above-referenced covenants, under existing law, in the opinion of Quint & Thimn1ig LLP, San Francisco, Culifornia, Bond Counsel, (i) interest on the Series 2009-A Bonds is excludable irom the gross income of the owners thereof for federe~l income tax purposes, (ii) is not included as an item of tax preference in con1puting the federal alternative minimum tax for individuals and corporations, and (iii) is not taken into account in con1puting "adjusted current earnings" as described belo\\'. The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an a1ten.lativc mininntnl tax(" AMT") for corporations in addition to the corporate rcgulnr tax in certain cases. The AMT for a corporation, if any, depends upon the corporation's alternative minimum taxable income (" AMTI"), which is the corporations' taxable income with certain adjustments. One of the adjustment items used in computing the AMTl of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporiltion's "ildjusted current earnings" over an amount equal to its AMTI (before such adjustn1ent item and the alten1ativc tax net operating loss deduction). "Adjusted current earnings" would generally include certain tax-exempt interest, but not interest on the Series 2009-A Bonds.

Subject to the Authority's compliance with certain covenilnts, in the opinion of Bond Counsel, the Series 2009-A Bonds are "qualified tax exempt obligations" under the small issuer exception provided under section 265(b)(3) of the Code, which affords banks and certain other financial institutions more favorable treatment of their deduction for interest expense than would otherwise be allowed under section 265(b)(2) of the Code.

In rendering its opinion, Bond Counsel will rely upon certifications of the Authority with respect to certain n1ateri"al facts within its knowledge. Bond Counsel's (lpinion represents 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.

Ownership of the Series 2009-A Bonds may result· in collateral federal income tax consequences to certain ta-xpayers, including, \Vithout limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certainS corporations, individual recipients of Social Security or Railroad Retirement benefits arid taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. Prospective purchasers of the Series 2009-A Bonds should consult their tax advisors as to applicability of any such collateral consequences.

The issue price (the "Issue Price") for eilch maturity of the Series 2009-A Bonds is the price at which a substantial amount of such maturity of the Series 2009-A Bonds is first sold to the public. The Issue Price of a maturity of the Series 2009-A 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 Series 2009-A Bonds who dispose of Series 2009-A Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Series 2009-A Bonds in the

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initial public offering, but at a price different from the Issue !'rice or purchase Series 2009-A Bonds subsequent to the initial public offering should consult their own tax advisors.

If a Series 2009-A Bond is purchased at any time for a price that is less than the Series 2009-A Bond's stated redemption price at maturity (the "Reduced Issue Price"), 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 incon1e and is recognized vvhen a Series 2009-A Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser's election, as it accrues. Such treatment \Vould npply to any purchCtser who purchases a Series 2009-A Bond for a price that is less than its Revised Issue Price. The applicobility of the market discount rules may adversely affect the liquidity or secondilry market price of such Series 2009-A Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Series 2009-A Bonds.

An investor tnay purchnse a Series 2009-A Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as "bond pren1ium" and must be an1ortizcd by an investor on c1 constant yield basis over the ren1nining term of the Series 2009-A Bond in a manner that tokes into account potentiill call dates and call prices. An investor connot deduct amortized bond premium relilting to a tax-exempt bond. The amortized bond premiurn is treated as a reduction in the tax-exen1pt interest received. As bond premium is amortized, it reduces the investor's bosis in the Series 2009-A Bond. Investors who purchase a Series 2009-A Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the Series 2009-A Bond's basis for purposes of con1puting gain or loss in con·nection with the sale, exchange, redemption or early retirement of the Series 2009-A Bond.

There are or may be pending in the Congress of the United States legislative proposals, including son1e that carry retroactive effective dates, thnt, if enacted, could alter or arnend the federal tax matters referred to above or affect the market value of the Series 2009-A 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 enactment. Prospective purchasers of the Series 2009-A Bonds should consult their ovvn tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tilx legislation.

The Internal Revenue Service (the "Service") has ai1 ongoing program of auditing tax exetnpt obligations to detcn11ine vvhether, in the view of the Service, interest on such tax exempt obligations is includable in the gross incon1e of the ovvners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Series 2009-A Bonds. If an audit is commenced, under current procedures the Service may treat the Authority as a taxpayer and the Series 2009-A Bondholders may have no right to participate in such procedure. The commencement of an audit could .adversely affect the market Villue and liquidity of the Series 2009-A Bonds until the audit is concluded, regardless of the ultimate ou tcomc.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tilx exempt obligations, including the Series 2009-A Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any Series 200\1-A 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 Series 2009-A Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax retums. The reporting and backup

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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 Series 2009-A Bonds is exempt fron1 Cctlifon1ia personal incon1e tCI xes.

Ownership of the Series 2009-A Bonds mav result in other state and local tax consequences to certain taxpayers. Bond Counsel exPresses no opinion regarding i:lny such collateral consequences arising with respect to the Series 2009-A Bonds. Prospective purchasers of the Series 2009-A 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 issuance of the Series 2009-A Bonds is set forth in Appendix E.

Absence of Material Litigation

To the best knowledge of the Authority, there is no controversy of any nature now pending or threatened against the Authority which seeks to restrain or enjoin the sale or issuance of the Series 2009-A Bonds or which in any way contests or affects the validity of the Series 2009-A Bonds or any proceedings of the Authority taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or security provided for the payment of the Series 2009-A Bonds, the use of the Series 2009-A Bonds proceeds or the existence or powers of the Authority relating to the issuance of the Series 2009-A Bonds.

NO RATING

The Authority has not applied for, and does not contemplate making application to any rating agency for, the assignment of a rating to the Series 2009-A Bonds. See "BONDOWNERS' RISKS-Secondary Market; Potential Reductions in Bond Value."

UNDERWRITING

The Undenvriter has agreed, subject to certain conditions set forth in "the purchase contract between the Authority and the Underwriter, to purchase all of the Series 2009-A Bonds for an aggregate purchase price of $2,480,981.25, which represents the par amount of the Series 2009-A Bonds, less an underwriter's discount of $65,375.00, and less an original issue discount.of $68,643.75. The purchase agreement related to the Series 2009-A Bonds provides that the Underwriter will purchase all of the Series 2009-A Bonds if any are purchased, the oblig<1tion to n1ake such purchase being subject to certain tenns and conditions set forth in the purchase contract, the approval of certain legal matters by Bond Counsel and certain other conditions. The initial offering prices of the Series 2009-A .Bonds stated on the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell Series 2009-A Bonds to certain dealers and others at prices lower such initial offering prices.

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PROFESSIONAL FEES

In cOimection with the issuance of the Series 2009-A Bonds, fees peyable to certein prof~ssionals are contingent upon the issuance and delivery of the Series 2009-A Bonds. Those proh~ssiona Is include:

• Quint & Thimmig LLP, as Bond Counsel and as Disclosure Counsel; and

• Goodwin Consulting Group, as Dissemination Agent with respect to the Series 2009-A Bonds.

MISCELLANEOUS

Included herein are brief sun1mories of certoin docun1ents and reports, whlch summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any stetements in this Official Stetement involvingmetters of opinion, whether or not expressly so stated, are intended as such and notes representations of fact. This Official Stetement is not to bl~ construed as a contract or agreement between the Authority or the Community Facilities District and the purchasers or Owners of any of the Series 2009-A Bonds.

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EXECUTION

The execution and delivery of the Official Statement by the Authority have been duly authorized by the Authority's Board of Directors on behalf of the District.

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WEST PATTERSON FINANCING AUTHORITY

By: /_s I Cleve Morris Executive Director

THIS PAGE INTENTIONALLY LEFT BLANK

APPENDIX A

AUTHORIZED FACILITIES AND THE RATE AND METHOD

DESCRIPTION OF FACILITIES ELIGIBLE TO BE FINANCED BY THE DISTRICT

It is intended that the District will finance <111 or a portion of the costs of the following:

1. Water Well Test Drilling and Site Acquisition

The drilling of test wells and provision of monitoring equipment at sites along east of Highway 33 in the unincorporated area of the County, to determine water quality and quantity to serve development projects within and in the vicinity of the District, and the acquisition of va(ious well sites.

2. Zone 1 Water System

Construction of \Vater wells east of Highway 33 in the vicinity of Orange Avenue, ,,vater storage tanks, \Vater booster stations and new distribution lines to com1cct to existing City systems.

3. Sewer Collection System

Construction of sewer lines, including those connecting the developments within and in the vicinity of the District, to the City's wastewater treatment plant. The line segments include " line starting at Salado Creek ru1ming east to Ward Avenue, then cast to Highway 33 and continuing on Walnut Avenue running east to Poplar Avenue. The foregoing construction may be funded by the District directly, or by reimbursement to the Western Hills Water District (the "Water District") or other entity that provides funds for such constmction (the Funding SotJrce") if the facilities are financed with funds provided by the Funding Source but the Water District is unable to connect to the City's sewer collection system. If the sewer collection system is financed with funds provided by the Funding Source and the Water District is able to connect to the City's sewer collection system, the District will not fund these facilities but the Phase 2 Wastewater Treatment l'bnt will be expanded as described in item 5 below .

. 4. Northe(lst Storn1 Drain

Construction of a major storm drain line connecting the drainage facility at Highway 33 and M Street running east to Sycan1ore Avenue and north to a nevv drainage detention facility to be acquired, construction of this new drainage facility including pun1p station and force 1nain and construction of n line fron1 this new drainage detention facility to Salado Creek pipeline.

5. Phase 2 Wastewater Treatment Plant

Acquisition of 80 acres or sufficient acreage adjacent to or in the vicinity of the City's existing vvastcvvater treat1nent plant, to be used for wastevvater disposal, and construction of a 0.5 MGD Advanced Integrated Wastewater Pond System (AlPS) or similar system, at the City's existing vvaste\vater treatment plant.

Notwithstanding the foregoing, in the event that the Sewer Collection System is financed with funds provided by the Funding Source as described in item 3 above, and the

A-1

Woter District is ilble to connect to the City's sewer collection system such that the District is not obligated to reimburse the Funding Source for the costs of construction of the Sewer Collection System, the Phase 2 Wastewater Treatment Plant will be increased in size and scope to include the acquisition of 120 acres or sufficient acreage adja,cent to or in the vicinity of the City's existing wastewater treatment plant, to be used for wastewater disposal, and construction of a 1.25 MGD Advanced Integrated Wastewater Pond System (AlPS) or similar systems at the City's existing wastewater treatment plant, with. up to forty percent (40%) of the cost of the expanded project to be funded by the Water District or another Funding Source.

6. Sperry A V<mue, Baldwin Road and Ward A venue Street Improvements

Construction of Sperry Avenue to its ultimate right of way between Ward Avenue and Baldwin Road, Baldwin Road to its ultimate right of way from npproximately 5,800 feet north of Sperry Avenue to approximntely 2,000 feet south of Sperry Avenue, Ward Avenue to its ultin1ate right of way from Sperry Avenue to the southen1 end of Patterson sports park. Construction n1ay include streets, pipelines, traffic signals, undergrounding and/or relocation of utilities, Inedi<lllS, landscaping, sidewalks, curbs and gutters.

7. West A reo Fire Station

Construction of a fire station in the vicinity of Sperry Avenue and Baldwin Road, within or in the vicinity of the District, along with the acquisition of fire apporatus including but not lin1ited to a fire engine.

8. School Facilities

Acquisition, construction and equipping ·of elementary, middle and high school facilities (nnd related school district support facilities) which serve all or nny portion of the student population residing and expected by the Patterson Unified School District (the "I'USD") to reside in the District, including reimbursement for finoncing costs, costs of carry or other amounts incurred or expended pending funding by the District, consistent with Section 2 of the )oint Community Facilities Agreement- School Facilities, nmong the District, the PUSD, the Authority and the City of Patterson, as such agreement is originally executed and as it n1ay thereafter be amended in accordance \Vith its tcrn1s and incident to any annexation of property to the District.

9. Community Facilities

Acquisition, construction and equippmg of a City hall, police fncility, community center (including an aquatic center, gynumsium and senior center), and a corporation yard, and additions to the existing City sports park.

11. Water, Sewer and Drainage Fncility Oversizing

Costs related to the oversizing of water, sevver and drainage pipelines constructed within the residential developments in the District to accommodate development of the project commonly known as the West Pntterson Business Park.

11. Street Improvements

Construction of rondwny nnd landscaped median improvements in Sperry Avenue between Ward Avenue and Snbdo Creek Bridge, the construction of the Salado Creek Bridge widening, and the construction of street improven1ents on American Eagle coru1ecting to the

A-2

Ward Avenue/M Street intersection from the west boundary of the Heartland Ranch subdivision.

·12. Infrastructure Plan

Preparation of master infrastructure plan for public infrastructure to serve properties \vithin and adjacent to the District, including fire nu1ster plt1n.

·13. ZoneliWaterSystem

Water distribution system for area con1monly known as Patterson Gardens, including wilter wells, associated vvater tanks, pipelines and booster stations. ~nnstn1ction of an alternate water supply and distribution system should the Zone li Water System prove infeasible or impractical. Such alternative water supply system to include pipelines, distribution, tanks, water treatment, facilities and other facilities needed to operate a surface \Vater supply system or other altcrnilte water supply system.

14. Fire Facilities

Construction of a fire station east of Highway 33, within or in the vicinity of the DistricL and/or the acquisition of sufficient fire apparatus to be stationed in an existing fire station capable of serving the portion of the District east of Highway 33.

The public improvements shall include the acquisition of right of way and land, the costs of design, engineering and planning, the costs of any environmental or traffic studies, surveys or other reports, landscaping and irrigation, utility undergrounding, soils testing, pern1its, plan check and inspection fees., insurance, legal ·and rebtecl overhead costs, coordination and supen,ision and any other costs or appurtenances related to any of the foregoing;.

OTHER

The District may also finance or pay from special taxes any of the following:

·1. Bond related expenses, including underwriters discount, reserve fund, capitalized interest, bond and disclosure counsel and all other incidental expenses.

2. Administrative fees of the Authority, the City of Patterson, the Patterson Unified School District and the Bond trustee or fiscal agent related to the District and the Bonds.

3. Reimbursement of costs related to the formation of the District advanced bv the Authority, the City of Patterson, the Potterson Unified School District or any entity relat~d to any of the foregoing, or any landowrler or developer within the District, .as wel1 as reimbursement of any costs advanced by the Authority, the City of Patterson, the Patterson Unified School District or any entity related to any of the foregoing, or any landowner or developer within the District, for facilities, fees or other purposes or costs of the District.

4. Any obligations of the District to the Patterson Unified School District not satisfied from the proceeds of Bonds issued by the District.

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RATE AND METHOD OF APPORTIONMENT OF SPEClA L TAX

A Special Tax applicable to each Assessor's Parcel in the West Patterson Financing Authority Community Faciliti~s District No. 200"1-1 (Public Infrastructure) ]herein "CFD No. 2001-1"] shall be levied and collected according to the tax liability determined by the Board of Directors of the West Patterson Financing Authority or its designee, through the application of the appropriate amount or rate for Taxable Property, as described below. All of the property in CFD No. 2001-1, unless exempted by Ia w or by the provisions of Section G below, shall be taxed for the purposes, to the extent, and in the manner herein provided, including property subsequently annexed to CFD No. 2001-1 unless a separate Rate and Method of Apportionment of Special Tax is adopted for the annexation area.

A. DEFINITIONS

The terms hereinafter set forth have the following meanings:

"Acre or Acreage" means the land nrea of an Assessor's Parcel as sho\vn on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable Final Map or other recorded County parcel map.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, (commencing with Section 53311), Division 2 of Title 5 of the Government Code of the State of California.

"Administrative Expenses" means any or all of the following: the fees and expenses of any fiscal agent or trustee (including any fees or expenses of its counsel) employed in connection with any Bonds, and the expenses of the Authority or the City in carrying out their respective duties with respect to CFD No. 200"1-1 and the Bonds, including, but not limited to, the levying and collection of the Special Tax, the fees and expenses of their respective counsel, charges levied by the County Auditor's Office, Tax Collector's Office, and I or the County Treasurer's Office, costs related to annexing property into CFD No. 2001-1, costs related to property owner inquiries regarding the Special Tax, amounts needed to pay rebate to the federal governn1ent vvith respect to Bonds, costs associated with complying vvith continuing disclosure requirements under the California Govcnunent Code with respect to the Bonds and the Special Tax, and all other costs and expenses of the Authority and the City in any way related to the establishment or ad minis tra tiun of CFD No. 2001-1.

"Administrator" shall mean the person or firm designated by the Authority to administer the Special Tax according to this Rate and Method of Apportio1m1ent of Specie! Tax.

"Assessor's Parcel" or "Parcel" means a lot or parcel shown on an Assessor's Po reel Map with an assigned Assessor's Parcel number.

"Assessor's Parcel Map" means an official map of the County Assessor designating parcels by Assessor's Parcel Number.

"Authority" means the West Patterson Financing Authority.

"Board" means the Board of Directors of the Authority, acting as the legislative body of CFD No. 2001-1.

"Bonds" means bonds or other debt (as defined in the Act), whether in one or more series, issued, insured or assumed by CFD No. 20ll1-1 related to public infrastructure and/or

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improvements that will serve property included within CFD No. 2001-1 or intended to be a1mexed into CFD No. 2001-1.

"Capitalized Interest" means funds in any capitalized interest account o vii ila ble to pay debt service on Bonds.

"City" means the City of Patterson.

"County" means the County of Stanislaus.

"Developed Property" meons, in o ny. Fiscol Yecr, all Taxo ble Property in CFD No. 2001-1 for which a fin a I building permit inspection was conducted or a certifico te of occupancy issued by the City prior to June 1 of the preceding Fiscal Year.

"Final Map" means a final mop approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410, et seq.) that creates individual lots on which a building permit can be issued for construction of Residential Units without further subdivision of the lots.

"Fiscal Year" means the period starting july 1 and ending on the following june 30.

"JCFA-School Facilities" means the Joint Community Facilities Agreement-School Facilities, dated as of December 18,2001, among the Authority, the City, CFD ·No. 2001-1 and the Patterson Unified School District.

"Maximum Special Tax" n1eans the maximun1 Special Tax, detcrn1_ined in accordance with Section C, thot can be levied in any Fiscal Year.

"Other Property" means all Porcels of Developed Property which are not Residential Property or Senior Housing Property, as defined below.

"Phase I" means the property making up the planned developments known, ot the time of CFD form8tion, os Walker Ranch I, Walker Ranch !I, Creekside Meadows and Cascioro­Shire Place and identified; at the time of CFD formation, bv Assessor's Parcel numbers 021-27-06, 021-27-()8, 021-27-09, and 021-27-10. -

"Planned Development" means, for a specific development project, an adopted Master Plan approved pursuant to the Planned Development Ordimnce of the City of Patterson.

"Proportiomtely" means, for Developed Property, that the ratio of the actual Special Tax levied in any Fiscal Year to the Maximum Special Tax authorized to be levied in that Fiscal Year is equal for all Assessor's Parcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax to the Maximum Special Tax is equal for all Assessor's Parcels of Undeveloped Property.

"Public Property" means any property within the boundaries of CFD No. 2001-1 that is owned by or irrevocably offered for dedication to the federal govenm1ent, State of California or other local governn1ents or public agencies.

"Residential Property" means all Parcels of Developed Property for which a building permit and/or certificate of occuponcy was issued for one or more Residential Unit(s), as defined below. Multi-family property (i.e., apartment units) shall be categorized os Other Property for purposes of this Rate and Method of Apportionment of Special Tax.

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"Residential Unit" means a residential dwelling unit within a single family detached or single family attached building, including a single family home, andc'individual condominium, townhome, duplex, triplex and fourplex units.

"Senior Housing Property" means all Developed Property for which a building permit has been issued for a residential project or community which prohibits residents that are eighteen years of age or less.

