Agenda — Desert Hot Springs City Council, June 2, 2026 (part 1 of 7)

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City of Desert Hot Springs
AGENDA

REGULAR MEETING OF THE CITY COUNCIL
and the City Council Serving as the Successor Agency to the Former Redevelopment Agency Board
Tuesday, June 2, 2026
4:30 PM - Closed Session
5:30 PM - Presentations
6:00 PM - Regular Session
Council Chambers/City Hall
11-999 Palm Drive
Desert Hot Springs, California, 92240

Page
CLOSED SESSION - 4:30 P.M.

CALL TO ORDER

ROLL CALL

PUBLIC COMMENTS
At this time, item(s) on the Closed Session agenda may be discussed during Public Comments. PLEASE STATE YOUR NAME FOR THE RECORD.

CLOSED SESSION:

1. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: (two potential cases)
RECESS
PRESENTATIONS - 5:30 P.M.

Every Student Succeeding Award Recognition
REGULAR SESSION - 6:00 P.M.

CALL TO ORDER

ROLL CALL

INVOCATION

PLEDGE OF ALLEGIANCE

CITY ATTORNEY REPORT ON CLOSED SESSION

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APPROVAL OF AGENDA
At this time the City Council may amend the order of the agenda, approve the Consent Calendar, remove items from the Consent Calendar for separate discussion and action, and add Urgency Items.

Urgency Items ("Added Starters"): The Brown Act, which governs public meetings, permits the City Council to take action on any item that does not appear on the agenda only if 2/3 of the City Council (if all are present) or all members of the City Council (if fewer than all members are present) determine there is a need to take immediate action on the item, and the need to take immediate action came to the City Council's attention after the agenda was posted.

PUBLIC COMMENTS
At this time, pursuant to the Brown Act, any person may comment on matters of general interest within the subject matter jurisdiction of the City Council, NOT listed on the agenda. Under the Brown Act, the City Council should not take action on or discuss matters raised during Public Comment portion of the agenda that are not listed on the agenda.

Comments are limited to the first ten (10) speakers at three (3) minutes per speaker. Speakers may not yield their time to others without consent of the Mayor. All comments are to be directed to the City Council and shall be devoid of any personal attacks. Members of the public are expected to maintain a professional, courteous decorum during public comments.

Please complete and submit a "speaker card" to the City Clerk. You will be asked to STATE YOUR NAME AND CITY OF RESIDENCE FOR THE RECORD.

CITY MANAGER REPORT

MAYOR AND COUNCIL MEMBER REPORTS

CONFLICT OF INTEREST & LEVINE ACT DISCLOSURES
ADMINISTRATIVE CALENDAR:

2. Resolution to Approve the Issuance of Desert Hot Springs Community Facilities District No. 2025-1 Improvement Area 1 Special Tax Bonds, Series 2026, and Certain Documents and Other Actions in Connection Therewith
Geoffrey Buchheim, Administrative Services Director
Recommendation:

Adopt a Resolution of the City Council of the City of Desert Hot Springs, California, acting as the legislative body of City of Desert Hot Springs Community Facilities District No. 2025-1 authorizing the issuance of its Improvement Area 1 Special Tax Bonds, Series 2026 in a principal amount not to exceed ten million dollars ($10,000,000) and approving certain documents and taking certain other actions in connection therewith
Staff Report - SR-26-124 - Pdf
7 - 330

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3. Landscape and Lighting Maintenance District No. 1 Intention Proceedings for the Levy and Collection of Assessments
Geoffrey Buchheim, Administrative Services Director
Recommendation:
1) Adopt a Resolution of the City Council, declaring its intention for the levy and collection of assessments for the Citywide Landscape and Lighting Maintenance District No. 1, Zone A and Zone B, for Fiscal Year 2026-27; and
2) Adopt a Resolution of the City Council, approving the Annual Engineer’s Report regarding the proposed levy and collection of assessments for the Landscape and Lighting Maintenance District No. 1 for Fiscal Year 2026-27.

Staff Report - SR-26-122 - Pdf
331 - 472

4. Landscape and Lighting Maintenance District No. 2 Intention Proceedings for the Levy and Collection of Assessments
Geoffrey Buchheim, Administrative Services Director
Recommendation:
1) Adopt a Resolution of the City Council declaring its intention for the levy and collection of assessments for Landscape and Lighting Maintenance District No. 2, Zones 1 through 19, for Fiscal Year 2026- 27; and
2) Adopt a Resolution of the City Council approving the Annual Engineer's Report regarding the proposed levy and collection of assessments for Landscape and Lighting Maintenance District No. 2, Zones 1 through 19, for Fiscal Year 2026-27.