"Special Tax" means a Special Tax levied in any Fiscal Year to pay the Special Tax Requirement.

"Special Tax Requirement" rneans the £ln1ount necessary in any Fi~cal Year (i) to pay principal and interest on Bonds which is due in the calendar year which begins in such Fiscal Year, (ii) to create or replenish reserve funds, (iii) to cure any delinquencies in the payment of principal or interest on Bonds which have occurred in the prior Fiscal Year or (based on delinquencies in the payment of Special Taxes which have already taken place) arc expected to occur in the Fiscal Year in which the tax will be collected, (iv) to pay Administrative Expenses, (v) to satisfy any unfunded obligations of CFD No. 2001-1 to the Patterson Unified School District under Section 2 of the JCFA-School Facilities, and (vi) to pay the costs of public improvements and public infrastructure authorized to be financed by CFD No. 2001-1. The amounts referred to in clauses (i) and (ii) of the preceding sentence may be reduced in any Fiscal Year by (i) interest eamings on or surplus balances in funds and accounts for the Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to the Bond indenture, Bond resolution, or other legal document that set forth these terms, (ii) proceeds from the collection of penalties associated with delinquent Special Taxes, and (iii) any other revenues available to pay debt service on the Bonds as determined by the AdministratoL ·

"Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2001-1 which are not exempt from the Special Tax pursuant to law or Section G below.

"Undeveloped Property" means, in any Fiscal Year, all Parcels of Taxable Property that are not Developed Property pursuant to the definition set forth in this Section A.

"Willian1son Act Property" n1eans, in any Fiscal Year, all Assessor's Parcels in CFD No. 20Cl'l -] that rem a in subject to contracts set in place pursuant to the California Land Conservation Act (Williamson Act), including Parcels for which a Notice of Non-Renewal have been filed and for which the contract has not yet terminated. Notwithstanding the foregoing, any Parcel within CFD No. 2001-1 that was Taxable Property in any Fiscal Year and was subsequently put into a Williamson Act contract shall continue to be Taxable Property for purposes of this Rate and Method of Apportionment of Special Tax.

"Zone 1" means the geographic area identified in Fiscal Year 2001-02 by Assessor's Parcel number 021-27-10.

"Zone 2" means all Parcels in CFD No. 2001-1 that are not within Zone I.

B. DATA FOR ANNUAL ADMINISTRATION OF SPECIAL TAX

On or about july 1 of each Fiscal Year, the Administrator shall identify the current Assessor's Parcel numbers for Taxable Property within the CFD. The Administrator shall also (i) determine whether each Pnrcel is located within Zone l or Zone 2, (ii) determine whether each Parcel is Developed Property or Undeveloped Property, (iii) for Developed Property, determine whether each Parcel is Residential Property, Senior Housing Property or Other

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Property, and (iv) determine whether any property that had been Williamson Act Property in prior Fisc a 1 Years has become Taxable Property for the then current Fiscal Year.

C. MAXIMUM SPEClA L TAX

Table 1 below identifies the Maximum Special Tax for Texable Property within CFD No. 2001-1:

TABLE 1 WPFA CFD NO. 2001-1

MAXIMUM SPECIAL TAXES -Maxi11111111 Special Tax

Tifpc of l'ropcrht Fiscal Ycnr 2002-03 Residential Property $1,836 per Residential Unit

Senior Housing Propertv $2,000 per Acre Other Propertv $15,735 _per Acre

Undeveloped Property $15,735 per Acre

* On July 1, 2003 and on each July 1 thereafter, all figures shown in Table 1 above shall be increased by an amount cquel to 2.0% of the amount in effect for the prior Fiscal Year.

Pursuent to Section 53321 (d) of the Act, the Special Tax levied against a Perce! used for private residential purposes shall under no circumstances increase more than ten percent (1 0%) e s a consequence of delinquency or de fa u It by the owner of any other I' a reel or Parcels end shell, in no event, exceed the Maximum Special Tax in effect for the Fiscal Year in which the Special Tax is being levied.

D. AMENDMENTS TO THE PLANNED DEVELOPMENT

The Maximum Specie! Tex set forth for Residential Property in Table 1 above is calculilted besed on the number of Residential Units required by the Planned Development at the time of fonnatimi of CFD No. 2001-1. If the number of Residential Units required by the Planned Development is reduced in future Fiscal Years or if the amount of Senior Housing Property proposed is greater than the Acreage anticipated at the time of formation of CFD No. 2001-1, the City shall apply the following steps:

Step J:

Step 2:

Step 3:

The Administretor shall calculate the Maximum Special Tex revenues thet could be collected from the property affected by the proposed Planned Development revision (the "Affected Property") prior to the revision being approved;

The Administretor shall calculate the Maximum Special Tax revenues that could be collected from the Affected Property if the Plam1ed Development revision is approved;

If the amount determined in Step 2 is higher than that calculated in Step 1, the Pla1med Development revision may be epproved without requiring a mandatory prepayment. If the revenues calculated in Step 2 are less then those calculated in Step 1, one of the following must occur:

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(a) The Planned Development revision is not approved by the City, or

(b) The landowner requesting the Pla1med Development reviSion prepays a portion of the Special Tax obligation that would have applied to the Affected Property prior to approval of the revision in an amount sufficient to retire a portion of the Bonds and tnaintain required debt service coverage with the reduced Maximum Special Tax revenues that will result after the Planned Development revision is approved. The required prepayment shall be due prior to approval of the revision to the Planned Development and shall be calculated using the formu Ia set forth in Section H below.

E. METHOD OF LEVY OF THE SPECIAL TAX

Commencing with Fiscal Year 2002-03 and for each following Fiscal Year, the Administrator shall determine the Special Tax Requirement to be collected in that Fiscal Year, including any unfunded obligations to the Patterson Unified School District under Section 2 of the JCFA-School Facilities. A Special Tax shall then be levied according to the following steps:

Step 1.

Step 2.

Step 3:

The Special· Tax shall be levied Proportionately on each Parcel of Developed Property up to 100% of the Maximum Special Tax for each Parcel for such Fisca I Year determined pursuant to Section C;

If additional revenues are needed after Step 1, and after applying Capitalized Interest to the Special Tax Requirement, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fiscal Year determined pursuant to Section C;

If additional revenues are needed after applying the first two steps, the Special Tax shall be levied Proportionately on each Parcel of Public Property within the CFD exclusive of property exempt from the Special Tax pursuant to Section G below, up to 100% of the Maximum Special Tax for Undeveloped Property for such Fisc<:1l Year dctern1ined pursuant to Section C.

F. MANNER OF COLLECTION OF SPECIAL TAX

The Spe~ial Taxes for CFD No. 2001-1 shall be collected in the same" manner and at the san1e tin1e as ordinctry a.d valorern property taxes, provided, however, that prepayments are permitted as set forth in Section 1-1 below and provided further that the City may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner, and may collect delinquent Special Taxes through foreclosure or other available methods.

The Specia I Tax shall be levied and collected until principal and interest on Bonds have been repaid and authorized facilities to be constructed directly from Special Tax proceeds have been completed. However, in no event shall a Special Tax be levied after Fiscal Year 2049-2050.

G. EXEMPTIONS

Notwithstanding any other provision of this Rate and Method of Apportionment of Special Tax, no Special Tax shall be levied on Parcels of Public Property, except as otherwise provided in the Act. In addition, no Special Tax shall be levied in any year on 1) Williamson

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Act Property (as defined in Section A above) and, 2) property within Zone l unless and until the eMiier of, a) the owner of the property within Zone 1 files a written request with the Authority requesting that the property in Zone 1 be subject to the levy of the Special Tax, or b) the recordation of the first Final B Map pertaining to the property in Zone 1 that creates buildable lots for Units, as such terms not otherwise defined herein are defined in the Walker Ranch 11 Development Agreement approved by the City Council of the City on June 5, 2001 by its Ordinance No. 618. In the first Fiscal Year after Williamson Act Property is no longer classified as such, or with respect to property in Zone 1, the aforementioned items a) or b) have occurred, all such former Williamson Act Property or Parcels within Zone 1 (except Parcels of Public Property, if any) shall be considered Taxable Property and shall be taxed at the same rates that Parcels of Taxable Property within Zone 2 are taxed in that Fiscal Year.

H. PREPAYMENT OF SPECIAL TAX

The following definitions apply to this Section H:

"Remaining Facilities Costs" means the Public Facilities Requirement (including all obligations to the Patterson Unified School District under Section 2 of the ]CFA­School Facilities) minus public facility costs funded by Outstanding Bonds, developer equity and I or any other source of funding.

"Outstanding Bonds" means all Previously Issued Bonds which remain outstanding, with the following exception: if a Special Tax has been levied against, or already paid by, an Assessor's Parcel making a prepayment, and a portion of the Special Tax will be used to pay a portion of the next principal payment on the Bonds that remain outstanding (as determined by the Administrator), that next principal payment shall be subtracted from the total Bond principal that remains outstanding, and the difference shall be used as the amount of Outstanding Bonds for purposes of this prepayment formula.

"Previouslv Issued Bonds" means all Bonds that have been issued prior to the date of prepaymei1t.

"Public Facilities Requirements" shall initially mean $45,491,327 in 2001 dollars, which shall increase on JanuMy 1, 2002, and on each January l thereafter by the percentage increase, if any, in the construction cost index for the San Franc'isco region for the prior twelve (12) month period as published in the Engineerin~ News Record or other comparable source if the Engineering News Record is discontinued or otherwise not available. The Public Fi!cilities Requirements inay be increased each tin1e property is annexed into CFD No. 2001-1 by an amount determined to be needed to fund additional facilities required to serve the annexing property, but in no event in an amount greater then the net construction proceeds that can be supported by the Maximum Special Tax revenues that can be collected from property am1exing into the CFD, as determined by the Administrator. At the time of any prepayment, the Public Facilities Requirements may also mean a lower number determined by the City to be sufficient to fund improvements authorized to be funded by CFD No. 200"1-l (including all obligations to the Patterson Unified School District under Section 2 of the ]CFA-School Facilities). Notwithstanding the foregoing, costs related to the JCFA­School Facilities shall increase until fully paid or made available to the Patterson Unified School District, on May 1, 2002 and on each May 1 thereafter by any increase in the Marshall & Swift Class D Wood Frame Index from May 1, 20ll1.

The Special Tax obligation applicable to an Assessor's Parcel in CFD No. 2001-1 may be prepaid and the obligation of the Assessor's Parcel to pay the Special Tax permanently

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satisfied as described herein, provided that a prepayment may be n1ade·only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the City with written notice of intent to prepay. Within 30 days of receipt of such written notice, the City or its designee shall notify such owner of the prepayment amount for such Assessor's Parcel. Prepayment must be made not less than 75 days prior to any redemption date for Bonds to be redeemed with the proceeds of such prepaid Special Taxes.

The Prepayment A mount sha II be calculated as follows: (capitalized terms as defined below):

Bond Redemption Amount plus Renu1ining Facilities Atnount plus Redemption Premium plus Defeasance Requirement plus Administrative Fees and Expenses less Reserve Fund Credit equals Prepay1nent An1ount

As of the proposed date of prepayment, the Prepayment Amount shall be determined by application of the following steps:

Step 1.

Step 2.

Step 3.

Step 4.

Step 5.

Step 6.

Step 7.

Compute the total Maximum Special Tax that could be collected from the Assessor's Parcel prepaying the Special Tax in the Fiscal Year in which prepayment would be received by the City.

Divide the Maximum Special Tax computed pursuant to Step 1 for such Assessor's Parcel by the lesser of (i) the Maximum Special Tax revenues that could be collected in that Fisca I Year from property in the entire CFD, or (ii) the Maximum Special Tax revenues that could be generated at buildout of property in the CFD based on anticipated land uses at the tin1e the prepayn1ent is calculated.

Multiply the quotient com'puted pursuant to Step 2 by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (tile "Bo11d RcdcniJIIioll AniOillii").

Compute the current Remaining Facilities Costs (if any).

Multiply the quotient computed pursuant to Step 2 by the amount determined pursuant to Step 4 to con1pute the a1nount of Ren1aining Facilities Costs to be prepaid (tile "RCIIlnillillg Fncilit.ics AniOllllf").

Multiply the Bond Redemption Amount computed pursuant to Step 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the" Rcdclllplion Frcllliwn").

Compute the amount needed to pay interest on the Bond Redemption Amount starting with the first Bond interest payment date after which the prepayment has been received until the earliest redemption date for the Outstanding Bonds. However, if Bonds are callable at the first interest payment date after the prepayment has been received, Steps 7, 8 and 9 of this prepayment formula will not apply.

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Step 8:

Step 9:

Step ll.

Step 11.

Step 12.

Compute the amount of interest the City reasonably expects to derive from reinvestment of the Bond Redemption Amount plus the Redemption Premium from the first Bond interest payment date after which the prepayment has been received until the redemption date for the Outstanding Bonds.

Take the amount computed pursuant to Step 7 and subtract the amount computed pursuant to Step 8 (the "Dc{cnsnucc Rcquircmmt").

The administrative fees and expenses of CFD No. 2001-·1 are as calculated by the Administrator and include the costs of computation of the prepayment, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Admiuistmtivc Fees n111i Expcuscs").

If and to the extent so provided in the indenture pursuant to which the Outstanding Bonds to be redeemed were issued, a rest'rve fund credit shall be calculated as a reduction in the applicable reserve fund for the Outstanding Bonds to be redeemed pursuant to the prepayment (the "Rcscn>e Fuud Cwd it").

The Spc'Cial Tax prepayment is equal to the sum of the amounts computed pursuant to Steps 3, 5, 6, 9, and 10, less the amount computed pursuant to Step 11 (the "PrcpnifiiiCJJI Amount").

A partial prepayment may be made in an amount equal to any percentage of full prepayment desired by the party making a partial prepayment. The Maximum Special Tax that can be levied on a Parcel after a partial prepayment is made is equal to the Maximum Special Tax that could have been levied prior to the prepayment, reduced by the percentage of the full prepayment that the partial prepayment represents, all as determined by or at the direction of the Administrator.

I. ANNEXATION CATCH-UP TAX

If anv Parcel within Phase I chooses not to be included in the CFD when the remainder of Phase I property elects to be subject to Special Taxes levied within the CFD, such Parcel shall be subject to an" Annexation Catch-up Tax" (implemented, if necessary under the Act, by means of the establislunent of an improvement area of CFD No. 2001-]) that will become due and payable after the Parcel has annexed into CFD No. 2001-1 and at such time as a successful election takes place pursuant to Section 53339.7 of the Act. Notwithstanding the foregoing, Parcels in Zone 1 shall not be subject to the Armexation Catch-up Tax. Proceeds from collection of the Am1exation Catch-up Tax shall be used to call Bonds and reduce the Special Tax being levied within the CFD. The Annexation Catch-up Tax shall be equal to the sum of the following:

(1) Missed Special Tax Payments- the total Special Tax amount that would have been levied on the Parcel proposing a1mexation had the Parcel been included in CFD No. 2001-1 at the time the reniainder of the applicable Phase was included in the CFD, as determined by the Administrator. Only Special Tax payments that would have been made through the first ten years after the applicable Phase was included in the CFD or up to the time of annexation, whichever is less, shall be included. Such amount shall be determined by evaluating the amount that would have been levied in each prior Fiscal Year on property in the CFD.

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(2) Interest Carr)!- the annual amounts calculated in (I) above shall be increased each year at a 10% interest rate from the first Fiscal Year in which Special Taxes were levied on behalf of CFD No. 2001-1 through and including the Fiscal Year in which the Annexation Catch-up Tax is being calculated (unless the annexing Pared is to be included on the tax roll for the Fisca I Year in which the Annexation Catch-up Ti1x is being calculilted) or up to a maximum of ten years, whichever is less.

In addition to the Annexation Catch-up Tax, any party requesting annexation into CFD No. 200'1-1 shall pay all costs associated with the annexation process, including the cost of City staff time, consultant fees, recording costs, and any other costs deemed appropriate by the City.

J. INTERPRETATION OF SPECIAL TAX FORMULA

The Authority reserves the right to n1ake minor <1dn1inistmtive and technical chZ~nges to this document that do not materially affect the rate and method of apportioning Special Taxes. In addition, the interpretation and application of any section of this document shall be left to the Authority's discretion. Interpretations may be made by the Authority by ordinance or resolution for purposes of clarifying ilny vngueness or ambiguity in this Rate and Method of Apportionment.

K. APPEAL OF SPECIAL TAX LEVY

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Administrator not later than one calendar year after having paid the Special Tax that is disputed. The Administrator shall promptly revievv the appeal, and if necessary, meet with the property owner, consider vvritten and oral evidence regarding the amount of the Special Tax, and decide the appeal. If the property owner disagrees with the Administrator's decision relative to the appeal, the owner may then file a written appeal with the Board whose subsequent decision shall be binding. If the decision of the Administrator (if the appeal is not filed with the Board) or the Board (if the appeal is filed with the Board) requires the Special Tax to be modified or changed in favor of the property owner, no cash refund shall be made for prior years' Special Tax levies, but an adjustment shall be made to the next Special Tax levy. This procedure shall be exclusive and its exhaustion by any property fn,vner shall be a condition precedent to any legal action by such owner.

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APPENDIXB

SUMMARY OF THE FISCAL AGENT AGREEMENT

The following is~ brief summary of certain provisions of the Fiscal Agent Agreement not otherwise described in the text of this Official Statement. Such summary is not intended to be definitive, and reference is made to the text of the Fiscal Agent Agreement for the complete terms thereof.

Definitions

Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following mcClnings \vhcn used in this sun1mary:

"Administrative Expenses" means costs directly related to the administration of the District consisting of the costs of computing the Special Taxes and preparing the am1ual Special Tax collection schedules (whether by the Treasurer or designee thereof or both) and the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent; fees and costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required of it under the Fiscal Agent Agreement; the costs of the Authority, the City or any designee of either the Authority or the City of complying with the disclosure provisions of the Act, the Continuing Disclosure Agreement and the Fiscal Agent Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the costs of the Authority, the City or any designee of either the Authority or the City reloted to an appeal of the Special Tax; any an1ounts required to be rebated to the federal goverrunent under the Fiscal Agent Agrecn1ent; any expenses related to releases fron1 the Escrow Fund; any amounts required to be rebated to the federal government under the Fiscal Agent Agreement; an allocable share of the salaries of the· City staff directly related to the foregoing and a proportionate amount of City general adn1 inistr(l tive overhead rei a ted thereto. Ad rninistra tive Expenses sha II olso include amounts advanced by the Authority .for any administrative purpose of the District, including costs related to prepayments of Speciol Taxes, recordings related to such prepaytnents and satisfaction of Special Taxes, anuntnts advanced to ensure compliance vvith the federal rebate provisions of the Fiscal Agent Agreement, and the costs of coinmencing foreclosure of delinquent Special Taxes. ':Administrative Expenses" shall include any and all "Administrative Expenses," as such term is defined in Section 1.03 of the Subordinate Fiscal Agent Agreernent.

"Administrative Exgense Fund" means the fund by that name established by the Fiscal A gent A greetnent.

"Agreen1ent" or "Fiscal Agent Agreement" means the Fiscal Agent Agreement, as an1ended and supplemented by Supplemental Agreement No. 1, by Supplemental Agreement No. 2, by Supplemental Agreement No. 3, by Supplemental Agreement No. 4, and by Supplemental Agreement No. 5, and as it may be further amended or supplemented from tin1e to time by any additional Supplemental Agreement entered into pursuant to the provisions thereof.

"Am1ual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of the provisions of the Fiscal Agent Agreement providing·for m~ndatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in

Il-l

such Bond Year (including any n1andatory sinking payment due in such Bond Year pursuant to the Fiscal Agent Agreement).