Staff Report - SR-26-121 - Pdf
473 - 561

5. Drainage Assessment District No. 1 Intention of Proceedings for the Levy and Collection of Assessments
Geoffrey Buchheim, Administrative Services Director
Recommendation:
1) Adopt a Resolution of the City Council, declaring its intention for the levy and collection of assessments for the Drainage Assessment District No. 1 for Fiscal Year 2026-27; and
2) Adopt a Resolution of the City Council, for approval of the Annual Engineer’s Report regarding the proposed levy and collection of assessments for the Drainage Assessment District No. 1 for Fiscal Year 2026-27.

Staff Report - SR-26-120 - Pdf
563 - 642
CONSENT CALENDAR:

Matters on the "Consent Calendar" are considered routine and may be acted upon by one motion under "Approval of the Agenda." Individual items may also be removed by the City Council for separate discussion under "Approval of the Agenda." The title is deemed to be read and further reading waived on any ordinance listed on the Consent Calendar for second reading and adoption.

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6. City Council Regular Meeting Minutes: May 19, 2026
Jerryl Soriano, City Clerk
Recommendation: Approve the minutes as presented; or as corrected.

Staff Report - SR-26-128 - Pdf
643 - 646

7. City Council Meeting Schedule for Summer/Winter 2026 Jerryl Soriano, City Clerk
Recommendation: Approve the proposed City Council Meeting Schedule for Summer/Winter 2026.

Staff Report - SR-26-123 - Pdf
647

8. Delegation of Investment Authority to the City Treasurer and Adopt the City Investment Policy for FY 2026-2027
Geoffrey Buchheim, Administrative Services Director
Recommendation:

Adopt a Resolution of the City Council approving delegation of investment authority and other related duties to the City Treasurer, as authorized by the City’s Investment Policy, and approve and adopt the attached Investment Policy for Fiscal Year 2026-2027.

Staff Report - SR-26-125 - Pdf
649 - 676

9. Professional Services Agreement Amendment for Social Action Group (SWAG)
Emily Granados, Management Analyst
Recommendation:

Authorize the City Manager to execute a Second Amendment to the Professional Services Agreement between the City and Social Action Group (SWAG) to provide the City with homeless outreach and engagement services in an amount not to exceed $625,000 annually with the option to extend for up to three additional one-year terms.

Staff Report - SR-26-126 - Pdf
677 - 703

10. Wardman Park Improvement Project, City Project No. 4019 Notice of Completion
Raul Arauz, Associate Engineer
Recommendation:

Approve the work, accept the project as complete, authorize final payment to Landmark Associated Builders, Inc., and direct the City Manager to file the Notice of Completion for the Wardman Park Improvement Project, City Project No. 4019.

Staff Report - SR-26-127 - Pdf
705 - 711

11. Payment Register and City Council Expenditures for the Period of April 1, 2026 to April 30, 2026
Sheila Hruby, Senior Accountant
713 - 876

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Recommendation:

Receive and file.

Staff Report - SR-26-116 - Pdf

12. Treasurer’s Report as of March 2026
Sheila Hruby, Senior Accountant
Recommendation: Receive and file.

Staff Report - SR-26-117 - Pdf
877 - 882

PUBLIC COMMENTS
Opportunity is given to those members of the public who have NOT addressed the City Council on an item which is NOT on the agenda. Comments are limited to three (3) minutes per speaker. PLEASE STATE YOUR NAME AND CITY OF RESIDENCE FOR THE RECORD.

ADJOURN

UPCOMING MEETING DATES
*Please refer to the City website calendar at www.cityofdhs.org for meeting locations and the most up to date information.

June 9 Planning Commission 6:00 p.m.

June 11 Public Safety Commission 6:00 p.m.

June 16 City Council Regular Meeting 6:00 p.m.
________________________________________________________________________________

NOTICES
In accordance with California Government Code Section 54957.5, any writing or document that is a public record, relates to an open session agenda item, and is distributed less than 72 hours prior to a regular meeting will be made available for public inspection in the Office of the City Clerk at City Hall during normal business hours at 11999 Palm Drive, Desert Hot Springs, CA 92240.

If, however, the document or writing is not distributed until the regular meeting to which it relates, then the document or writing will be made available to the public at the location of the meeting, as listed on this agenda at 11999 Palm Drive, Desert Hot Springs, CA 92240.

Americans with Disabilities Act
In an effort to comply with the requirements of Title 2 of the Americans with Disabilities Act of 1990, the City of Desert Hot Springs requires that any person in need of any type of special equipment, assistance, or accommodation(s) in order to communicate at a City public meeting, must inform the City Clerk a minimum of 72 hours prior to the scheduled meeting to enable the City to make reasonable arrangements.

Disclosure of Campaign Contributions (Levine Act - Government Code Section 84308) Pursuant to Government Code section 84308, members of the City Council are disqualified and not able to participate in any agenda item involving contracts (other than competitively bid contracts, labor contracts, or personal employment contracts with City employees), franchises, discretionary land use permits and other entitlements if the Councilmember received more than $500 in campaign contributions from the applicant or contractor, an agent of the applicant or contractor, or any financially interested participant who actively supports or opposes the City’s decision on the agenda item in the previous 12 months. Members of the City Council who

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have received, and applicants, contractors or their agents who have made, campaign contributions totaling more than $500 to a Councilmember in the previous 12 months are required to disclose that fact for the official record of the subject agenda item and shall not make, participate in making, or in any way attempt to use their official position to influence the subject agenda item. Disclosures must include the amount of the campaign contribution and identify the recipient persons and may be made either in writing to the City Clerk prior to the subject hearing or by verbal disclosure at the time of the hearing.

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SR-26-124
City of Desert Hot Springs
City Council

AGENDA ITEM REPORT
To: City Council
Date: June 2, 2026
Department: Administrative Services
Prepared by: Geoffrey Buchheim, Administrative Services Director Subject: Resolution to Approve the Issuance of Desert Hot Springs Community Facilities District No. 2025-1 Improvement Area 1 Special Tax Bonds, Series 2026, and Certain Documents and Other Actions in Connection Therewith RECOMMENDATION:

The City of Desert Hot Springs (“City”) formed Community Facilities District No. 2025-1 (“District”) and designated Improvement Area 1 therein (the “Improvement Area”) in 2025 for the purpose of financing various public improvements and services required in connection with the proposed development within the District. On January 21, 2025, an election was held within Improvement Area 1 at which the landowners eligible to vote approved the issuance of bonds in an amount not-toexceed $13,000,000, secured by special taxes levied on property within the Improvement Area.

The District comprises a portion of a master-planned community that has been marketed as “Skyborne at Desert Hot Springs” (“Skyborne”). Skyborne is located to the southeast of Mission Lakes Boulevard and Worsley Road. Improvement Area No. 1 is generally located on the northwest corner of Karen Avenue and Promenade Drive in the City. The property in Improvement Area No. 1 is being developed by Lennar Homes of California, LLC (“Lennar”).

Improvement Area No. 1 includes approximately 74 gross acres planned for 286 single family detached homes. As of April 1, 2026, the date of value of the Appraisal, Lennar had completed and conveyed 114 homes within the Improvement Area to individual homeowners. As of such date, Lennar had pulled a total of 187 building permits, and Lennar owned four completed model homes and seven homes under construction. The remaining 161 lots (of which 62 were under construction) were owned by AG EHC II (LEN) CA 2, L.P. (the “Landbank”), which is serving as Lennar’s landbank for the development of the Improvement Area.

Development has progressed since April 1. Between April 1, 2026, and May 15, 2026, Lennar had completed and conveyed 1 home to an individual homeowner and pulled an additional 14 building Item Number: 2.

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SR-26-124
permits. As of May 15, 2026, Lennar owned five completed model homes, 18 completed but unclosed homes, 41 homes under construction, and 7 finished lots. The remaining 100 lots (of which 16 are under construction and 84 are finished lots) were owned by the Landbank.

Lennar currently expects to complete and convey all remaining planned homes within the Improvement Area by February 2028.

The Resolution before the City Council authorizes the issuance of special tax bonds (the “2026 Bonds”) to finance the costs of construction of facilities benefiting the property in the District.

Additionally, the Resolution authorizes the approval and execution of certain documents, as further described below.

DISCUSSION:

Based on market conditions as of May 22, 2026, the 2026 Bonds are expected to be issued in a par amount of approximately $9,415,000. The final maturity will be September 1, 2056.

Proceeds from the 2026 Bonds will be primarily used to finance certain public improvements needed with respect to the development of property located within the District, including public improvements to be owned by the City and water and sewer facilities to be owned and operated by the Mission Springs Water District.