< "Auditor" means the auditor/controller of the County of Stanislaus.

"Bond Year" means the one-year period beg_inning September 2nd in each year and ending on September 1st in the following year.

"Bonds" means the Series 2002-A Bonds, the Series 2003-A Bonds, the Series 2003-B Bonds, the Series 2004-A Bonds, the Series 2004-B Bonds, the Series 200'1-A Bonds, and, if the context requires, any additional Parity Bonds, at any time Outstanding under the Fiscal Agent Agreement or any Supplementa I Agreement.

"Business Day" means any day other than (i) a Soturdil)' or a Sunday or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office arc authorized or obligated by law or executive order to be closed.

"CDIAC" means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau there.to.

"Continuit!g Disclosure Agreement" means, collectively, that certain· Continuing Disclosure Certificate of Authority executed by the Authority on the Closing Date, and any continuing disclosure certificate of a simibr nature executed by the Authority in connection \Nith the issuilnce of illl)' Parity Bonds, ilS each such certifkilte is originaJJy exectJted or asH may be amended fron1 time to ti1ne in accordance \1\'ith its tern1s.

"Costs of Jssuancc" 1neans itctns of expense payable or rei1nbursable directly or indirectly by the Authority or the City and related to the authorization, sale and issuance of the Bonds, which items i1f expense shall include, but not be limited to, printing costs, costs· of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its first am1ual administration fee, expenses incurred by the City or the Authority in connection with the issuance of the Bonds and the establishment of the District, special tax consultant fees and expenses, preliminary engineering fees and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel, financial consultants' fees, charges for execution, transportation and safekeeping of the Bonds, landowner expenses related to the District formation, School District costs related to the District formation, and other costs, charges and fees in connection with the foregoing.

"Costs of Issuance Fund" means the fund by that name established by the Fiscal Agent Agreement.

"Debt Service" means the scheduled amount of interest and amortization of principal payable on the Bonds during the period of computation, excluding amounts scheduled during such period whkh relate to principal which has been retired before the begimting of such period.

"Fair Market Value" means the price at which a willing buyer would purchase the investment from " willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accorde1nce with applicable regulations under the Code, (ii) the invest1nent is nn agreetnent \1\'Hh specifically negotiated withdrawal or reinvestn1ent provisions and a

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specifically negotiated interest rate (for cx(1mple, a guaranteed investn1ent contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordonce with applicable regulations of the United States Burmu of Public Debt, or (iv) the investment is the Local Authority Investment Fund of the State of California but only if at illl times during which the investment is held its yield is reasonably expected to .be equal to or greater than the yield on a reasonably comparable direct obligation of the United States.

"Feder" I Securities" means any of the following which are non-callable and which at the time of investment are legal investments under the laws of the State of Califomia for funds held by the Fiscal Agent: (i) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing vvhich are con1monly referred to as "stripped" obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obliga lions of the Export-Import Bank, (b) certificates of beneficia I ownership issued by the Fanners Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or pass-through obligations issued and gl1aranteed by the Governntent National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America.

"Fiscal Agent" means the Fiscal Agent appointed by the Authority and acting as an independent fiscal agent with the duties and powers provided in the Fiscal Agent Agreement, its successors and assigns, ond any other co_rporation ·or association which n1ay at any time be substituted in its place, as provided in the Fiscal Agent Agreement. · ·

11 Fiscal Year" means any twelve-n1onth period extending fron1 July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive.

"General Account" means the account by that name within the Improvement Fund established by the Fiscal Agent Agreement.

"lmj2rovement Fund" means the fund by that name created by and held by the Fiscal Agent Agreement.

"Independent Financial Consultant" Tnean.'i any consultant or fim1 of such consultants appointed by the Authority, the City or the Treasurer, and who, or each of whom: (i) has experience in matters rei a ting to the issuance and I or administration of bonds under the Act; (ii) is in fact independent and not under the domination of the Authority; (iii) does not have any substantial interest, direct or indirect, with or in the Authority, or any owner of real property in the District, or any real property in the District; and (iv) is not cmmected with the City or the Atithority as an officer or employee of the City or the Authority, but who may be regularly retained to make reports to the City or the Authority.

"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds.

"Moody's" tneans Moody's Investors Service, and any successor thereto.

"Officer's Certificate" means a written certificate of the Authority signed by an Authorized Officer of the Authority.

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"Ordinance" tneans any ordinance of the Authority levying the Special Taxes.

"Original Purchaser" mci1ns Wulff, Hansen & Co., the first purchaser of the Bonds from the A u·thority.

"Outstanding:," vvhen used as of any particular tin1e with reference to Bonds, 1neons (subject to the provisions of the Fiscal Agent Agreement) all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deen1ed to have been paid within the 1neaning of the Fiscal Agent Agreement; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Authority pursuant to the Fiscal Agent Agreement or any Supplemental Agreement.

"Owner" ur "Bondowncr" means any person who shall be the registered owner of any Outstanding Bond.

"ParticiRating Underwriter" shall have the n1caning ascribed thereto in the Continuing Disclosure Agreen1ent.

"Permitted Investments" means any ·of the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities; (b) time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank (including the Fiscal Agent and its affiliates) or trust con1pany, or a state or federal savings and Joan association; provided, that the certificates of deposit shall be one or more of the following: continuously and fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (a) of this definition of Permitted Investments which shall have a tnarket value, as dctennined on n n1arked-to~1narket bnsis calculated <1t least weekly, and exclusive of accrued interest, of not less than 102 percent of the principal amount of the certificates on deposit; (c) commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or S&P, which commercial paper is lin1ited to issuing corporations that are organized and operating \Nithin the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an" A" or higher rating for the issuer's debentures, other than commerciel paper, by either Moody's or S&P, provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding con11nercial paper of an issu-ing corporation; (d) a repurchase agreen1ent \Vith a state or nationally charted bank or trust company or a national banking association or goverrunent bond dealer reporting to, trading vvith, and recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the following conditions are satisfied: (1) the agrec1ncnt is sect~red by any one or n1ore of the securities described in subdivision (a) of this definition of Permitted Investments, (2) the underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least one hundred million dollars ($1 00,000,000) and which is independent of the issuer of the repurchase agreement, and (3) the underlying securities are maintained at a market value, as determined on a n1arked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested; (e) an investn1ent agreen1ent or guaranteed investn1ent contract with, or guaranteed by, a financial institution (not including any insurance con1pany) the long-tenn unsecured obligations of which are rated "AA" or better by Moody's and S&P at the time of initial investment. The inveshnent agreen1ent shall be subject to a dovvngrade provision vvith at least the folJo\,ving requirements: (l) the agreement shall provide that within five business days after the financia-l institution~s long-term unsecured credit rating has been withdrawn, suspended, other than because of general withdrawal or suspension by Moody's or S&P from the practice of rating

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that debt, or reduced below "AA-" by S&P or below "Aa3" by Moody's (these events arc called "rating downgrades") the financial institution shaH give notice to the Fiscal Agent nnd, within the fivt ..... day period, and for as long as the rating.do\\Tngradc is in effect, shall deliver in the name of the Fiscal Agent to the Fiscal Agent federal securities (lllo\ved aS investments under subdivision (a) of this definition of Permitted Investn1ents with aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement invested with the financial institution at that time, and shall deliver additional allowed federal securities as needed to rnaintain an aggregate current n1arket value equal to at least 105 percent of the principal amount of the investment agn.'Cment within three days after each evaluation date, which shall be at least weekly, and (2) the agreement shall provide that, if the financial institution's long-tern1 unsecured credit rating is reduced be]ovv "A3" by Moody's or below" A-" by S&P, the Fiscal Agent may, upon not more than five business days' \"''ritten notice to the financial institution, withdraw the investn1ent agreement, vvith accrued but unpaid interest thereon to the date, and terminate the agreement; (f) the Local Agency Investment Account of the State Treasurer of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the Califomia Govemment Code; and (g) investments in a money n1arket account (including any ilC~ounts ·of the Fiscill Agent or its affiliates) rated in the highest rating category by Moody's or S&P.

"Project" means the facilities more particularly described in the Resolution of Formation.

"Reserve Requirement" means, as of any date of calculntion an amount equal to the least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the then Outstanding principal amount of the Bonds.

"S&P" means Standard & Poor's Ratings Service, a division of McGraw-Hill, and any successor thereto.

"School District" means the Patterson Unified School District.

"School District Agreement" means the Joint Community Facilities Agreement- School Facilities, dated as of December lil, 2001, among the Authority, the City, the School District and the District, as in effect on the Closing Date or as thereafter amended in accordance with its tern1s.

"SJ>ecial Tax Prq2ayments" means the proceeds of any Special Tax prepayments received by the Authority, as calculated pursuant to the Rate and Method of Apportimuncnt of the Special Taxes for the District, less any administrative fees or penalties collected as part of any such prepayment.

"Special Tax Revenues" means the proceeds of the Special Taxes received by the Authority, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. "Special Tax Revenues" does not include any penalties collected in cmmection with delinquent Special Taxes. "Special Tox Revenues" does not include any amounts to be transferred to the Subordinate Fiscal Agent pursuant to clauses (ii), (iii) or (iv) of the second paragraph of Section 4.06(A) of the Fiscal A gent A green1ent.

"Special Taxes" means the special toxes levied within the District pursuant to the Act, the Ordinance and the Fiscal Agent Agreement.

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"Subordinate Bonds" means the Series 2009-B Bonds and any Parity Bonds, as such term is defined in the Subordinate Fiscal Agent Agreement.

"Subordinate Fiscal Agent" means the entity serving as the Fiscal Agent under and as such term is deiined in the Subordinate Fiscal Agent Agreement.

"Subordinate Fiscal Agent Agreen1ent" means the Fiscal Agent Agreement, dated as of july 1, 2009, between the Authority, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent, as originally executed and as it may thereafter be amended or supplemented in accordance with its terms.

"SuJ2_P-lemental Agreement" means an agreen1ent the execution of »7llich is authorized by a resolution which has been duly adopted by the Authority under the Act and which agreement is amendatory of or supplemental to the Fiscal Agent Agreement, but only if and to the extent that such agree1nent is specifically nuthorized under the Fiscnl Agent Agreement.

"Tax Consultant" means GoodWin Consulting Grtn1p or another independent financial or tax consultant retained by the Authority or the City for the purpose of computing the Special Taxes.

"Treasurer" means the Treasurer of the Authority or such other officer or employee of the Authority performing the functions of the chief financia I officer of the Authority.

"2009-A and 2009-B Costs of Issuance" means items of expense payable or reimbursable directly or indirectly by the Authority and related t') the authorization, sale and issuance of the Series 2009-A Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, dosing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including annual administration fees, expenses incurred by·the Authority or the City in com1ection with the issuance of the Series 2009-A Bonds, special tax consultant fees and expenses, appraisal fees, preliminary engineering fees and expenses, bond (underwriter's) discount, legal fees and charges, including bond counsel, disclosure counsel, financial consultants' fees, charges for execution, transportation and safekeeping of the Series 2009-A Bonds and other costs, charges and fees in connection with the foregoing. In addition to the foregoing, "2009-A and 2009-B Costs of Issuance" also includes any and all "Costs of Issuance," as such tenn is defined in Section 1.03 of the Subordinate Fiscal Agent Agreement.

"2009-A and ?()09-B Costs of Issuance Fund" means the fund by that name established and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

Funds and Accounts

The Fiscal Agent Agreement provides for the following funds, in addition to the Specia I Tax Fund, the Bond Fund and the Reserve·Fund described in the text of this Official Statement:

Improvement Fund. There is established under the Fiscal Agent Agreement as a separate fund to be held by the Fiscal Agent, the Improvement Fund, to the credit of which deposits shall be made as required by the Fiscal Agent Agreement, and within the Improvement Fund a General Account and a PUSD School Facilities Account. Moneys in the General Account of the Improvement Fund shall be held in trust by the Fisc~] Agent for the benefit of the Authority, and shall be disbursed for the payment or reimbursement of costs of the Project. Moneys in the PUSD School Facilities Account of the Improvement Fund shall be held in trust by the Fiscal Agent for the benefit of the School District, and shall be disbursed for

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the payment or reimbursement of PUSD School Facilities. Amounts in the Improvement Fund, including the accounts therein, are not pledged as security for the Bonds.

Disbursements from the General Account of the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer's Certificate which shall: (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made (which shall be for payment of it Project cost or to reimburse expenditures of the Authority or any other party for Project costs previously paid), that the disbursement is it proper expenditure from the General Account of the Improvement Fund, and the person to which the disbursement is to be paid; and (ii) certify that no portion of the amount then being requested to be disbursed was set forth in any Officer's Certificate previously filed requesting a disbursement.

Disbursements from the PUSD School Facilities Account of the Improvement Fund shall be made by the Fiscal Agent upon receipt of a certificate of the Superintendent or Business Manager of the School District which shall set forth the amount required to be disbursed, the purpose for which the disbursement is to be made (which shall be for payment of a cost reb ted to the acquisition, construction and I or equipping of the PUSD School Facilities or to reimburse expenditures of the School District for costs related to the acquisition, construction and I or equipping of the PUSD School Facilities previously paid), that the disbursement is for an obligation incurred and not for reinvestment, and that such disbursement is a proper expenditure from the PUSD School Facilities Account in accordance with the School District Agreement.

Moneys in the accounts within the Improvement Fund will be invested and deposited in accordance with the Fiscal Agent Agreement. Interest eitmings and profits from the investment and deposit of amounts in the General Account of the Impwvement Fund shall be retained in the General Account of the Improvement Fund to be used for the purposes of the General Account of the Improvement Fund. Interest earnings and profits from the investment and deposit of amounts in the PUSD School Facilities Account of the Improvement Fund shall be retained in the PUSD School Facilities Account of the Improvement Fund to be used for the purposes of thePUSD School Facilities Account of the Improvement Fund.

Upon the filing of an Officer's CertificMe stating that the Project has been completed ilnd that all costs of the Project have been paid,.or that any such costs are not required to be paid from the General Account of the Improvement Fund, the Fiscal Agent shall transfer the amount, if any, remaining in the General Account of the Improvement Fund to the Bond Fund to be used to pay debt service on the_ Bonds on the next Interest Payment Date and the General Account shall be closed. When no an1ounts remain on deposit in the PUSD School Facilities Account and the School District certifies to the Fisc a I Agent that no further deposits to the PUSD School Facilities Account are required to be made under the terms of the School District Agreement, the PUSD School Facilities Account shall be closed.

2009,A and 2009-B Costs of Issuance Fund. There is established under the Fiscal Agent Agreement a separate fund to be known as the "2009-A and 2009-B Costs of Issuance Fund", which shall be held by the Fiscal Agent in trust. The moneys in the 2009-A and 2009-B Costs of Issuance Fund shall be used and withdrawn by the Fiscill Agent from time to time to P"Y the 2009-A and 2009-B Costs of Issuance, as set forth in one or more Officer's Certificates containing respective an1ounts to be paid to the designated payees, signed by the Treasurer and delivered to the Fiscal Agent concurrently with the delivery of the Series 2009-A Bonds or at any time thereitfter. The Fiscal Agent shall pay all 2009-A and 2009-B Costs of Issuance after receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee pursuilnt to an Officer's Certificate requesting payment of 2009-A and 2009-B Costs of Issuance. The Fiscal Agent shall maintain the 2009-A and 2009-B Costs of Issuance Fund for a period of 90 days from the

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date of delivery of the Series 2009-A Bonds and then shall transfer any moneys remaining therein, including any investment eamings thereon, to the Treasurer for deposit by the Treasur"r in the Administrative Expense Fund.

Administrative Expense Fund. There is established under the Fiscal Age1it Agreement, as a separate fund to be held by the Treasurer, the Administrative Expense Fund to the credit of which deposits shall be made as required by the Fiscal Agent Agreement. Moneys in the Administrative Expense Fund shall be held in trust by the Treasurer for the benefit of the Authority, sha11 be disbursed as provided be1ovv, and are not pledged as security for the Bonds.

Amounts in the Administrative Expense Fund will be withdrawn by the Treasurer and paid to the Authority or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or a Cost of Issuance, and the nature of such Administrative Expense or Cost of lssuane<,. Annually, on the last day of each Fiscal Year commencing with the last day of Fiscal Year 2003-2004, the Treasurer shall withdraw .any amounts then remaining in the Administrative Expense Fund that have not been allocated to pay Administrative Expenses incurred but not yet paid, ond vvhich are not othenvise encumbered, and transfer such amounts to the Fiscal Agent for deposit in the Special Tax Fund.

Moneys in the Administrative Expense Fund will be invested and deposited in accordance with the Fiscal Agent Agreement. Interest earnings and profits resulting from said investment shall be retained by the Treasurer in the Administrative Expense Fund. to be use"d for the purposes of such fund.

Parity Bonds

The Authority may from time to time issue bonds (the "Parity Bonds"), in addition to the Bonds outstanding under the Fiscal Agent Agreement, by means of a Supplemental Agreement and without the consent of any Bondnwners, upon compliance with the following provisions. Any such Parity Bonds shall constitute Bonds under the Fiscal Agent Agreement and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fi.scal Agent Agreen1ent on a parity \vith all other Bonds Outstanding thereunder. The Authority may issue the Parity Bonds subject to the following specific conditions precedent:

(a) Current Compliance. the Authority must be in compliance nn the date of issuance of the Parity Bonds with all covenants set forth in the Fiscal Agent Agreen1ent il nd all Supplementa 1 Fisca 1 Agent Agreements.

(b) Payment Dates. The Supplemental Fiscal Agent Agreement providing for the issuance of such Parity Bonds must provide that interest thereon will be payable on March 1 and September 1, and principal will be payable on September 1 in any year in which principal is payable (provided that there is no requirement that any Parity Bonds pay interest on a current basis).

(c) Funds and Accounts; Reserve Fund Deposit. The Supplemental Fiscal Agent Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts, and must provide for a deposit to the l~eserve Fund in an a1nount necessary so that the an1ount on deposit therein, following the issuance of such Parity Bonds, is equal to the Reserve Requirement.

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(d) Value-to-Lien Ratio. The District Value must be at least four (4) times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal an1ount of any fixed assessn1ent liens on the parcels in the District subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payiJble at least partially frc)m special taxes to be levied on parcels of land within the District (the "Other District Bonds") equal to the aggregate principal amount of the Other District Bonds multiplied by a· fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on piHcels of land within the District, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes arc levied to pay the Other District Bonds (such fraction to be determined based upon the n1axin1un1 special taxes which could be levied in the year in which n1axin1un1 annual debt service on the Other District Bonds occurs), based upon infom1ation from the most recent avail0:1ble Fiscal Year.

For purposes of the foregoing, "District Value" means the n1arkct value, <'IS of the date of the appraisal described below, of all parcels of real property in the District subject to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the General Account of the Improvement Fund, as determined by reference to (i) an appraisal performed within six (6) months of the date of issuance of any proposed Parity Bonds by an MAl appraiser selected by the City or the Authority, or (ii), in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on the then current County real property tax roll available to the Treasurer. Neither the Authority nor the Treasurer shall be liable to the Bond owners or any other person or entity in respect. of any appraisal provided for purposes of the foregoing or by reason of ~ny exercise of discretion made by any such appraiser.

(c) The Special Tax Coverage Test. The Authority must obtain a certificate of a Tax Consultant to the effect that (i) the amount of the maximum Special Taxes that may be levied in each Fiscal Year will be at least one hundred ten percent (110%) of the total Annual Debt Service for each such Fiscal Year on the Outstanding Bonds and the proposed Parity Bonds and (ii) based upon the Special Taxes that may be levied under the Special Tax Formul<'l at the time vvhen there is no longer any Undeveloped Property (as defined in the Spedal Tax Formula) in the District, and taking into account the status of the then and expected Developed Property (as defined in the Special Tax Formula) in the District, (A) the estimated maximum Special Taxes that may then be levied in the District on the then existing and expected Developed Property in each Fiscal Year are reasonably expected to exceed one hundred ten percent (110'1.,) of the total Atmual Debt Service for each Fiscal Year on the Outstanding Bonds and the proposed Parity Bonds, and (B) the aggregate Special Tax Prepayments that could occur after the issuance of the Parity Bonds is not less than the outstanding principal amount of the Outstanding Bonds and such Parity Bonds. For purposes of this paragraph (e), the term" Atmual Debt Service" shall not include the portion of the debt service on any proposed Parity Bonds that is to be paid from proceeds of such Parity Bonds or other legally available funds of the Authority to be deposited to the Capitalized Interest Account on the date of issuance of the respective Pority Bonds.

(f) Refunding Purposes Only. Following the issuance of the Series 2009-A Bonds, Parity Bonds may only be issued if they arc Refunding Bonds.

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(g) Officer's Certificate. The Authority shall deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in subsections (a), (b), (c), (d), (e) and (f) above have been satisfied.

Covenants of the Authority

The Authority will punctually pay or cause to be paid the principal of, and interest and any premium on, the Bonds when and as due in strict conformity with the terms of the Fiscal Agent Agreement and any Supplemental Agreement, and it will faithfully observe and pcrforn1 all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Agreements and of the Bonds.

The Bonds are limited obligations of the Authority on behalf of the District and arc payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Capitalized Interest Account and the Special Tax Prepayment Account therein), the Reserve Fund and the Special Tax Fund created under the Fiscal Agent Agreement.

In order to prevent any accumulation of claims for interest after maturity, the Authority may not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and may not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the Authority, such claim for interest so extended or funded shall not be entitled, in case of default under the Fiscal Agent Agreement, to the benefits of the Fiscal Agent Agreement, except subject to the prior payment in full of the principill of illl of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded.

The Authority will not encumber, pledge or place any charge or lien upon any of the Special T<Jx Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien under the Fiscal Agent Agreement for the benefit of the Bonds, except as pcrn1itted by the Fiscal Agent Agrecnlei-lt. - ·

The Authority will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Authority, in which complete and correct entries are n1ade of "II transactions relating to the expenditure of an1ounts disbursed fron1 the Administrative Expense Fund and to the Special Tax Revenues. Such books of record and accounts will at all times during business hours be subject to the inspection of the Fisc<1l Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representat1ves duly authorized in V\'riting.

The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries must be made of all transactions relating to the expenditure of amounts disbursed from the Bond Fund (including the Capitalized Interest Account and the Special Tax Prepayments Account therein), the Improvement Fund (including the Generill Account and the PUSD School Facilities Account therein), the Special Tax Fund, the Reserve Fund and the Costs of Issuance Fund. Such books of record and accounts tnust at a11 tirnes during business hours be subject to the inspection of the Authority and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in vvriting upon reasonable prior notice.

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The Authority will preserve and protect the security of the Bonds and the rights of the Owners, (llld will V\'arrant and defend their rights against all" claims and detnands of al1 persons. From and after the delivery of any of the Bonds by the Authority, the Bonds shall be incontestable by the Authority.

On or within five (5) Business Days of each December 1, the Fiscal Agent is reqciired provide the Treasurer with a notice stating the amount then on deposit in the Bond Fund, the Capitalized Interest Account and the Reserve Fund, and informing the Authority that the Special Taxes may need to be levied pursuant to the Ordinance as necessary to provide for Annual Debt Service and Administrative Expenses and replenishment (if necessary) of the Reserve Fund so that the balances therein equal the Reserve Requirement. The receipt of or failure to receive such notice by the Treasurer shall in no way affect the obligations of the Treasurer under the following two paragraphs, and the Fiscal Agent shall not be responsible for any inability or failure to provide such notice. Upon receipt of such notice, the Treasurer shall communicate with the Auditor to ascertain the relevant parcels on which the Special T<1xes <He to be levied, taking into account any parcel splits during the preceding and then ct\rrent year.

The Treasurer shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final dote on which Auditor will accept the tn1nsmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Treasurer shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property Ia x roll.

The Treasurer shall fix and .levy the amount of Special Taxes within the District required for the payment of principal of and interest on any outstanding Bonds and Sttbordinatc Bonds of the District becoming due and payable during the ensuing year, including any necessary replenislunent or expenditure of the Reserve Fund for the Bonds and of the Reserve Fund (as defined in the Subordinate Fiscal Agent Agreement) for the Subordinate Bonds, and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts .necessary to pay any rebate due to the federal goven1n1ent) during such year, taking into account the balances in such funds and in the Special Tax Fund. The Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings pursuant to the Resolution of Fom1ati01i.

The Special Taxes shall be payable and be collected in the same manner and at the snme ti1ne (l!ld in the san1e installment as the general taxes on real property arc payable, and have the same priority, become delinquent at the same time and in the same proportionate an1ounts <Jnd bear the same proportionate penalties and interest after delinquency as do the·ad valorem taxes on real property; provided that, pursuant to and in accordance with the Ordinance, the Special Taxes may be collected by means of direct billing of the property owners within the District, in which event the Special Taxes shall become delinquent if not paid when due pursuant to said billing.

The Authority shall assure that the proceeds of the Series 2009-A Bonds and of the Series 2009-B Bonds are not so used as to cause the Series 2009-A Bonds or the Series 2009-B Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Series 2009-A Bonds or the Series 2009-13 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code.

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The Authority shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment eamings, if any, to the federal government, to the extent that such section is applicable to the Series 2009-A Bonds or the Series 2009-B Bonds. If necessary, the Authority may use earnings on amounts in the Reserve Fund, amounts on deposit in the Administrative Expense Fund, and any other funds available to the District, including amounts advanced by the Authority or the City, in its sole discretion, to be repaid by the District as soon as practicable from amounts described in the preceding clauses, to satisfy its obligations described in this paragraph.

The Authority shall not take, or permit or suffer to be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the Series 2009-A Bonds and of the Series 2009-B Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately und intentionally taken, on the date of issuance of the Series 2009-A Bonds and of the Series 2009-B Bonds would have caused the Series 2009-A Bonds or the Series 2009-B Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code.

The Authority shall take all actions necessary to assure the exclusion of interest on the Series 2009-A Bonds and the Series 2009-B Bonds from the gross income of the Owners of the such bonds to the scnne extent as such interest is pern1itted to be excluded frotn gross incorne under the Code as in effect on the date of issuance of the Series 2009-A Bonds and the Series 2009-B Bonds.

The Authority designates in the Fiscal Agent Agreement the Series 2009-A Bonds for purposes of paragraph (3) of section 265(b) of the Code and represents that (a) it does not reasonably expect to issue or incur any Tax-Exempt Debt, other than the Series 2009-A Bonds and the Series 2009-B Bonds, in calendar year 2009; and (b) the City Council of the City has adopted a resolution expressing its expectation that the principal amount of any Tax-Exempt Debt that will be issued or incurred by the City and its related and subordinate entities (for purposes of the Code) in calendar year 2009, together with the Series 2009-A Bonds and the Series 2009-B Bonds, will not exceed $30,000,000. The term "Tax-Exempt Debt," as used in the preceding sentence n1eans and includes any obligations the interest on which is excludable (under section 103(a) of the Code) from gross income for federal income tax purposes, excluding (i) private activity bonds, as defined in section 141 of the Code, and (ii) current refunding obligntions to the extent the <1n1ount of the refunding obligation does not exceed the outstanding amount of the refunded obligation.

The Auth()rity covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of the Fiscal Agent Agreement, failure of the Authority to comply with the Continuing Disclosure Agreement shall 11ot be considered a default under the .fiscal Agent Agree1nent; however, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance by the Authority of its obligations thereunder, including seeking mandate or specific performance by court order.

The Authority covenants and agrees to not consent or conduct proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the District below an an1ount? for any Fiscal Year, equal to ll{YXJ of the aggregate of the debt service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal Year. It is acknowledged in the Fiscal Agent Agreement that Bondowners are purchasing the Bonds in reliance on the foregoing coven11nt, and that said covenant is necessary to assure the full and timely payment of the Bonds.

and The AuH!ority covenants not to exercise its rights under the Act to waive delinquency

redemption penalties related to the Special Taxes or to declare Special Tax penalties

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an1nesty prognun if to do so would In<lterially and odverscly affect the interests of the owners of the Bonds and further covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not. result in the Authority having insufficient Special Tax revenues to pay the principal of and interest on the Bonds and any Parity Bonds remaining Outstanding following such tender.

Investments

Moneys in any fund or account created or established by the Fisccd Agent Agreement and held by the Fiscal Agent is required to be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investn1ents. In the absence of any such Officer's Certificate, the Fiscal Agent shall invest to the extent reasonably practicable any such moneys in the Permitted Investments described in clause (g) of the definition thereof in the Fiscal Agent Agreement. Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Treasurer shall be invested by the Treasurer in any Permitted Investme11t, which in any event by their terms mature prior to the date on which such moneys are required to be poid out. Obligations purchased as an investn1ent of moneys in any fund shall be deemed to be p0rt of. such fund or 0ccount, subject, however, to the requireinents of the Fiscal Agent Agreement for transfer of interest earnings and profits resulting from investment of amounts in funds ;,nd accounts. Whenever in the Fisc;,! Agent Agreement any moneys are required to be transferred by the Authority to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments.

The Fiscal Agent and its affiHah .. 'S or the Trectsurer ntay act as sponsor, advisor, depository, principal or agent in the acquisition or disposition of any investment. Neither the Fiscal Agent nor the Treasurer shall incur any liability for losses arising from ;,ny investments made pursuant to the Fiscal Agent Agreement. The Fiscal Agent will not be required to determine the legality of any investments.

Except as othem'ise provided in the next sentence, all investments of amounts deposited in any fund or account created by or pursuant to the Fiscal Agent Agr~etnent, or otherwise containing gross proceeds of the l.londs (within the meaning of Section ·148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by the Fiscal Agent Agreement or the Code) at Fair Market Value. The Fiscal Agent shall have no duty in connection with the determination of Fair Market Value other than to follow the investn1ent direction of an Authorized Officer in any \Vritten direction of any Authorized Officer. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the subaccounts within the Reserve Fund shall be valued at their present value (within the me;,ning of section 148 of the Code). The Fiscal Agent shall not be liable forverifica tion of the application of such sections of the Code.

Investn1ents in any and all funds nnd accounts n1ay be comn1ingled in a separate fund or funds for purposes of 1naking, holding and disposing of investn1ents, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Treasurer, provided that the Fiscal Agent or the Treasurer, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and othem,ise as provided in the Fiscal Agent Agreement. The Fiscal Agent or the Treasurer, as applicable, shall sell at Fair Market Value, or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payn1ent, transfer, \vithdraw<'ll or disbursement from the fund or account to which such investment security is credited and

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neither the Fiscal Agent nor the Treasurer shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance with the Fiscal Agent Agreetncnt.

Liability of Authority

The Authority shall not incur any responsibility in respect of the Bonds or the Fiscal Agent Agreement other than in connection with the duties or obligations explicitly therein or in the Bonds assigned to or imposed upon it. The Authority shall not be liable in cmmection with the perforn1ance of its duties under the Fiscal Agent Agreement, except for its o\vn negligence or willful default. The Authority shall not be bound to ascertain or inquire as to the performance or observance of any of the tenns, condition ... s, covenants or agreetnents of the Fiscal Agent in the Fiscal Agent Agreement or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder.

In the absence of bad faith, the Authority, including the Treasurer, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions fumished to the Authority and conforming to the requirements of the Fiscal Agent Agreement. The Authority, including the Treasurer, shall not be liable for any error of judgm<~nt made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts.

No provision of the Fiscal Agent Agreement shall require the Authority to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations under the Fiscal Agent Agrecn1cnt, or in the exercise of any of its rights or powers, if it shall have reasonoble grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonllbly assured to it.

The Authority and the Treasurer may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, rep<)rt, warrant, bond or other peper or document believed by it to be genuine nnd to have been signed or presented by th<.> proper party or proper parties. The Authority may consult with counsel, who may be the Authority A tton1ey, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under t_he Fiscal Agent Agreetncnt in good fa'.ith and in accordance therewith.

The Authority shall not be bound to recognize any person ns the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactory established, if disputed.

Whenevc,r in. the administration of its duties under the Fiscal Agent Agreement the Authority or the Treasurer shall deem it necessary or desireble that il matter be proved or established prior to taking or suffering any action under the Fiscal Agent Agreement, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Authority, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, an Appraiser, an Independent Financial Consultant or a Tax Consultant, and such certificate shall be full warrant to the Authority and the Treasurer for any action taken or suffered under the provisions of the Fiscal Agent Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Authority or the Treasurer may, in lieu thereof, accept other evidence of such matter or n1ay require suc:h additional evidence as to it may seem rensonable.

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In order to perforn1 its duties and obligations under the Fiscal Agent Agreement, the Authority and I or the Treasurer may etnploy such persons or entities as it deem.s necessary or advisable. The Authority shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith under the Fiscal Agent Agreement, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.

The Fiscal Agent

The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in the Fiscal Agent Agreernent, and no implied covenants or obligations shall be read into the Fiscal Agent Agreement against the Fiscal Agent.

Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any con1pany resulting fron1 any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act.

The Authority may remove the Fiscal Agent initially appointed, and any successor thereto,. and may appoint a successor or successors thereto, but any such successor shall be a bank, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000), and be subject to supervision or examination by federal or state authority. If such bank, corporation or trust company publishes a report of condition at least aiU1Ually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then the combined c<1pital and surplus of such bank or trust company shall be deen1ed to be its combined capital and surplus as set forth in its most recent report of condition so published.

The Fiscal Agent may at any time resign by giving written notice to the Authority and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the Authority shall promptly appoint a successor Fiscal Agent by an in . .:;tnunent in writing. Any resignation or ren1oval of the Fiscal Agent shall beco1ne effective upon acceptance of appointment by the successor Fiscal Agent.

If no appointment of a successor Fiscal Agent shall be made within forty-five (45) days after the Fiscal Agent shall have given to the Authority written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to ilct, the Fiscal Agent or any Owner Inay apply to any court of cotnpetent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fisca I Agent.

If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is rendered unable to perform its duties lllider the Fiscal Agent Agreement, all such duties and all of the rights and powers of the Fiscal Agent thereunder shall be assumed by and vest in the Treasurer of the Authority in trust for the benefit of the Owners. The Authority covenants for the direct benefit of the Owners that its Treasurer in such case shall be vested with all of the rights and powers of the Fiscal Agent under the Fiscal Agent Agreement, and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent thereunder, in trust for the benefit of the Owners of the Bonds. In such event, the Treasurer may designate a successor Fiscal Agent gt~alified to act as Fisca I Agent thereunder.

The recitals of facts, covenants and agreements in the Fiscal Agent Agreen1ent and in the Bonds contained shall be taken as statements, covenants and agreements of the Authority,

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and the Fiscal Agent assun1es no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of the Fiscal Agent Agreement or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations in the Fiscal Agent. Agreement or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties under the Fiscal Agent Agreement, except for its own negligence or willful default. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds.

In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the sta te1nents and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of the Fiscal Agent Agree1nent; btt t in the case of any such certificates or opinions by which any provision of the Fiscal Agent Agreement are specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Fisc a I Agent Agreement. Except as provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of the Fisca I Agent Agreen1ent, upon <lll)' resolution, order, notice, request, consent or ,,vaivcr, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of the Fiscal Agent Agreen1ent, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any state1nents contained or m<1tters referred to in any such instrun1ent.

The Fiscal Agent shall not be liable for any error of judgment made in good faith unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of the Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Fisc a I Agent Agreement, or in the exercise of any of its rights or poweis.

The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by the Fiscal Agent Agreement at the request or direction of any of the Owners pursuant to the Fiscal Agent Agreement unless such Owners shall have offered to the Fiscal Agent reasonctble security or inden1nity <1gainst the costs, expenses and liabilities which n1ight be incurred by it in compliance with such request or direction.

The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it vverl' not the Fiscal Agent.

The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it under the Fiscal Agent Agreement, or as to the correCtness of any amounts received, and its liability shall be limited to the proper accounting for such funds as it shall actually receive.

ln order to perforn1 its duties and obligations under the Fiscal Agent Agreement, the Fiscal Agent m£1y employ such persons or entities as it deen1s necessary or advisabJc. The Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.

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The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, wrtrrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper partips. The Fiscal Agent may consult with counsel, who may be counsel to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under the Fiscal Agent Agreement in good faith and in accordance therewith.

The Fiscal Agent shall not be bound to reco0'1uze any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and Ius title thereto satisfactorily established, if disputed.

Whenever in the administration of its duties under the Fiscal Agent Agreement the fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering <1ny action under the Fiscal Agent Agreen1ent, such matter (unless other evidence in respect thereof be ih the Fiscal Agent Agreement specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by an Officer's Certificate, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of the Fiscal Agent Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the f'iscal Agent may, in lieu thereof, accept other evidence of such matter or may require such c1dditional evidence as to it may seem reasonable.

Amendment of the Fiscal Agent Agreement

The Fiscal Agent Agreement and the rights and obligations of the Authority ~nd of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or ·with the vnitten consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Fiscal Agent Agreement. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the Authority to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the Authority of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of Califonua or the Fiscal Agent Agreement), or (iii) reduce the percentage of Bonds required for the amendment of the Fiscal Agent Agreement. Any such amendment may ncit modify any of the rights or obligations of the Fiscal Agent \Vithout its vvritten consent.

The Fiscal Agent Agreement and the rights and obligations of the Authority and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:

(A) to add to the covenants and agreements of the Authority in the Fiscal Agent Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power in the Fiscal Agent Agreement reserved to or conferred upon the Authority;

(B) to make modifications not adversely affecting any outstanding series of Bonds of the Authority in any material respect;

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(C) to make such provisions for the purpose· of curing any <lmbiguity, or of curing, correcting or supplementing any defective provision contained in the Fiscal Agent Agreement, or in regard to questions arising under the Fiscal Agent Agreement, as the Authority or the Fiscal Agent may deem necessary or desirable and not il1consistent with the FiscnJ Agent Agreeznent, and which shaH not adversely affect the rights of the Owners of the Bonds;

(D) to make such additions, deletions or modificotions as may be neccssory or desirable to assure exemption from gross federal inco1ne taxation of interest on the Bonds; omi

(E) in connection with the issuance of Parity Bonds under and pursuant to the Fiscol Agent Agreement.

Discharge of the Bonds and the Fiscal Agent Agreement

The Authority shall have the option to pay and discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways:

(A) by well and truly poying or causing to be poid the principal of, and interest and any pren1ium on, such Bonds Outstanding, as and vvhen the same become due and payable;

(B) by depositing with the Fiscal Agent, in trust, ot or before maturity, money \vhich, together \t\rith the an1ounts then on deposit in certain funds and <1ccounts therein as provided in the Fiscol Agent Agreement is fully sufficient to pay such Bonds Outstanding, including all principol, interest and redemption premiums; or

(C) by irrevocably depositing with the Fiscal Ag;ent, in trust, cash and Federal Securities in such amount os the Authority shall determine as confirmed by Bond Counsel or an independent certified public accountant will, together with the interest to accrue thereon and moneys then on deposit in the Reserve Fund and in the Bond Fund and accounts therein as provided in the Fiscol Agent Agreement, be fully sufficient to pay and discharge the indebtedness on such Bonds (including; all principal, interest and redemption prerniurns) at or-before their respective maturity dates.