Given the level of development noted above, Lennar will provide a Letter of Credit that may be drawn upon by the District to cover payment of special taxes levied on property owned by Lennar and the Landbank. The initial term of the Letter of Credit is one year and will be renewed each year until certain development and conveyance thresholds are met.

Assuming that the City Council approves the resolution this evening, the 2026 Bonds are expected to be priced during the week of June 15, 2026, and close by the end of June 2026. Provided in the table below are a few estimated financing statistics relating to the 2026 Bonds, as well as the projected special tax levy on homes within the District. As required under Section 5852.1 of the California Government Code, good faith estimates have been provided to the City by Urban Futures, Inc., the Municipal Advisor in consultation with Stifel, Nicolaus & Company, Incorporated, as underwriter of the 2026 Bonds as Attachment A.

Select Financing and Levy Statistics
Par Amount $9,415,000
True Interest Rate 5.26%
Average Annual Payments $620,229
Total Payments $18,711,978
Estimated Levy Per Parcel FY 2026-27 $2,140 - $2,916
Based on market conditions as of May 22, 2026
As previously mentioned, the resolution for City Council’s consideration authorizes the issuance of the 2026 Bonds and approves forms of the Preliminary Official Statement, the Bond Indenture, the Bond Purchase Agreement, and the Continuing Disclosure Certificate.  Preliminary Official Statement: The Preliminary Official Statement (the “POS”) is the offering document for the 2026 Bonds. It provides a description of the District and Improvement Area, the 2026 Bonds, the proposed development within the Improvement Area, and any other Item Number: 2.

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SR-26-124
information that would be material to a prospective investor’s decision on whether to purchase the 2026 Bonds.
 Bond Indenture: The Bond Indenture is a contract entered into between the District and Wilmington Trust, National Association, as the appointed Trustee for the 2026 Bonds. This document contains terms of the 2026 Bonds including, but not limited to, the payment and redemption provisions, the pledge of revenues to pay the 2026 Bonds, rights and duties of the Trustee, remedies upon a default in the payment of the 2026 Bonds, and other related matters.  Continuing Disclosure Certificate: Executed for the benefit of bondholders, the Continuing Disclosure Certificate obligates the District to file an annual report each Fiscal Year which includes, among other things, the most recent audited financial statements of the City and financial data relating to the District. The District is also required to report certain events which are significant to bondholders if and when they occur.
 Bond Purchase Agreement: Pursuant to the Bond Purchase Agreement, the District agrees to sell the 2026 Bonds to the underwriter, and the underwriter agrees to purchase the 2026 Bonds, subject to typical closing conditions. City staff, the City’s municipal advisor, and bond counsel will sign off on the final pricing of the 2026 Bonds prior to the execution of the Bond Purchase Agreement.
 Appraisal: The Appraisal provides an estimate of the market value of property within the Improvement Area subject to the special tax lien. The Appraisal will be included as an appendix to the POS.

Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf of the City.If this resolution is approved, City staff will continue to work with the financing team to finalize all of the aforementioned documents. As previously mentioned, the pricing date would be targeted for mid-June 2026.

FISCAL IMPACT:

The 2026 Bonds are paid from special taxes levied in the Improvement Area. There is no fiscal impact to the City’s General Fund. The City will, however, be required to provide administration for the District, which will be funded as part of the annual special tax levy.

The property owners are expected to pay Special Taxes of approximately $2,140 to $2,916 per parcel in Fiscal Year 2026-27, depending on the size of the home. Such special taxes will not escalate.

These figures are preliminary and subject to prevailing market conditions at the time of sale.

ATTACHMENTS:
1) ATTACHMENT A Good Faith Estimate
2) Resolution of Issuance- Desert Hot Springs CFD 2025-1 IA No. 1 (Skyborne) 2026 Special Tax Bonds
3) PRELIMINARY OFFICIAL STATEMENT CITY OF DESERT HOT SPRINGS CFD 2025-1 4) Bond Indenture - Desert Hot Springs CFD 2025-1 IA No.1 - 2026 Special Tax Bonds 5) CONTINUING DISCLOSURE CERTIFICATE DHS CFD 2025-1
6) Bond Purchase Agreement- City of Desert Hot Springs CFD No. 2025-1 (Skyborne Village) IA No. 1 2026 Bonds
Item Number: 2.

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SR-26-124
7) Appraisal - City of Desert Hot Springs CFD No. 2025-1 Item Number: 2.