If the Authority shall hove taken any of the actions specified in (A), (B) or (C) above, and if such Bonds a·re to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in the Fiscal Agent Agreernent provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the Authority, and notwithstanding that any Bonds shall not have been surrendered for pay1nent, the pledge of the Special Taxes and other funds provided for in the Fiscal Agent Agreement and all other obligations of the Authority under the Fiscal Agent Agreement -with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the obligation of the Authority to pay or cause to be poid to the Owners of the Bonds not so surrendered and paid oll sums due thereon, to pay oil amounts owing to the Fiscal Agent pursuant to the Fiscal Agent Agreement, and othenvise to assure that no <1ction is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from gross income for federal income tax purposes, shall continue in any event.

Upon compliance by the Authority with the foregoing with respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding parograph, shall be paid over to the Authority and any Special Taxes thereafter received by the Authority shall not be

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remitted to the Fiscal Agent but shall be retained by the Authority to be used for any purpose permitted under the Act. ·

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APPENDIXC

ABSORPTION ANALYSIS

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TI-ll~, PACE INTENTIONALLY LEFT BLANK

ABSORPTION STUDY OF 244 LOTS IN THE WEST PATTERSON COMMUNITY FACILITIES DISTRICT

IN PATTERSON, CALIFORNIA

ASOF MAY 31, 2009

ABSORPTION STUDY FOR CITY OF PATTERSON

MR. CLEVE MORRIS- CITY MANAGER P.O. BOX 667

PATTERSON. CALIFORNIA 95363

STEPHEN R. CLARK APPRAISER & CONSULTANT, INC.

THIS PAGE INTENTIONALLY LEFT BLANK

~TEPHEN R. CLARK ,PPRAISER & CONSULTANT, INC.

'.0. Box 1844 • Stockton, CA 95201 • (209) 932-0700 • Fax: (209) 467-3518

City of Patterson June 9, 2009 Mr. Cleve Morris- City Manager

·P.O. Box 667 Patterson, California 95363

Dear Mr. Morris,

In accordance with your request, I have completed an investigation and analysis of the remaining 244 lots in the West Patterson Community Facilities District for purposes of estimating the probable time frame when the lots will achieve final development status as defined in the Rate and Method of Apportionment. In the following report you will find a summary of the investigation that lead to my opinions. Based on my investigation and analysis of the market, I am of the opinion that the probable absorption of the 244 remaining lots in the West Patterson Community Facilities District is likely to be somewhere between the slow and fast scenarios summarized as follows:

Slow Scenario - Lots Remaining Lots Built -Cumulative Conventional Senior Conventional Senior

June I, 2009 233 11 0 0 June1,2010 233 11 0 0 June I, 2011 233 11 0 0 June 1, 2012 233 11 0 0 June 1, 2013 175 8 58 3 June I, 2014 117 5 116 6 June 1., 2015 59 3 174 8 Jw1e 1,2016 0 0 233 11

Fast Scenario - Lots Remaining Lots Built- Cumulative Conventional Senior Conventional Senior

June 1, 2009 233 11 0 0 June l, 2010 233 11 0 0 June 1, 2011 233 11 0 0 June 1, 2012 156 7 77 4 June 1,2013 81 3 !52 8 June 1, 2014 0 0 233 11

If you have any questions regarding this report, please feel free to call me at your earliest convemence.

Sincerely,

~~(WL STEPHEN R. CLARK- MAl California Certificate No. AG003414

TABLE OF CONTENTS

Page 1.0 Background and Scope of Investigation .................................................................... : .... ! 2.0 Photographs of the Subject Lots .................................................................................... 3 3.0 Assessor's Parcel Maps of the Subject Lots ................................................................... 5 4.0 National Economic Conditions ....................................................................................... l8 5.0 Statewide Analysis .......................................................................................................... 20 6.0 Regional Analysis ........................................................................................................... 22 7.0 Investigation and Analysis .............................................................................................. 23

ADDENDA Certification ........................................................................................................................... Exhibit A Appraiser Qualifications ........................................................................................................ Exhibit B

Page I

(1.0) BACKGROUND AND SCOPE OF INVESTIGATION

I have been asked by the City of Patterson to prepare an opinion of the probable time frame needed to absorb the remaining 244lots in the West Patterson Community Facilities District (WPCFD). I have been the appraiser of prior bond sales in the WPCFD and have experience as both an appraiser and a residential broker in the local market. The ownership of the remaining lots can be swnmarized as follows:

KDH Group, LP (Rick Kiper) EthanComad MSCP Pacific Union Patterson Gardens, LLC Patterson Seniors, LLC Bright Development Southwest C & R Funding, LLC ZabiarKahn

No. of Lots 47 61 74 11 49

1 _I_

Total: 244

All of these lots are in "undeveloped" status as defined by the WPCFD Rate and Method of Apportionment report. The lots will shift to "developed" status at the time that the City of Patterson issues a final building permit on a new home constructed on each of these lots. The vast majority of the above lots are located in the Patterson Gardens project (KDH Group, Ethan Comad and MSCP Pacific Union Patterson Gardens). The Bright Development Jots are located in Wilding Ranch on the east side of Patterson. The two individual lots are located in the Miraggio subdivision near the southwest corner of Ward and Sperry Avenues.

Currently all of the 244lots are improved with streets, curb, gutter, sidewalk and all public utilities available. All of the lots except one is vacant. The lot owned· by Zabiar Kahn is improved with a single family residence at about the 75% stage of construction and it appears that construction was stopped some time ago.

The WPCFD was developed starting in 2002 and included a total of2,470 residential lots. The project was nearing full build out and completion when the economy turned down sharply in 2006. In my previous analysis of absorption report which was last updated August 28, 2005, I had estimated that the WPCFD would be completely absorbed (fully developed as defined) by June 30, 2009. So it is clear that the previous absorption missed the target, but considering what has transpired in the economy since August 28, 2005, the WPCFD has done surprisingly well to have only 244 undeveloped lots.

The scope of my investigation in this absorption study included the following activities and areas of investigation.

1. I updated general economic conditions at the national, state and regional levels with a focus on the local housing market in Patterson.

2. I physically inspected on the ground the 244 lots that are the subject of this report.

3. I interview ail three of the bulk lot purchasers (Rick Kiper with KDH Group; Gary Grant with MSCP Pacific Union; and Ethan Comad with Ethan Comad Properties) as to their intentions for disposing of the recently purchased lots and their projected time frames.

STE£HEN_R-CL~SER_&_CONS_ULTANT,_INC. __ . ____ _

Page2

4. Interviews were conducted with the Patterson School District and the Patterson City Manager, Cleve Morris and planning and public works staff regarding current impact fees and other related matters.

5. Research was made into the volume of homes that are currently for sale in the multiple listing service in Patterson and how many have sold over the past year.

6. Research was conducted into the number of homes in the WPCFD that are currently bank owned, since these will likely have to be sold before any new construction can be considered economically feasible.

Because there is no clear exact answer to the question at hand, I have decided that it would be best to frame the question with a range of reasonable expectations. Therefore I will include two scenarios that are intended to simulate a "faster" and a "slower" time line for the absorption of the 244 lots into the market with completed homes (fmal permits). With a projection of this type it is my experience that there could be any number of reason that the last I% to 2% of the lots might remain in undeveloped status for extended periods of time that have to do with the peculiar motivations the owner/buyer. That being said it is my intention to develop the opinion of absorption along time lines whereby the vast majority of the lots are brought to completed homes (final permits).

·------=ST.LJE"-'·JPLJHu.E"'-.NLL-R._CL.ARK=..APPRAISER.&_CONSIILTANT, ... .INC. __

Viewing northeast the residence owned by Zabiar Kahn at 871 Miraggio Drive The home is about 75% complete and construction has stopped

•

Viewing west along Bogdanich Way at the south end of the Wilding Ranch Projects- the vacant lots are owned by Bright Development .

Page3

STEPHEN R. CLARK- APPRAISER & CONSULTANT, INC.

Viewing north along American Eagle Way at the vacant lots on the right Owned by Ethan Conrad in Patterson Gardens- Salado Creek is on the left

•

Viewing northeast along the north side of Jasmine Drive at Jots owned by MSCP Pacific Union Patterson Gardens, LLC in Patterson Gardens

Page4

STEPHEN R. CLARK- APPRAISER & CONSULTANT, INC.

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SHIRE PARK NO. 2 (33M44) MIRAGGIO ( 4oM66) e

THIS MAP FOR ASSESSMENT PURPOSES ONLY

Copyright 2001 Stanislaus County. AI! rights reserVed

61' SPERRY pa.... '"11:!72) 7f1l Sl'

MIRAGG!O ORI'<t:

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8

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048- 057

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FROM: 04 7- 035 DRA\IM: 05-13-04 MB. REVIS EO

POR. SECTION 19 & 20 T.5S. R.8E. M.D.B.& M. 'MLDING RANCH UNIT 1 LOTS 44-85 & LOT "A" (41M61)

8

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8

• Stanislaus County - All rights reserved

Back To Book Index

005 025 047- 055

THIS MAP FOR ASSESSMENT PURPOSES ONLY

Copyright 2001. Stanislaus County. All rights reserved ..

8 1" .. 1100'

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8

8 8

FROM; 047-0~5 ORAI'o'N: 10-09-06 MS. REVISED

Stanislaus County - All rights reserved

005 025 047- 057

THIS MAP FOR ASSESSMENT PURPOSES ONLY

8

Back To Book Index

Stoni1~07

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-REFLECTIONS AVE.

POR. NW. 1/4 SECTION 36 T.5S. R.7E. M.D.B.& M. PATTERSON GARDENS UNIT NO. 4 ( ROSE LANE- PHASE 1 )

LOTS. 90-144 (41M99)

005 045 021- 075

~~I) THIS MAP FOR ASSESSMENT PURPOSES ONLY

~ ,_ ... = Q '

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128.

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"

50' PHLOX DR. I FROM: 021-021 8 Stanislbus/ZB DRA\1-N: 11-09-04 t-.!9 086 /1f;z RE\1SEO 9-14-05 DH. 5-12-06 DH, 05-22-06 MS. 05

I

Stanislaus County - All riahts reserved Co nty icrurnr

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PATITRSON GARDENS UNIT NO. 4 (ROSE LANE - PHASE 1) LOTS. 1-61, LOT"A" (41M99)

8 70' CAL VINSON PARKWAY

THIS MAP FOR ASSESSM£Nr PURPOSES ONLY

1111.10' &D.:D' OO.lO' 60.20' 60.20' ~0.20 SO.lO" 60.20 7iiJ); ~57' ~

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Stanislaus Count v - All riqh ts reserved Index 021- 076

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POR. NW. 1/4 SECTION 36 T.5S. R.7E. M.D.B.& M. 005 045 021- 077

PATTERSON GARDENS UNIT NO. 4 (ROSE LANE - PHASE 1) LTS. 62-89 (41M99) PATTERSON GARDENS UNIT NO. 10 (ROSE LANE - PHASE 2) LTS. 145-17D & 225-252 (42M58)

THIS MAP FOR

ASS£SSMENT PURPOSES ONLY

l ~~:l @ Ji:l J . l-IS. 119.31'

~~ (§} !a 6711 'if ,.,

'~ 1~' P.U.E. . ~~-\~--iil];::-..:¢5

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~ 61~0 sr ~fi1 112.5J' I

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10 PUE _,. _eJl,QQ: -1-l!~.:_ ]_.J!.l!Qit._ l::. i.O_OQ' _ J _.JI!.Qi[ .:.L-:®:W: _

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8

8

Back To Book Index

Stanislaus County - All riahts reserved 8

Stant(f;'s us -;z:;­u 05,06 (qunty

AfriiHDr

021- 077

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POR. NE 1/4 SECTION 36 T.5S. R.7E. M.D.B.& M. 005 045 021 ~ 078 PATTERSON GARDENS UNIT NO. 7, SEASONS (42M02)

PATTERSON GARDENS UNIT NO. 3 LTS. 67-74 (42M09)

8 ~Ji~ ~ THIS MAP FOR

ASSESSM[N T PURPOSES ONLY

g ---·,z.. ~

~

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"' $ ..., .r "' " ...,

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-" '"' 50' SPRING AVENUE 11 o.oa .: 2. §)...,.. -69. r;;;:::;"\ . .., S2<G $1'". \'-' f"..::.:;~:U: ~,per- ~~ -'_Q,Q.O:_ -~&'~- ... ~O_.po' ___ 9.,H.1.:.-:.:;-..,J' 5s

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Page 18

(4.0) NATIONAL ECONOMIC CONDITIONS

After eight consecutive years of expansion in the 1980s, the nation's economy turned down sharply in 1990. The real Gross Domestic Product (GDP) for all of 1991 was up a mere 0.1 %. However from March 1991 through March 200 I, the nation experienced the longest economic expansion on record, spanning a total of 120 months, and surpassing the economic boom of the 1960s (February 1961 through December 1969), which was largely fueled by the Vietnam War. The recession that started in March of 200 I was not officially recognized until after the September II, 2001 terrorist attacks and ended nine months later in November of2001. According to the National Bureau of Economic Research, the economy is now in another recession that started in December of 2007. In particular the following events suggest the economy is in serious trouble of magnitude not seen since the great depression of the 1930s.

• In March 2008 the Federal government loaned JP Morgan Chase & Co $29 billion to facilitate the take over of Bear Stearns, which was about to collapse.

• In July 2008 the Federal government gave Freddie Mac and Farmie Mae access to the Fed's lending programs, but that was not enough and in September the Federal government took over both struggling giants and pledged up to $200 billion in capital.

• In mid September 2008 the Federal government loaned AIG (the nation's largest insurance company) $85 billion in order to avoid an international financial disaster. The company is obligated to pay back the loan within two years. It now appears that tbe AIG bail out was inadequate and the giant insurance company needs further assistance and the total cost of the bail out could approach up to about $150 billion.

• In mid September 2008 Lehman Brothers filed for bankruptcy, representing single largest bankruptcy filing in the United States history.

• The President asked and Congress has approved a $700 billion bailout of the banking industry in order to get bad financial assets off of the books of troubled financial institutions. In order to accomplish this, the national debt ceiling was raised from $10.6 trillion to $11.3 trillion. The implementation of the plan bas shifted to include a significant portion of this bailout to go directly to banks as a cash infusion in the hopes of freeing up the creditiliquidity crisis. Some banks have elected to use the money for other purposes, potentially frustrating the original intent of the bailout.

• Washington Mutual was seized by the FDIC and this represented the largest single bank failure in the history of the nation. JP Morgan Chase quickly came to the table and bought the assets of the failed company. Washington Mutual investors were wiped out.

• The credit markets are nearly frozen and even governments are struggling with liquidity. The Federal Reserve has invoked Depression era emergency powers by buying commercial paper in an attempt to free up nearly frozen the credit markets.

• The stock market has lost about half of its value over the past year and a half and in the last quarter of 2008 alone American households lost $5 trillion in value. The credit crisis has spread into a global recession.

• Manufacturing is at a 26 year low and U.S. auto sales have plummeted in recent months and are now at a 17 year low. The cash strapped U.S. auto industry is in a tailspin and both Chrysler and GM have declared bankmptcy and 60% ofGM is now owned by the U.S. government.

• In response to continuing deterioration of economic conditions the Obarna administration and Congress has also approved another $787 billion in funding available to help with the bailout of"toxic" mortgages in the Freddie Mac and Fannie Mae system along other programs to help out State governments to stimulate the creation of up to 3.5 million jobs. The Federal government has also approved another $700 billion fiscal bailout and a new $410 billion spending bill that is filled with earmarks for special interests.

In 2004 the GDP posted a strong 4.4% seasonally adjusted rate of growth, the strongest growth rate since 1999 when the economy grew at a 4.5% rate. Overall GDP advanced 3.5% in 2005, 2.8% in 2006 and 2.0% in 2007. For the first quarter of2008 indicates that GDP grew at a rate of0.9% over the prior quarter and in the second quarter of 2008 GDP increased at a 2.8% rate, largely helped by exports and the weak'dollar. The third quarter 2008 GDP posted a 0.5% decline and in the fourth quarter the

------STEI?.HEN-R . ..CLARK~APJ?RAISER .. &_CONSULTANT,_lNC. __

Page 19

preliminary estimate is that GDP decreased h ·~ 3%. The real GDP ~~row•l1 fu .'008 .,,y overall up 1.1% from 2007 GDP. In the frrst quarter",·.·. or ) GDD Wff, dov,-, s 1% ac~:.. .. ."1!; to p:eliminary estimates.

The Conference Board's April2009 Index of Leading Economic Indicator (LEI) increased 1.0 percent now stands at 99.0 (2004:100). Duririg the six-month span through April, the leading index decreased 0.6 percent with only three of the 10 components advancing. The LEI is designed to predict economic activity about six months in advar1ce ar1d although the strong increase last month sight signal a turnaround, it will have to be supported by firrther positive signals in the monthly index going forward.

The May 2009 seasonally adjusted unemployment rate was at 9.4%, up 0.5% from the prior month. Last month the number of unemployed persons increased by 345,000 and since the beginning of the recession in December 2007 number of unemployed persons has risen by 7 million.

The Federal budget deficit, which has historically been a significant drag on the nation's economy, had improved dramatically in the late 1990s. For the frrst time since 1969 the U.S. government reported a surplus for fiscal 1998 (year ending September 30, 1998) of$69.2 billion. This was followed by a $124.4 billion surplus in FY 1999, and a record $237 billion surplus for FY 2000. The surplus for FY 2001 was about $127 billion. However with the weakening economy, tax cuts and the cost of responding to the terrorist attacks ar1d the war in Iraq, the Federal budget has run at a deficit ever since and for FY 2007 the deficit was about $162 billion. The FY 2008 deficit was an all time record high of$455 billion. The FY 2009 deficit is already estimated at $1.2 trillion and likely could be much more than that.

In 2004 the CPI increased at an annual rate of3.3% and in 2005 CPI increased by 3.5% reflecting upward pressure on prices. In 2006 price pressures moderated and the CPI increased at an amnJal rate of 2.5%. However in 2007 the CPI increased at a strong annual rate of 4.1 %. In 2008 the CPI increased at a very moderate 0.1% for the entire year driven down by sharp declines in oil and gasoline prices. The "core rate" of inflation which excludes food ar1d energy, increased at a rate of 2.4% in 2007, and in 2008 the "core rate" was 1.8%. Through April2009 the "core rate" of inflation was 1.9 percent over the past year. Some economists suggest that the Federal Reserve views a rate of 2.0%, or less, for the core inflation to be a comfort zone for inflationary trends.

On December 16, 2008, the Federal Reserve Board decreased the federal funds rate from 1.00% to 0.25%, the eleventh rate cute sirice mid September 2007. This is an unprecedented move by the Federal Reserve ar1d never in its 95 year history has the rai:e been this low. The federal funds rate is the rate that is charged between banks for overnight loans. In response to the most recent Federal Reserve rate cut, most major banks dropped their prime lending rate from 4.00% to 3 .25%. According to the Federal Reserve Bank's U.S. Financial Data, as of May 28, 2009, 90 day certificates of deposit return about 0.43%; two year Treasury securities 0.96%; the yield on 10 year Treasury bonds was at 3.61 %; the yield on 30 year Treasury Bonds return about 4.52%; Aaa corporate bonds pay 5.83% and Baa corporate bonds pay 8.16%.