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ATTACHMENT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the 2026 Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the District by Urban Futures, Inc., the District’s Municipal Advisor (the “Municipal Advisor”) in consultation with Stifel Nicolaus (the “Original Purchaser”).

Principal Amount. The Municipal Advisor has informed the District that, based on the District’s financing plan, its good faith estimate of the aggregate principal amount of the 2026 Bonds to be sold is $9,415,000 (the “Estimated Principal Amount”).

True Interest Cost of the Bonds. The Municipal Advisor has informed the District that, assuming that the respective Estimated Principal Amount of the 2026 Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the 2026 Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the 2026 Bonds, is 5.26%.

Finance Charge of the Bonds. The Municipal Advisor has informed the District that, assuming that the Estimated Principal Amount of the 2026 Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the 2026 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2026 Bonds), is $379,456. Additionally, there will be an annual Trustee fee of $2,000 for as long as the 2026 Bonds are outstanding.

Amount of Proceeds to be Received. The Municipal Advisor has informed the District that, assuming the Estimated Principal Amount of the 2026 Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the District for sale of the 2026 Bonds, less the finance charge of the 2026 Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the 2026 Bonds, is $8,399,917.

Total Payment Amount. The Municipal Advisor has informed the District that, assuming that the Estimated Principal Amount of the 2026 Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the District will make to pay debt service on the 2026 Bonds, plus the finance charge for the 2026 Bonds, as described above, not paid with the respective proceeds of the 2026 Bonds, calculated to the final maturity of the 2026 Bonds, is $18,711,978. Additionally, there will be an annual Trustee fee of $2,000 for as long as the 2026 Bonds are outstanding.

The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates. The actual principal amount of the 2026 Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the 2026 Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of 2026 Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the 2026 Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the 2026 Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the Item Number: 2.

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District’s financing plan, or a combination of such factors. The actual date of sale of the 2026 Bonds and the actual principal amount of 2026 Bonds sold will be determined by the District based on various factors. The actual interest rates born by the 2026 Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the 2026 Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the District.

Item Number: 2.

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RESOLUTION NO. 26-___

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DESERT HOT SPRINGS,

CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) OF THE CITY OF DESERT HOT SPRINGS AUTHORIZING THE ISSUANCE OF ITS IMPROVEMENT AREA NO. 1 SPECIAL TAX BONDS, SERIES 2026 IN A PRINCIPAL AMOUNT NOT TO EXCEED TEN MILLION DOLLARS ($10,000,000) AND APPROVING CERTAIN DOCUMENTS

AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council (the “City Council”) of the City of Desert Hot Springs (the “City”), has heretofore undertaken proceedings to establish Community Facilities District No. 2025-1 (Skyborne Village) of the City of Desert Hot Springs (the “District”) and declared the necessity to issue bonds on behalf of the District for Improvement Area No. 1 therein (“Improvement Area No. 1”) pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, pursuant to Resolution Nos. 2025-001 and 2025-002 adopted by the legislative body of the District on January 21, 2025, certain bond propositions were submitted to the qualified electors within Improvement Area No. 1 and were approved by more than twothirds of the votes cast at the election held on January 21, 2025; and WHEREAS, the legislative body of the District desires to issue a first series of bonds for Improvement Area No. 1 of the District at this time under the Act to finance certain public facilities which the District is authorized to finance (the “Facilities”); and WHEREAS, the District desires to finance certain Facilities through the issuance of bonds in an aggregate principal amount not to exceed $10,000,000 designated as the “Community Facilities District No. 2025-1 (Skyborne Village) of the City of Desert Hot Springs Improvement Area No. 1 Special Tax Bonds, Series 2026” (the “Bonds”); and WHEREAS, in order to effect the issuance of the Bonds, the District desires to enter into various agreements and approve certain documents in substantially the forms presented herein; and
WHEREAS, based on the appraisal of real property prepared by Integra Realty Resources (the “Appraisal”) of property within Improvement Area No. 1, the value of the real property in Improvement Area No. 1 subject to the special tax to pay debt service on the Bonds is more than three times the sum of the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within Improvement Area No. 1 as calculated in the manner set forth in Section 53345.8(a) of the Act; and
WHEREAS, the City Council has determined in accordance with Section 53360.4 of the Act that a negotiated sale of the Bonds to Stifel Nicolaus & Company, Incorporated (the “Underwriter”) in accordance with the terms of the Bond Purchase Agreement for the Bonds to be entered into by the District and the Underwriter (the “Bond Purchase Agreement”) approved as to form by this City Council herein will result in a lower overall cost to the District than a public sale; and
Item Number: 2.