According to Freddie Mac on May 28, 2009, the average 30 year fixed interest rate loan was 4.91 %, and for 15 year loans the average rate is 4.53%. According to the U. S. Conunerce Department, new privately owned housing starts authorized by building permits in 2005 were estimated at 2.155 million units; and in 2006 that number dropped to 1.839 million units; and in 2007 the number dropped firrther to 1.376 million units; and in 2008 the number of new housing starts dropped to 892,800 units,

______ ...,Su.-T-"E,_._.P..uH'""'EN_lLCLARK~PPRAISER.&.-CONSULI.ANT,--lNC-----

Page 20

about 41% of the volume in 2005. Depressed by the current economic conditions, new home building in 2008 was at its slowest pace since 1945. Acco~ding to the U. S. Commerce Department, the number of new single-family home sales in 2005 was at 1.283 million units, an all time record high. However in 2006 new home sales totaled 1.053 million units; the market continued to decline in 2007 and 2008 with sales volume of774,000 and 331,000 units respectively. The National Association of Realtors (NAR) reports existing home sales in 2005 was at 7.075 million, an all time record high. However in 2006 existing home sales were at 6.478 million; and in 2007 and 2008 declined further to 5.652 million and 4.912 million respectively.

There is some positive news that housing and home building may be stabilizing. Both new and existing home sales increased in April 2009 and although the gains were modest, it is a positive signal that the markets could be stabilizing. Also noteworthy is fairly strong 6. 7% increase in the April 2009 pending home sales index.

According to estimates by the U.S. Commerce Department, retail sales actually decline by 0.1% in 2008 compared with 2007. This miserable performance in 2008 marks the first annual decline in retail sales in nearly 40 years. By contrast the annual retail sales increased at a rate of 4.2% in 2007 compared with 2006 sales activity. These rates of retail sales are not adjusted for inflation. The Conference Board's April2009 consumer confidence index is now 54.9 (1985 = 100), reflecting a 14.1 point increase from the prior month. Says Lynn Franco, Director of The Conference Board Consumer Research Center: "After two months of significant improvements, the Consumer Confidence Index is . now at its highest level in eight months (Sept. 2008, 61.4). Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the fust. Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us."

As we approach mid 2009, the economic picture is still looking dim with continued fallout from the credit markets. The credit' crisis has spread around the world and has impacted all sectors of the national economy. Wall Street has suffered huge losses. The housing market remains depressed and is likely to remain at depressed price levels for several years. Commercial real estate markets have generally been less susceptible to the effects of the housing downturn, but are now also showing signs oJ weakness. Employment, which was fairly strong in 2007, is now clearly faltering. The question most pressing is, how long will the economic downturn last? Many economists seem to think that is likely to last at least through 2010 and maybe longer. However there some flickers of hope on the horizon with an uptick in construction spending (including homes) and new factory orders increasing for the first tim< since November 2007 (the month before the recession started). ·

(5.0) STATEWIDE ANALYSIS

Starting in 1994/95 the California economy rebounded and in 1997 the state passed a historic threshold with production of goods and services in excess of$1.0 trillion, about 13% of the total U.S. output. Although California was slow to come out of the recession of the early 1990s, it then grew at a · pace well in excess of the nation.

STEPHEN R. CLARK-APPRAISER & CONSULTANT, INC.

Page 21

Four years after former Governor Gray Davis was recalled, current Governor Arnold Schwartzenegger fmds himself in a similar fiscal crisis to the one that lead to the downfall of the former governor. The new budget that was passed in February 2009 after several months of difficult negotiations closed a $42 billion shortfall in the State budget. The compromise budget that was unpopular with virtually everyone included cutting $15.8 billion from existing programs and raising $12.8 billion through new taxes and borrowing. Part of the package required voter approval in a May 2009 special election in which the electorate turned down the vast majority of the proposed funding and sent a clear message to State to cut the cost of government. Once again the State faces a difficult $24 billion shortfall in its budget.

California's seasonally adjusted unemployment rate is at 11.0% as of May 2009, down 0.2% prior month, and is the highest it has been in well over a decade. According to the April 2009 California Labor Market Review (published by the California Employment Development Department) private sector employment in California, which excludes government, decreased 73,000 jobs over the prior month. Over the last year, California private payroll employment decreased by 706, I 00 jobs (or 5.6 percent).

According to the Anderson School at UCLA first quarter 2009 Forecast report by Economist Jerry Nickelsburg, notes that California's economy "reflects a deeper and longer recession than we previously thought". The forecast call for very weak conditions for the rest of this year and the State's economy will start to grow again in 2010 and end of next year "will begin to grow at something resembling normal levels". As for the State's employment situation it is expected to get worse with an average unemployment rate of 11.7% for all of next year and single digit unemployment (below 1 0%) is not expected until 2012.

According to the Department of Finance, total population in California as of January 1, 2009 is estimated at 38.293 million- an increase of 408,695 residents or 1.1% over the January 2008 estimate. From 1986 to 1990 the population growth in California averaged about 850,000 per year. However, from January 1998 to January 2009 the average armual population growth in California was about 536,000 and the most recent years show a continuing and decelerating downward growth trend with an average population growth in the State of only 453,000 over the past four years. According to the California State Department of Finance, the population ofCalifomia is projected to reach 48.1 million by the year 2030, reflecting a 1.1% annual compounded rate of growth over the next 21 years.

According to the California Association of Realtors (CAR), the median price of a home in California was $256,700 in Apri\2009, down 36.5% from a year ago. There is a significant variation across the state in housing prices and affordability. In the Central Valley home prices are considerably more affordable than in the Bay Area. For example in January 2009 in San Joaquin and Stanislalis Counties median home prices were $145,000 and $133,000 respectively, compared with Alameda and Contra Costa Counties where the median home prices were $306,600 and $225,000, respectively.

In 2008 California home builders started construction on 65,380 units, including just 33,048 single family homes. During the past 20 years the average number of housing starts (single and multi family) California was 138,500. During the recent boom period (2002 through 2006) there were about

· 190,000 new home starts per year. With the significant slow down in new construction there will inevitably become increasing demand and pressure on the housing market as the State's population increases by about 400,000 per year.

_____ ....., ..... T"""E"-P...,HE ......... N,_R. CLARK - APPRAISER..&_CONSIJLTA.N.T,.....INC. __ _

Page 22

(6.0) REGIONAL ANALYSIS

The City of Patterson is located in western Stanislaus County. Both San Joaquin and Stanislaus Counties have all experienced substantial growth over the past 15 years from Bay Area commuters who are attracted to the area because of the affordable housing. Each day over 80,000 Central Valley commuters drive over the Altamont Pass to employment centers in the Bay Area. Largely because of the lack of housing in the Bay Area, this number is expected to increase to 120,000 in 20 years. The reason for strong housing growth in the Central Valley is largely explained by affordable housing. The following chart was compiled from the Data Quick web site and summarizes the most recent (April 2009) median house prices for several cities in the Bay Area and Central Valley.

BAY AREA MEDIAN PRICE CENTRAL VALLEY MEDIAN PRICE Walnut Creek $524,000 Stockton $105,000 Livermore $350,000 Modesto $103,000 Hayward $235,000 Turlock $150,000 Pleasanton $525,000 Tracy $221,500 San Jose $350,000 Patterson $150,000 Milpitas $360,000 Manteca $170,000

As is apparent, the differential in housing prices between the Bay Area and the Central Valley is vast and generally speaking, an across the board conclusion might be that housing is about twice as expensive in the Bay Area as it is in the Central Valley. Median home prices in both the Bay Area and the Central Valley have declined over the past year. In San Joaquin and Stanislaus Counties median prices have decreased 41% from April 2008 to April 2009. In the Bay* Area, Alameda County housing prices have declined by 35% and in Contra Costa County housing prices declined 43% over the same one year time period.

The growth in the Central Valley is closely tied to the economic prospects of the San Francisco Bay Area. According to a report by the Bay Area Council, the Bay area Economic Forum, and the Association of Bay Area Governments found that the region continues to be the most productive metropolitan area in the U. S. The Bay Area's economic per capita output is 84% higher than the U.S. average. The Bay Area is second only to New York in the number of Fortune 500 companies located here. The reasons for the region's productivity advantage are fundamental and sustainable. based on factors such as a concentration ofleading universities and research institutions and a culture of innovation that had been developed by the highly educated and technically trained workforce. However it is noted that transportation costs coupled with the fact that the Bay Area is getting more adept at in-fill redevelopments with medium to high density housing, there may be a slower growth rate in Bay Area workers who are willing to suffer the commute into the Central Valley for affordable homes.

Investors from the Bay Area were a major factor in driving up home price in the Central Valley in 2004 and 2005 and now many of these homes are facing foreclosure, which further places an imbalance on the supply side of the new home market equation. It can be argued that the lending practices (sub-prime, negative amortization and variable rate loan products) in 2004 through 2006 pulled many home buyers into the market several years before they were actually ready, and thereby has depleted the number of ready and qualified buyers going forward for the next several years.

_______ ,STEJ!HEN_R_CLARK..=.A~RAISER..&...CONS.ULTANT,_INC._ __

Page 23

(7.0) INVESTIGATION AND ANALYSIS

In my investigation of the prospects for the construction of new homes in Patterson I started by interviewing the three buyers who purchases the vast majority of the subject lots that are the focus of this report. All three bulk lot purchases occurred in December 2008 and it is apparent that the builders were motivated to take looses and write these assets off the books before the end of the year. In my interview with Rick Kiper with KDH Group, LP he indicated it was his intention to build on the lots and that the time frame was unknown but could be 2012 to 2015 but he was quick to point out that it could be longer or shorter than that, just depending on the market. Rick did not disclose the price paid for the lots but I heard from an unofficial source that it was around $10,000 per lot and in his case the 47 lots came with prepaid impact fees. This fact was confirmed with the City of Patterson.

In my interview with Gary Grant with MSCP Pacific Union Patterson Gardens, LLC he indicated that they partnered with a fmancial buyer with the stated objective to sell these lots within the next two to four years in the hopes of doubling their investment. Although Pacific Union Homes is a home builder, their purpose and motivation in this deal was purely as a financial buyer. So the two to four year horizon provides some insight into the absorption question. The purchase of these lots did not include the prepayment of the impact fees.

I also talked with Ethan Conrad and he indicated that his plan is to resell to merchant builders at the appropriate time. He thought that the time frame was somewhere between 6 and 24 months. He also indicated that he paid $7,200 per lot for the 6llots purchased from Ryland. The purchase of these lots did not include the prepayment of the impact fees.

I also interviewed the sales agent for Bright Development in Patterson and he indicated that they have several homes in standing inventory that will close escrow within the next week or so and they do not intend to start any new construction at this time. His biggest concern was with the economic effect of the Mello Roos bonds on the property. Clearly the Mello Roos and other direct assessments are some of the highest in the region and while there was little market resistance in better times, the impact of the bonds is more pronounced in the down economy.

On the supply side of the equation there are about I 15 single family homes available for sale in Patterson on the multiple listing service that were built in 2002 or later. Some small part of this inventory is likely attributable to Diablo Grande or other rural areas around Patterson, but it is safe to estimate that 90% or more ofthis.ll5 home supply is within the WPCFD. Of this supply about 92 listings are "active short sales" meaning that the seller is attempting to sell the property for less than the value of the Joan and try to convince the lender to accept this as payment in full. The remaining 23 listings are likely bank owned foreclosed properties that are now being put back on the market. The majority of all the 115 properties that are being offered on the MLS are in the price range of $135,000 to $I 75,000. This is in stark contrast to the pricing that was in effect a few years ago when these homes sold for $350,000 to $500,000 or more.

It is an inescapable fact that there will be no new construction until the supply of this foreclosure inventory is off the market or significantly reduced. This is the real heart of the question to absorption of the 244lots remaining the WPCFD. So how long will it take for this foreclosure inventory to "burn off'? It is a difficult question to answer, because it is a fluid situation. The foreclosed properties actually sell rather quickly because they are very competitively priced. I researched the multiple listing service going back 12 months to June 1, 2008 and found a fairly consistent pattern of60 sales per month

-------"'· TEP..HEN.-R,_CLA~SER.&-CONSULTANT,__IN.C~--

Page24

on average in the Patterson market, again looking at homes built since 2002. So if 60 homes sell every month, then the existing supply of 115 homes represents only a two month supply of inventory. However it should be cautioned that not all of the short sales listings actually close escrow. Many short sales are rejected and wind up going back to the bank as foreclosures. I have seen a greater percentage of short sales actually closing in the past six months, but still there is clearly some significant percentage of the 115 listings that will not close escrow and will become future foreclosures.

So the more difficult question is how long will there be a steady supply of new foreclosed properties coming into the market? Based on my research of the Assessor's records there are currently about 207 bank owned foreclosed properties in the WPCFD. Arguably about 11% of these (23 divided by 207) are already on the market. There are also notices of default statistics that I researched that indicate 1,129 notices of default were recorded in Patterson from August 7, 2008 through June 1, 2009, which indicates an average of about 115 notices of default per month for all of the Patterson area. Analyzing this number is tricky because this number includes all Patterson housing stock and areas outside of the city limits (Diablo Grande for example) and further there is no guarantee that a notice of default results in a trustee's sale and hence a foreclosed property. All of that being said there is still a likely strong correlation between the notices of defaults and foreclosures. Another complicating factor is the national moratorium that was put in place on foreclosures at the end oflast year. Many of these properties are still working their way through the system and have not yet hit the market.

Since it is fairly apparent that the market is absorbing foreclosures at a rapid pace and there is ·currently only a two month supply of foreclosures, the real question is "when will the pace of foreclosure generation stop or at least materially slow down". It is my considered opinion that this is not readily defined as a point in time, but rather reflected in a gradual stabilization of the economy and employment in the region. It is my opinion that this time frame could be 20 II or 2012, but very unlikely to occur in 2010.

In order to further define the setting of what it will take to stimulate or induce new home construction in Patterson lets ask this question- at what price point will a production builder be able to generate a respectable profit from the sale of a new home? This question should be viewed in terms of what a merchant builder would be willing and able to pay for the subject finished lots- not necessarily the price point that Ethan Comad or the other bulk buyers could make a profit; since their stated objective is to sell the lots at a profit. Even Rick Kiper, who one day plans on building homes in Patterson, said that he would not build just to realize a minimall eve! of profit. Clearly Rick Kiper could make a profit today by building smaller homes and directly competing with the foreclosed property in the mid $1 OO,OOOs. However he will wait for the better market conditions. Rick Kiper has also expressed a concern about the design standards that were imposed in Patterson Gardens. Particularly certain streetscape design standards that may be difficult and expensive to implement with a modest quality home. Clearly the new homes that will get built on the remaining lots in the WPCFD will be smaller in size and feature fewer amenities than the homes built previously.

One of the aspects in evaluating the feasibility of new construction in Patterson is the current muniCipal fee structure. The municipal fees (including school fees and building permit costs) are currently about $21,660 in Wilding Ranch and $24,550 in Patterson Gardens. The fees will vary a little bit based on house size. These fees include $734 per house for an affordable housing in lieu fee, which was subsequently raised in 2006 to $20,946 for this one fee category and effectively doubling the overall· fee structure for the community. One building (Morrison Homes) challenged the fee in court and at firs the City was upheld but that was overturned when it was ruled that the fee was not properly calculated.

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Page 25

However the City is appealing this to the Supreme Court and the matter is still in litigation. For purposes of tit is analysis I am assuming that the old affordable housing in lieu fee will be applicable going forward. If this assumption is wrong, then the feasibility of new construction will likely be further delayed.

Based on these considerations the average price point for feasibility is probably around $200,000 with an average house size of 1,700 sq. ft. (ranging from 1,200 sq. ft. to 2,200 sq. ft.). This should allow the builder to realize a 7% to 10% profit on costs assuming the lots are purchased for about $25,000 each. These profits are very modest in comparison to recent history but it should be realized that for many years builders were very happy with a $15,000 to $20,000 profit on the sale of a home. It should also be kept in mind that home builders can not afford to sit on the side lines for several years while the market recovers, if they do they will go broke. Many of the big public companies have already had their equity values decimated by the stock market and they will have to become very creative in order to find ways to start back up with production, even if it means modest profits.

California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price o{$10,000, whichever is less. Also the Federal government also has an $8,000 tax credit. The amount of money allocated to this program in California will likely run out well before the buyers of homes on the 244 lots under study could benefit and given the State's financial condition it is speculative to think that the credit will be expended for several more years. The Federal tax credit could help stimulate interest with new home buyers.

Based on all of these considerations it is my opinion that the subject 244 lots can be fully improved within a 3 to 4 year time frame. In the "fast scenario" I estimate that construction and marketing would start in mid 2011 and be fully built out in mid 2014. In the "slow scenario" I estimate that construction and marketing would start in mid 2012 and be fully built out in 2016. Since the senior lots have a different taxing structure these 1Jlots are shown separately. As of June 1, of each year the absorption of final permit homes is shown as follows:

Slow Scenario - Lots Remaining Lots Built - Cumulative Conventional Senior Conventional Senior

June I, 2009 233 11 0 0 June I, 2010 233 11 0 0 Jime I, 2011 233. 11 0 0 June 1, 2012 233 11 0 0 June I, 2013 175 8 58 3 June I, 2014 117 5 116 6 June 1, 2015 59 3 174 8 June 1, 2016 0 0 233 11

Fast Scenario - Lots Remaining Lots Built- Cumulative Conventional Senior Conventional Senior

June I, 2009 233 I 1 0 0 June 1, 2010 233 I I 0 0 June I, 201 I 233 11 0 0 June 1, 2012 !56 7 77 4 June I, 2013 81 3 !52 8 June I, 2014 0 0 233 11

-------"'~._CL.A..Rl{.=._Af.rnAISER_&_CO.NS.IILIANI,__I.N_C .. ___ .

ADDENDA

'···

CERTIFICATION

The undersigned does hereby certify that, to the best of my knowledge and belief...

I. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and is my personal, unbiased professional analyses, opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this report.

4. My compensatjon is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event.

5. My analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute.

6. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

7. Disclosure of the contents of this appraisal report is governed. by the By Laws and Regulations of the Appraisal Institute. Neither all, nor any part, of the contents of this report, (especially any conclusions as to value, the identity of the appraisers or the firm with which they are connected, or any reference to the Appraisal Institute or their designations) shall be disseminated to the public through advertising media, public relations media, news media or any other public means of communication, without the prior written consent and approval of the undersigned.

8. I have made a personal inspection of the property that is the subject of this report.

9. I, Stephen R. Clark, am currently certified under the voluntary continuing education program of the Appraisal Institute.

lo~-R Ch.~ Stej)h R. Clark - MAl California Certificate No. AG003414

PROFESSIONAL QUALIFICATIONS- STEPHEN R. CLARK MAl PRESIDENT OF STEPHEN R. CLARK· APPRAISER & CONSULTANT, INC. P.O. Box 1844 ·Stockton, CA 95201 Phone (209) 932-0700 Fax (209) 467-3518

PROFESSIONAL EDUCATION 1974 B.A. Degree Psychology, Cal State Stanislaus 1976 Master's Degree Public Administration, Cal State Stanislaus

AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS- COURSES CREDITED WITH COMPLETION: Course I Series (I A I through I B3) Principles, Procedures, and Capitalization Theory and Techniques Course 2 Series (~-1 through 2-3) Case Studies, Report Writing Seminar, Standards of Professional Practice Course 4 Litigation Valuation and Course 8 Applied Residential Property Valuation

SOCIETY OF REAL ESTATE APPRAISERS- COURSES CREDITED WITH COMPLETION: Course 1 01 Introduction to Appraising Real Property Course 201 Principles of Income Property Appraisal Course 202 Applied Income Property Valuation and Course R-2 Narrative Report Seminar Course 301 Special Applications of Appraisal Analysis

APPRAISAL INSTITUTE· COURSES CREDITED WITH COMPLETION Course 550 Advanced Applications Standards of Professional Practice Federal and State Laws and Regulations New Industrial Valuation and Easement Valuations Law and the Financial Institution Reform and Recovery Enforcement Act (FJRREA) Understanding Limited Appraisals and Appraisal Report Writing Options - General Satisfied all continuing education requirements of the Appraisal institute

AMERICAN SOCIETY FARM MANAGERS & RURAL APPRAISERS COURSES CREDITED WITH COMPLETION- Rural Business Valuation

CALIFORNIA STATE BOARD OF EQUALIZATION- COURSES CREDITED WITH COMPLETION Course 1 Appraiser Certification and Course 9 Valuation of Possessory Interests

AMERICAN SOCIETY OF APPRAISERS- COURSES CREDITED WITH COMPLETION: Business Valuation 201,202,203 and 204

INSTITUTE OF BUSINESS APPRAISERS- COURSES CREDITED WITH COMPLETION: Demonstration Report Writing and Advanced Applications Application of the Market Approach Discount & Capitalization Rates: Practical & Defensible Derivation Techniques- Small & Closely Held Businesses Fractional Interest Valuation - Premiums and Discounts Valuation of Hea]thcare Entities in a Changing Regulatory and Reimbursement Environment Succession Planning - A Value Added Service Appraising for Estate and Gift Tax Purposes Report Writing and Analysis

ASSOCIATION OF INVESTMENT MANAGEMENT INVESTMENT RESEARCH:- Successfully passed the Level I examination for the Chartered Financial Analyst (CFA) designation in 1997.

BECKMAN COMPANY- COURSES CREDITED WITH COMPLETION: The Technical inspection of Real Estate

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT All the Right Moves- Relocation and Tenant Assistance HUD Programs

EXPERIENCE: 1997-present: Business Valuation- Specializing in the valuation of closely held business for estate and gift tax purposes, litigation and lending purposes. Valuation assignments have included small businesses and fractional or minority interest discounts in limited partnerships and real estate holdings as tenants in common.

1984- present: Independent fee appraiser concentrating in the appraisal of a wide variety of real estate valuation including agricultural property, residential, commercial and industrial, subdivision development land, restaurants, financial institutions, motels, shopping centers, apartments, professional and medical office buildings, manufacturing buildings, warehouses, truck terminals, senior housing including congregate, residential care and skilled nursing facilities. Consultation with public agencies on right of way projects including relocation housing studies and right of way acquisition estimation and project design.

1984 -present Consulting Activities 1991 -Possessory Interest Valuation of leased land at Cal Expo State Fairgrounds in Sacramento 1994 -Newark Sierra- Recycled waste paper manufacturing plant in Stockton 1996 - Florsheim Brothers - Several apartment complexes in Modesto 1996 - Com Products manufacturing plant in Stockton 1995- Market Study of Downtown Stockton Office sales for Pacific Gas and Electric (P. G. & E.) 1995 - Relocation Housing Study for Fresno Flood Control Agency Right of Way budget estimates for major highway projects: 1995- City of Escalon- Realignment of Highway 120 through the downtown area- Client: Nolte and Associates .1996 -City of Ripon- Jack Tone Road Interchange at Highway 99- Client: Rajappan and Meyers 1997- City of Rocklin- Sierra College Interchange at Interstate 80- Client: Omni Means 1997 -City of Turlock- NW Triangle Specific Plan: several intersections along Highway 99 -Client: Omni Means 1981-1984: Fee Appraiser with Robert Ford & Assoc., Inc. Assignments included valuation of the Federal Government's Leasehold interest in the Aero jet Plant in Sacramento, along with other complex valuation assignments.

1980 to 1981: Chief Real Property Appraiser for Douglas County Nevada Assessor's office- responsible for reviewing all real estate appraisals and for establishing policies and procedures for a mass appraisal system in that county. Certified by the Nevada State Tax Commission to appraise real and personal property for assessment purposes.

1977-1980: Real Estate Appraiser- Stanislaus County Assessor's Office. Staff Appraiser- Performed residential, commercial and industrial valuations for property tax purposes.

COLLEGE AND UNIVERSITY INSTRUCTOR: 1980: Commercial Appraisal Instructor at Modesto Junior College. 2006: Spring Semester University of the Pacific, Stockton- Real Estate Valuation and Investments

EXPERT WITNESS: Qualified as an expert witness in San Joaquin, Stanislaus and Sacramento Counties.

PUBLICATIONS: "Business Enterprise Value in Special Purpose Properties" - Appraisal Journal- January 2002. "Appraising Industrial Properties"- Chapter 8 "Appraising Special Purpose Industrial Properties Without the Use of Comparable Sales"- 2005

PROFESSIONAL ACTIVITIES: Member of the Appraisal Institute (MAl) Member of American Society of Appraisers (ASA) -Real Property/Urban California Real Estate Broker- License No. 770134 California Certified General Real Estate Appraiser: No. AG003414 Lifetime Member of the Institute of Business Appraisers President of the American Society of Appraisers Sacramento Chapter 58 - 1999/00 and 2000/0 I Co-Secretary & Member of Board of Directors of American Society of Appraisers Sacramento Chapter 58- 1998/99 State Chair Appraisal Institute's California Government Relations Subcommittee 1993-1994 & 1996 Chair Government Relations Committee - Sacramento Sierra Chapter of AI 1992 Chair Legislation/Research Committee- Sierra Nevada Chapter American Institute Real Estate Appraisers 1990/91 Board of Directors: Sierra Nevada Chapter of American Institute of Real Estate Appraisers 1987-1989

APPRAISAL ASSIGNMENTS COMPLETED BY STEPHEN R. CLARK- MAl HAVE INCLUDED THE FOLLOWING CLIENTS

GOVERNMENT AGENCIES AND PUBLIC INSTITUTIONS Housing and Urban Dev. (HUD) Modesto City Schools Federal General Services Administration Bureau of Indian Affairs Tuolumne County City of Turlock Amador County Assessor United States Postal Service City of Riverbank Federal Deposit Insurance Corp. Salida Public Finance Agency San Joaquin County Superior Court City of Sacramento City of Galt Fresno Flood Control District City of Manteca City of Patterson San Joaquin Regional Rail Commission City of Brentwood San Joaquin Regional Rail Commission

FINANCIAL INSTITUTIONS Bank One of Arizona Bank of America First National Bank of Chicago Guaranty Federal Savings Bank Wells Fargo Bank Weyerhauser Mortgage Center State Bank Saint Paul Savings and Loan Bankers Mutual Westside Bank Barclays Bank Central Illinois Bank First Security Bank

City of Modesto City of Stockton Tracy Joint Union School District California Department of Transportation City of Tracy United States Department of the Navy Small Business Administration Turlock Irrigation District Ceres Unified School District San Joaquin County Stockton Unified School District Manteca Unified School District City of Lathrop City of Escalon San Joaquin Area Flood Control Agency City of Plymouth City ofLodi City of Oakdale Resolution Trust Corporation Stanislaus County Schools Superintendent

United Savings Bank Home Savings and "Loan Trans Pacific National Bank Dean Witter Reynolds Inc. Capital Federal Savings & Loan Comerica Bank Bank of Agriculture and Commerce Bank of Stockton First Interstate Bank of Arizona Merrill Lynch Primerit Bank The Money Store Regency Bank

MAJOR CORPORATIONS AND REAL ESTATE DEVELOPMENT FIRMS Allied Insurance Group Kimball Hill Homes Warmington Homes Florsheim Development Tiechert Aggregates Grupe Communities Inc. Emerald Properties Texaco Trading and Transportation Inc. Bayer Corporation Resource Development Robertson Homes Toys R Us Trust for Public Lands The William Lyon Company The Luckey Company Catellus Residential Group Ahmanson Development Zagaris Management Services Pacific Gas & Electric Alexander Development Brazos Partners Union Pacific Railroad Interstate Medical Group King and Lyons H.D. Arnaiz Corporation Santa Fe Pacific.Realty Corp. Spreckels Sugar Mobil Oil

APPENDIXD

FORM CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Ccrtifica te (this "Disclosure Certificate") is executed and delivered by the West Patterson Financing Authority (the "Authority") in connection with the issuance of (a) $2,615,000 principal amount of the West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) Special Tax Refunding Bonds, Series 2009-A (the "Series 2009-A Bonds"), and (b) $3,240,000 principal amount of the West Patterson Fimncing Authority Community Facilities District No. 2001-l (Public Improvements) Subordinate Special Tax Refunding Bonds, Series 2009-B (the "Series 2009-B Bonds," and, together with the Series 2009-A Bonds, the "2009 Bonds"). The Series 2009-A

. Bonds are being issued pursudnt to a Fiscal Agent Agreement, dated as of January 1, 2002, between the Authority for and on behalf of the West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) (the "District"), and The Bank of New York Mellon Tmst Company, N.A. (successor to BNY Western Tmst Company), as fiscal agent (the "Fiscal Agent"), as amended and supplemented by a Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of January 1, 2003, a Supplemental Agreement No.2 to Fiscal Agent Agreement, dated as of September 1, 2003, a Supplemental Agreement No.3 to Fiscal Agent Agreement, dated as of February 1, 2004, a Supplemental Agreement No.4, dated as of October 1, 20ll4, and a Supplemental Agreement No.5 to Fiscal Agent Agreement, dated as of July 1, 2009, each by and between the Authority, for and on behalf of the District, and the Fiscal Agent (collectively, the "Senior Fiscal Agent Agreement"). The Series 2009-B Bonds are being issued pursuant to a Fiscal Agent Agreen1ent, dated as of July I, 2009 (the "Subordinate Fiscal Agent Agreement"), between the Authority and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the "Subordinate Fiscal Agent"). The Authority covenants and agrees as follows: ·

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Authority for the benefit of the Holders and Beneficial Owners of the 2009 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Senior Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate uriless otherwise defined in this Section, the capit<liized terms used in the first paragraph of this Disclosure Certificate have the meanings given therein, and the fol1ovving capitalized tenns sh<11l have the follovving 01eanings when used in this Disclosure Certificate:

"Affiliate" shall mean, with respect to any first person or entity, any second person or entity which controls, is controlled by, or is under common control with such first person or entity.

"Annual Report" shall mean any Annual Report provided by the Authority pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Beneficial Owner" shall mean any person that (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any of the 2009 Bonds (including persons holding 2009 Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any 2009 Bonds for federal income tax purposes.

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"Dissen1in(ltion Agent" sh(lll n1ean Goodwin Consulting Group, Inc., Sncramento, California, or any successor Dissemination Agent designated in writing by the Authority to the Fiscal Agent which has filed with the Authority and the Fiscal Agent a written acceptance of such designation. .

"Listed Events" shall mean any of the events listed in Section S(a) of this Disclosure Certificate.

"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule.

"Participating Underwriter" shall mean the original underwriter of the 2009 Bonds required to comply with the Rule in connection with offering of the 2009 Bonds.

"Repository" shall mean each National Repository and each State Repository.

"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1"934, as the same may be amended from time to time.

"State" sh<1llmean the State of Californi<l.

"State Repository" shall mean any public or private repository or entity designated by the St<Jte· as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Con1missiOn.

SECTION 3. Provision of Annual Reports.

(a) The Authority shall provide, or shall cause the Dissemination Agent to provide, not later than February 28 of each year (the "Report Date"), which is 8 months after the end of the Authority's fiscal year, which is june 30, commencing with the report for the 2008-2009 fiscal year, to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate, with copies to the Fiscal Agent and the Subordinate Fiscal Agent. The Atmual Report n1ay be subn1itted ?ts a single doct1n1ent or ns separate docun1ents comprising.a package, and may cross-reference other infonnation as provided in Section 4 of this Disclosu•e Cert{ficate. If either the Authority's fiscal year or the Report Date changes, the Authority sh.:~ll give notice of such ch<~nge in the same n1aru1er as for a Listed Event urider Section 5(c). The Authority's audited financial statements shall be preceded by the following legend in bold, large print, of the type shown below. If the financial statements arc submitted separately, the reference to them in the Amlllal Report shall also contain the same legend, which follows:

NOTE: The Authority has not obligated itself to incur any liability in the event the special taxes are not adequate to pay principal and interest on any of the 2009 Bonds. Further, the Authority will under no circumstances advance any of its funds (other than the special taxes and the funds .and accounts established under the Fiscal Agent Agreement) to the payment of principal or interest on any of the 2009 Bonds. Therefore, the Authority believes its audited financial statements are not material to the owners or Beneficial Owners of the 2009 Bonds and for that reason they were not included in either of the two Official Statements for the 2009 Bonds. They are being submitted a part of the continuing disclosure solely due to an interpretation of Rule 15c2-12 by the Staff of the Securities and Exchange Commission that it is required under the l'ule. Investors and others should not infer from the inclusion of the Authority' fina ncia I statements in any continuing disclosure that the Au thcirity considers its

0-2

financial statements to be material to the owners or Beneficial Owners of the 2009 Bonds, or that the Authority will, under any circumstances, advance any of its funds (other than the special taxes and the funds and accounts established under the applicable Fiscal Agent Agreement) for the payment of principal or interest on the 2009 Bonds.

(b) Not later than fifteen ("IS) Business Days prior to the Report Date, the Authority shall provide the Annual Report to the Dissemination Agent (if other than the Authority). If the Authoritv is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the Authority or the Dissemination Agent shall send a notice to the Municipal Securities Rulemaking Board in substantially the form attached hereto as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Armual Report the nun1e and address of each National Repository and the Stnte Repository, if any; and

(ii) file a report with the Authority, which shall, to the extent the Authority has provided the Dissemination Agent with the Annual Report, certify to the Authority that the Annual Report has been provided to the Repositories pursuant to this Disclosure Certificate, state the date it was provided, and list all the Repositories to which it was provided.

SECTION 4. Content of Annual Reports.

(a) The Am1ual Report shall contain or include by reierence the following:

(i) The audited financial statements of the Authoritv for the fiscal vear most recently ended, prepared in accordance with generally accePted accounting~principles as promulgated to apply to govcnm1ental entities from time to time by the Governmental Accounting Standards Board. If the Authority's audited financial statements arc not available by the Report D~te, the Annual Report shall contain unaudited financial statetnents in a format sin1ilnr to the audited financial staten1ents of the Authority for the preceding fiscal year, and the audited financial statements shall be filed in the same manner as the Annu-al Report when they become available.

(ii) A copy of any report prepared pursuant to Section 9.07 of the Fiscal Agent Agreement or Section 9.07 of the Subordinate Fiscal Agent Agreement.

(iii) A table showing the number of parcels in each Special Tax category of the Rate and Method of Apportiorm1ent.

(iv) A table showing, with respect to each owner (including Affiliated entities known to the Authority) of parcels in the District in the aggregate oblig~ted for more than 10% of the most recent Special Tax levy (the "Major T~xpayers"), the following:

Name of person or entity (including known Affiliates). Assessor's pa reel numbers owned. Acres ovvned. Status of such parcels (as Residential Property, Senior Housing Property, Other Property, or Undeveloped Property under Rate and Method of A pportio1m1ent). Assessed value of parcels owned. Aggregate Special Tax levy on the parcels. Aggregate Special Tax <:'mounts delinquent on the parcels.

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(v) Total Special Tax most recently levied in the District.

(vi) Special Tax delinquency rate for the then most recently ended fiscal year of the Authority (currently june 30).

(vii) Description of status of foreclosure proceedings related to parcels accounting in the aggregate for so;;) or n1ore of the then most recent Spcciol Tax levy.

(viii) Status of any litigation filed in the Superior Court of the State of California in and for the County of Stanislaus or the Federal District Court or bankruptcy court having similar jurisdiction, which has been served upon the Authority or the District, challenging the development of property in the District (until the first date or which all property is in the "Developed Property" category in the Rate and Method of Apportiotm1ent), or litigation in which the Authority or District has been served challenging the validity or levy of the Specia I Tax.

(ix) If there have been any changes in the Rate and Method of Apportionment of the Special Tax, a description in reasonable detail of such changes.

(x) Any additional information required to be provided by the Authority if and to the extent the Authority is provided by the Participating Underwriter or the Fiscal Agent with an opinion of nationally recognized bond counsel to the effect that pursuant to subsequent interpretative releases or regulations of the United States Securities and Exchange Commission, applicable case law, or similar authority, such additional information is required to be provided under the Rule.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Authority or related public entities, that have been submitted to each of the Repositories or the Securities and Exchange Commission. lf .. the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Authority shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) Plirsuant to the provisions of this Section 5, the Authority shall give, or cause to be given, noticC of the occurrence of any of the folltnving events with respect to either the Series 200<J-A Bonds or the Series 200<J-B Bonds, if material:

l. Principal and interest payment delinquencies.

2. Non-payment related defaults.

3. Modifications to rights of holders of any of the 2009 Bonds.

4. Optional, contingent or unscheduled bond calls.

5. Defeasances.

6. Rating changes.

7. Adverse tax opinions or events affecting the tax-exempt status of any of the 2009 Bonds.

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8. Unscheduled draws on the debt serv1ce reserves reflecting financial difficulties.

9. Unscheduled drcnvs on any credit enhancen1ents reflecting financi<11 difficulties.

10. Substitution of any credit or liquidity providers or their failure to perform.

11. Release, substitution or sale of any property securing repayrnent of any of the 2009 Bonds.

(b) Whenever the Authority obtains knowledge of the occurrence of a Listed Event, the .Authority shall as som.1 as possible determine if such event would be material under applicable federal securities laws. ·

(c) If the Authority determines that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Authority shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository, with a copy to the Fiscal Agent and the Dissemination Agent. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2009 Bonds pursuant to the Fiscal Agent Agreement.

SECTION n. Termination of Reporting Obligation. The Authority's, the Fiscal Agent's and the Dissemination Agent's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2009 Bonds. If such termination occurs prior to the final maturity [)f the 2009 Honds, the Authority shall give notice of such termination in the same manner as for a Listed Event under Section S(c).

SECTION 7. Dissemination Agent. The Authority may, from time to time, appoint or engage a Dissen1ination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such DisscminCltion Agent, \vith or without appointing a successor Dissen1in<1tion Agent. The Dissen1ination Agent shall not be responsible in any manner for the content of any notice or report prep<~red by the Authority pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be Goodwin Consulting Group, lnc., Sacrarnento, CZ!Iifonlla.

SECTION 8. [Intentionally Omitted}

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Authority may amend this Disclosure Certificate, and any provision of this Disclosure· Certificate may be waived, provided that the following· conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or S(a), it may Ol)ly be made in connection with a change in circumstances that arises from a change in leg<ll requiren1ents, change in law, or change in the identity, nature or status of an obligated person with respect to any of the 2009 Bonds, or the type of business conducted;

(b) The undertaking, as amended or taking into ()Ccount such \vaiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the 2009 Bonds, after taking into

D-5

occount any an1endments or interpretations of the Rule, as \Vell as any change in circun1stances; and

(c) The amendment or waiver either (i) is approved by the owners of both the Series 2009-A Bonds and the Series 2009-B Bonds in the same maimer as provided in the Fiscal Agent Agreement or the Subordinate Fiscal Agent Agreement, as applicable, for amendments to such respective agreen1ent \-vith the consent of the respective bondowners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or Beneficial Owners of the 2009 Bonds.

In the event of any amendment or \vaiver of a provision of this Disclosure Certificate, the Authority shall describe such amendment or waiver in the next Annual Report, and shall include, as applicable, a narrotive explanation of the reason for the amendment or woiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information and/or operating data being presented by the Authority. In addition. if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Am1ual Report for the year in which the change is made should present a comparison (in narrative form <tnd also, if feasible, in quantitative fonn) between the financial statements as prepared on the basis of the new accounting principles and those prepored on the basis of the former accounting principles.

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Authority from disseminating any other information. using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in <~ny Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Authority chooses to include any information ii1 any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Authority shall have no obligation under this Disclosure Certificate to update such information or include it in any future Aru1ttal Report or notice of occurrence of a Listed Event.

SECTION 11. Default. ln the event of a failure of the Authority to comply with any .Provision of this Disclosure Certificate the Fiscal Agent may (and, at the request of any Participating Underwriter or the owners of at least 25(X) aggregate principal amount of Outstanding Series 2009-A Bonds, the Fiscal Agent shall, but only to the extent indemnified to its satisfaction from any liability or expense, including fees of its atton1eys), or any owner or Beneficial Owner of the Series 200'1-A Bonds may, take such actions as may be necessary and appropriate, including seeking rnandote or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Certificate. In the event of a failure of the Authority to comply with any provision of this Disclosure Certificate the Subordinate Fiscal Agent may (and, at the request of any Participating Underwriter or the owners of at least 25% aggregate principal amount of Outstanding Series 2009-B Bonds, the Subordinate Fiscal Agent shall, but only to the extent indemnified to its satisfaction from any liability or expense, including fees of its attomeys), or any owner or Beneficial Owner of the Series 2009-B Bonds may, take such actions. as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed a default under the Fiscal Agent Agreement or the Subordinate Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Authority to comply with this Disclosure Certificate shall be an action to corn pel performa nee. ·

D-6

SECTION 12. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Authority agrees to inden1nify and save the Dissemination Agent, its officers, directors, crnployees and ageots, hartnless against any loss, expense and liabilities \Nhich it n1ay incur t~rising out of or in the exercise or performance of its pcnvers and duties hereunder, including the costs and expenses (including attomcys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the Authority under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2009 Bonds.

SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Authority, the Fiscal Agent, the Subordinate Fiscal Agent, the Dissemination Agent, the Participating Underwriter, and the owners and Beneficial Owners from time to time of the 2009 Bonds, and shall create no rights in any other person or entity.

Date: July __ , 2009

D-7

WEST PATTERSON FINANCING AUTHORITY

By ______ ~--~~------------Execu tive Director

EXJ-IIl3IT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Narne of Issuer: West r)atterson Financing Authority.

Nome of Bond Issues: $2,615,000 West Patterson Financi•1g Authority Community Facilities District No. 200]-J (Public Improvements) Special Tax Refunding Bonds, Series 2009-A, and $3,240,000 West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) Subordinate Special Tax Refunding Bonds, Series 2009-B

Date of Issuance: July 28, 2009

NOTICE IS HEREBY GIVEN that the West Patterson Financing Authority (the" Authority") has not provided an Annual Report with respect to the above-named Bonds as required by (a) Section 5.17 of the Fiscal Agent Agreement, dated as of january 1, 2002, between the Authority and The Bank of New York Mellon Trust Company, N.A. (successor to BNY Westem Trust Company), as fiscal agent (the "Fiscal Agent"), as amended and supplemented by Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of january ·1, 2003, Supplemental Agreement No. 2 to Fiscal Agent Agreement, dated as of September 1, 2003, Supplemental Agreement No. 3 to Fiscal Agent Agreement, dated as of February 1, 2004, Supplemental Agreement No.4 to Fiscal Agent Agreement, doted as of October 1, 2004, and Supplemental Agreement No.5 to Fiscal Agent Agreement, dated as of July 1, 2009, each by and between the Authority and the Fiscal Agent; and (b) Section 5.17 of the Fiscal Agent Agreement, dated as of July 1, 2009, between the Authority and The Bank of New York Mellon Trust Company, N.A., as fiscal agent. The Authority anticipates that the Am1ual Report will be filed by --------~-·

Dated: ________ _

cc Go<._.xiwin Consulting Group 555 University Avenue, Suite 280 Sacramento, CA 95825

WEST PATTERSON FINANCING AUTHORITY

By:------------------Its: __________________________________ __

The Bank of New Ynrk Mellon Trust Company, N.A. 700 South Flower Street, Suite 500 Los Angeles, CA 91J(J17

D-8

APPENDIXE

FORM OF OPINION OF BOND COUNSEL

Board of Directors West Patterson Financing Authority c/o City of Patterson 1 Plaza Patterson, California 95363

July __ , 2009

OPINION: $2,615,000 West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) Special Tax Refunding Bonds, Series 2009- A

Members of the Board of Directors:

We have acted as bond counsel in connection with the issuance by the West Patterson Financing Authority (the" Authority") of its $2,615,000 West Patterson Financing Authority Community Facilities District No. 2001-1 (Public Improvements) Special Tax Refunding Bonds, Series 2009-A (the "Bonds") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq., of the California Government Code) (the "Act"), a Fiscal Agent Agreement, dated as of January 1, 2002 (the "Original Fiscal Agent Agreement"), by and between the Authority, for and on behalf of West Patterson Financing Authority Community Filcilities District No. 2001-1 (Public Improvements) (the "District"), and The Bank of New York Mellon Trust Company, N.A. (successor to BNY Western Trust Company), as fiscal agent (the "Fiscal Agent"), as amended and supplemented by Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of January 1, 2003, Supplemental Agreement No. 2 to Fiscal Agent Agreement, dated as of September 1, 2003, Supplemental Agreement No. 3 to Fiscal Agent Agreement, dated as .of February·], 2004, Supplemental Agreement No.4 to·Fiscal Agent Agreement, dated as of. October 1, 2004, and Supplemental Agreement No.5 to Fiscal Agent Agreement, dated as of July 1, 2009 each by and between the Authority, for and on behalf of the District, and the Fiscal Agent (the Original Fiscal Agent Agreement, as so amended and supplemented, is referred to below as the "Fiscal Agent Agreement''), and Resolution No. 2009-01 adopted by the Authority on June 16, 2009 (the "Resolution").

In connection with this opm10n, we have examii1ed the law and such certified proceedings and other docun1ents as vve deen1 necessary to render thjs opinion. As to questions elf fact material to our opinion, we have relied upon representations of the Authority contained in the Resolution and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation.

E-1

Based upon the foregoing, we are of the opinion, under existing law, as follows:

·1. The Authority is duly created and validly existing as a joint exercise of powers authority, with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein and issue the Bonds.

2. The Fiscal Agent Agreement has been duly entered into by the Authority and constitutes a valid and binding obligation of the Authority enforceable upon the Authority.

3. Pursuant to the Act, the Fiscal Agent Agreen1ent creates a valid lien on the funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with the pledge thereof for the security of the Series 2002-A. Bonds, the Series 2003-A Bonds, the Series 2003-B Bonds, the Series 2004-A Bonds, the Series 2004-B Bonds and anv other Parity Bonds issued under, and as such terms are defined in, the Fiscal Agent Agreen1e1~t. ~

4. The Bonds have been duly authorized, executed and delivered by the Authority and are valid and binding limited obligations of the Authority, payable solely from the sources provided therefor in the Fiscal Agent Agreement.

5. Subject to the Authority's compliance with certain covenants, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the alternative ntintntunt tax for individuals and corpori'ltions under the lntern<1.l Revenue Code of 1986, as amended (the "Code"), and (iii) is not taken into account in computing adjusted current earnings, "''hich is used as an Cldjustment in determining the federal alternative 1ninimum tax for certain corporations. Failure by the Authority 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. It is also our opinion that the Bonds are "qualified tax-exempt obligations" under section 265(b)(3) of the Code.

6. The interest on the Bonds is exempt from personal income taxation imposed by the State of Califomia.

Ovvnership of the Bonds tn<~y result in other tax conseclucnces to certain taxpayers, t1nd we express no opinion regarding any such collateral consequences arising vvith respect to the Bonds.

The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laV\'S affecting creditors' rights heretofore or hereafter enacted and also tnay be subject to the exercise of judicial discretion in accordance with general principles of equity.

In rendering this opinion, we have relied upon certifications of the Authority and others with respect to certain material facts. Our opinion represents our legal judgment based upon such reviev.' of the law and facts that. we deen1 relevant to r"ender our opinion and is not n guarantee of a result. This opinion is given as of the d<1te 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 n1a.y hereafter occur.

Respectfully submitted;

E-2

APPENDIXF

GENERAL INFORMATION REGARDING THE CITY OF PATTERSON AND THE COUNTY OF STANISLAUS

The i11{on11ntio11 i11 this Appc11dix F is provided ns gCilernl bnckgro1111d dntn. The Bo11ds nrc payable solely }i-o111 the Pledged Co/Intern/ ns described i11 the bod11 of this Officinl Stni£'111CIIt. The CiiiJ of Pntterso11 owl the County of Stnuislnus hove 110 liability whatsoever with respect to the pn!JIIIC/It of tile Series 2009-A Bo11ds or the Authority's obligntious 1111dcr tile Fiscal Ageut Agrec/1/CIIt. Sec tile section iu the Ojjicinl Stntcmcut Clltitlcd "SECURITY FOR THE SEJ<IES 2009-A BON OS."

General

The City is located on State Route 33, about four miles east of U.S. Interstate Highway 5 and about 18 miles southwest of Modesto. The City was incorporated in 1919. The City is a center for agricultural production and food processing in the western portion of the County.

The County is located approximately 90 miles east of San Francisco and 60 miles south of Sacramento. The County is bordered by San Joaquin County on the north, Calaveras and Tuolumne counties on the east, Merced County on the south, ilnd Santa Claril County on the west. The County is located in the Central Valley of California, one of the fastest-growing areas in the State. Modesto, incorporated in 1884, is the county seat of Stanislaus County.

Agriculture and agricultural-related industries, such as food processing, arc the major industries in the County. Tl:e County also has large Zlnd growing services, retail trade and manufacturing employment sectors.

U.S. Interstate Highway 5 and State Highway 99 provide the County with access to the rest of California and the western United States. The County is served by long and short-haul trucking firms, as well as by trains and buses. Major rail lines of the Union Pacific and Burlington Northern Santa Fe railroad systems serve the County, including daily scheduled Amtrak service. Modesto airport provides daily scheduled airline service to San Francisco. International shipping facilities are ilvailable in Stockton, 26 miles north of Modesto.

Population

The County's population as of )iinuary 1, 2008, was 525,903 persons. The County's 2008 popul~tlon \NOS 41.9rX) above its 1990 population, representing an average annual con1pound growth rate of 1.961Xl.

The City had a population of 21,229 persons in 2008, accounting for 4% of the then total population of the County. The City's population increased by approximately 146.19% between 1990 and 2008, representing an average atmual compound growth rate of 5.13%.

The following table shows the history of population growth in the City and the County between 1990 and 2008.

F-1

POPULATION GROWTH, 1990-2008 City of Patterson and County of Stanislaus

Ci tv of Patterson Countv of Stanislaus

Year Pof:ulation Annual ry,, Change Po12ulation Annual <Y,, Clumge 1990 8,626 370,522 1991 8,975 4.osry,, 382,000 3.10'X, 1992 9,300 3.62 392,700 2.80 1993 9,400 !.OR 401,600 2.27 1994 9,650 2.66 408,300 1.67 1995 9,750 1.04 413,000 1.15 19% Y}J25 1.79 417,500 1.09 1997 10,150 2.27 423,200 1.37 1998 I 0,31l0 1.48 429,100 1.39 1999 10,850 5.34 436,100 "1.63 2000 11,606 6.97 446,997 2.50 2008 12,221 5.32 458,512 2.60 2002 13,076 7.08 472,185 3.06 2003 13,704 4.87 483,705 2.51 2004 14,209 3.77 493,515 2.12 2005 16,110 13.43 503,003 1.97 2006 19,172 19.03 511,848 1.78 2007 20,773 8.55 518,938 1.57 2008 21,229 2.20 525,903 1.34

Note: 19lJO Cl nd 2000 stn ti stic~ 11 re <1 s of Apri 1 1 . 1 Y91-llJ99 <mel 2001-2008 popul<~ tion statistics arc as of Jn nua ry 1. Source: State Dep<l rtment of FinCI nee for 1991-1999 <1 nd 200 1-2008; U.S. State Department of Commerce, Bureau of

the Census for ·1 l)l)Q o1nd 2000.

Employment

The largest employers in the City as of June 30, 2008, were as follows:

LARGEST EMPLOYERS City of Patterson

Firm Patterson Vegetnblc Company l$onacich Ord1ards Traina Dried Fruits Salinas Fann Labor Contractor, lnc. Lucich-Si'tntos Farms Potter Farms John Potter Specialty Foods

A rriculture-Rclated Pnxi uct/Ser\' ice

Frozen Produce Sun Dried Tomatoes/ Apricots Sun Dried Tomatoes/ Apricots Agri-Business Contractor Fruit Packer Tonu1to Products Fruit & Nut Processor

Non-Agriculture-Related Firm

Patterson Unified School District CVS Distribution Center Patterson Teen Center Kohl's Distribution Center DiobloGronde Designed Mobile Systems, inc. City of Patterson ·

Source: 0 ty of l)a tterson, 2008-2009 Fi nnl Bud get.

Product/Service Educational District Warehouse After School Activities Warehouse Golf Resort/Restaurant Mrdular Buildings Municipal Covernn1ent

F-2

Emplovment 600 250 IY2 180 158 100 100

Employment 523 515 165 140 120 100

89

The following table shows wage ond salilry employment by industry for the County.

ANNUALAVERAGEWAGEANDSALARYEMPLOYMENT County of Stanislaus

Industr 2004 2005 2006 2007 2008 Agriculture 13,800 13,800 I 2.900 12,800 13,400 Construction 12,300 13,400 13)00 11,400 10,000 Manufacturing 22]00 22,600 22)00 22,700 22,800 Transportation & Public Utilities 4,700 5,200 5)00 5,600 5,800 Wholesale Trade 6,000 6,300 5,900 6,000 6,000 Retail Trade 21,500 22,300 22,500 22,200 22,300 Infonnation 2,500 2,500 2,400 2,300 2,200

· Finance, Insurnnce & Real Estate 6,100 6,200 6,100 6,200 5,700 l)rnfessional ilnd Business Services 14,200 14,900 I 4,800 14,900 15,000 Educationnl and Health Services 19,200 19,400 19,900 21,100 21,500 Leisure and Hospitality 14,200 14,800 15,100 15,400 15,'100 Other Services 6,200 6,100 5,900 6,000 6,000 Government 25,100 25,600 26,300 26,300 26,100

Toto! ] 68,500 172,800 172,800 172,800 172,100

(1) Employment is reported by pi <tee of work; it does not include persons invol\'ed in labor-management disputes. Figures are roundL-'CI tn the nearest hLmd red. Columns m<~y not add hl totnls due h) n)und in g.

Source: California Employment Development Department.

The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, Stanislaus County, the State of California and the nation as a vvhole. ·

Year

2004

2005

2006

2007

2008

Source:

Civilian Area Labor Force EmEioyed

City of Peltterson 5,700 5,000 Stan isla us County 225,600 204,700 California 17,444,400 16,354,800 United States 147,401,167 139,251,'!17 Citv ofPntterson 5,800 5,100 Stai1islaus County 229,200 209,700 California 17,629,200 16,671,900 United States 149,320,000 141,730,000 City of Patterson 5,800 5,100 Stanislaus County 228,000 209,800 California 17,821,100 16,948,400 United States 151,427,583 144,427,000 Citv of Pntterslm 5,800 5,100 Sta;1islaus County 231c101J 210,900 California 18,078,000 17,108,700 United States 153,167,750 146,093,917 City ofP(ltterson 6,000 5,100 Stanislaus County 237,700 210,900 California 18,391,800 17,059,600 United States 154,287,000 145,362,000

State of Cdiforni<t, Employment Develt)pment Depnrtment; ad jus ted; U.S. Bureau of La bnr Statistics.

c 0 ~--~")

U nemploy men t UnemEloyed Rnte

700 12.8% 20,900 Y.2

1,089,700 6.2 8,149,250 55

700 11.1)% I 9,400 8.5

957,200 5.4 7 CW1,000 5.1

600 ll:t<Ji, 18,200 8.0

872,700 4.9 7,000,583 4.6

700 12.0% 20,300 8.8

969,300 5.4 7,073,B33 4.6

900 15.3'/:, 26,700 11.2

1,332,300 7.2 8,924,000 5.8

M<trch 2009 Benchmark, not ~easomlly

The annual average unemployment rate in the County in 2008 was 11.2%, and in the City in 2008 was '15.3%. It is expected that unemployment rates for the County and the City \Viii show an increase vvhen data is available for 2009. In contrast, the average unemployment rate in Californi<1 for that time period \VClS 7.2°;:), The higher rates in Stanislaus C()unty (lnd in the City reflects the effect of agricultural employment in the County and the City and the seasonal patten1 of crop harvesting and food processing.

Construction Activity

The following tables summarize building permits and construction valuation 111 the County and in the City from 2004 through 2008.

BUILDING PERMITS AND VALUATIONS Stanislaus County

2004-2008

2004 2005 Valuation ($000)

Residential $791,442 $929,747 Non-Residential 291,921 335,781

Total $1,083,363 $1,265,528

Dwelling Units Single Family 4,106 4,489 MultipJ'e Family 497 234

Total 4,603 4,723

Note: Detail m<~y not add to ~ums bee<~ use of independent rounding. Snurce: Construclion lndustry Rt.'Search Bo<1rd.

2006

$521,231 349,713

$870,943

2,276 134

2,410

2007

$347,724 305,700

$653,424

1,230 537

1,767

BUILDING PERMITS AND VALUATIONS City of Patterson

2004-2008

2004 2005 Valuation ($000)

Residential $47,071 $191,623 Non-Residential 4,020 30,710

Total $51,091 $222,333

Dwelling Units Single Fan1ily 247 896 Multiple Family 0 0

Total 247 890

Note: Detail may not add to sums bee<~ use of independent round in g. Source: Construction Industry Research Board.

F-4

2006 2007

$ 70,107 $ 9,153 38,\56 '14,1 04

$108,263 $23,257

308 33 () 0

308 33

201JH

117,431 235,855 353,285

468 19

487

2008

$ 2,343 18,473

$20,817

5 8

13

Retail Sales

The County is the principal comn1ercial center for a large region extending into San Joaquin County to the north, Merced County to the south, and Tuolumne County and other Sierra foothill communities to the east. The following tables set forth retail snles figures for the City and the County.

Year 2003 2004 2005 2006 2007

TAXABLE SALES City of Patterson 2003-2007 ($000s)

Number of Permits (As ofJuly)

206 222 231 255 276

Source: Californin St<1te Board of Equaliz<1tion.

Apparel Stores General Merd1andisc Stores Spcci<~lty Stores Fot.xi Stores Eating & Drinking Places Household Group Building Materials Automotive Gnmp Service Stations** Other Retoil Stores

T otol Retail Stores Busi1iess and Personal Services All Other Outlets

Total All Outlets

TAXABLE SALES County of Stanislaus

2003-2007 ($000s)

2003 2004 $ 154,867 $ 192,858

803,255 846,742 465,562 501,694 282,781 291,867 421,793 452,120 187,214 198,691 416,983 508,825

1,305,986 1,'196,277

297,729 331,376 $4,336,170 $4.720,450

224,429 240,245 1,614,093 I ,804,973

. $6,175,492 $6,765,668

Total Taxable Soles ($000)

$

$79,280 85,089

103~'142

118,723 117,028

2005 213,R50 927,418 535480

308,864 489,169 210,720 572552

1516702

368269 $5,143,024

253838 1889038

$7,285,900

2006 $ 224,909

956,378 558,432 320,361 505,384 192,275 567,014

1,573,719

369,917 $5,268,389

240,'104 1,843,839

$7 "'152,532

Source: C<1 Ji forn i <1 St<1 te Bm1 rd of Equ<ll izn tion "T<'l X <I ble Sale:> inCa I i forni a." * St<1rting in 2007, category included in "Other ret<1il stores." ** Starting in 2007, category broken out from "Autnnwti ve Group."

F-5

2007 $ 229,220

926,548 '

336,853 516,132 174,113 475,633

I ,018.574 622,125 793,555

5,092,753 228,283

I ,814,847 $7,135,883

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INvESTMENT BANKERS

351 CALIFORNIA STREET, SUITE 1000 SAN FRANCISCO, CA 94104

(415) 421-8900