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2 WHEREAS, the District has determined to adopt the City’s Debt Management Policy as the debt management policy of the District; and

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DESERT HOT SPRINGS HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS:

Section 1. Each of the above recitals is true and correct.

Section 2. The issuance of the Bonds is hereby authorized in an aggregate principal amount not to exceed $10,000,000 with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 5 below. The City Council hereby determines that it is prudent in the management of the District’s fiscal affairs to issue the Bonds. The Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 5 hereof. All other provisions of the Bonds shall be governed by the terms and conditions of the Bond Indenture (the “Indenture”), which Indenture is hereby approved in substantially the form on file with the City Clerk, with such additions thereto and changes therein (including, but not limited to, changes in the amount to be maintained in the Reserve Account (as defined in the Indenture)) as the officer or officers executing the same deem necessary to enhance the security for the Bonds, to cure any ambiguity or defect therein, to insert the offering price(s), interest rate(s), selling compensation, principal amount per maturity, redemption dates and prices and such other related terms and provisions as limited by Section 5 hereof or to conform any provisions therein to the Bond Purchase Agreement or the Official Statement delivered to the Underwriter of the Bonds. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by one of the following: the Mayor, the City Manager, the Administrative Services Director (or any acting or interim of such position), or their written designees (each, an “Authorized Officer” and collectively, the “Authorized Officers”), each of whom is authorized to execute the Indenture. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture.

Section 3. The Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City or his or her written designee and be attested by the manual or facsimile signature of the City Clerk. Wilmington Trust, National Association is hereby appointed to act as trustee, registrar and transfer agent for the Bonds.

Section 4. The covenants set forth in the Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council and shall be complied with by the District and its officers. The Indenture shall constitute a contract between the District and the Owners of the Bonds.

Section 5. The form of the Bond Purchase Agreement presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized to execute the Bond Purchase Agreement, with such additions thereto and changes therein relating to dates and numbers as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest rates applicable to the Bonds as of the sale date. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement by one or more of such Authorized Officers; provided, however, that the Bond Purchase Agreement shall be signed only if the Underwriter’s discount does not exceed 1.375% of the principal amount of the Bonds and only if the true interest cost on the Bonds does not exceed 5.75%. Each of the Authorized Officers is authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District Item Number: 2.

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3 and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District.

Section 6. The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Certificate in the form hereby approved, with such additions therein and changes thereto as the officer or officers executing the same deem necessary to cure any defect or ambiguity therein, with such approval to be conclusively evidenced by the execution and delivery of such certificate.

Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved and the Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined necessary by the Authorized Officers to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Authorized Officers is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officers, to make such Official Statement complete and accurate as of its date. The Underwriter is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers of the Bonds upon the execution of the final Official Statement as described above.

Section 8. In accordance with the requirements of Section 53345.8 of the Act, based on the Appraisal, the legislative body of the District hereby determines that the value of the real property in Improvement Area No. 1 subject to the special tax to pay debt service on the Bonds is more than three times the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within Improvement Area No. 1, all as calculated in the manner provided in Section 53345.8(a) of the Act.

Section 9. Each Authorized Officer is authorized to provide for all services necessary to effect the issuance of the Bonds. Such services shall include, but not be limited to, printing the Bonds, obtaining legal services, trustee and paying agent services, and any other services deemed appropriate as set forth in a certificate of such Authorized Officer. Each Authorized Officer is authorized to pay for the cost of such services, together with other costs of issuance, from Bond proceeds deposited pursuant to the Indenture.

Section 10. The Authorized Officers, the City Clerk and the other officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the Bonds as described in the Indenture, including providing certificates to the Underwriter as to the accuracy of any information relating to the District and Improvement Area No. 1 which is included within the Official Statement. Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk.

Section 11. The District hereby adopts the City’s Debt Management Policy, as amended, supplemented and restated from time to time, as the debt management policy of the District pursuant to California Code Section 8855.

Item Number: 2.

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4 Section 12. The City Council acknowledges that the good faith estimates required by Section 5852.1 of the California Government Code are disclosed in the staff report and are available to the public at the meeting at which this Resolution is approved.

Section 13. The City Council hereby approves the execution and delivery of all agreements, documents, certificates and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.

Section 14. This Resolution shall be effective upon its adoption.

PASSED, APPROVED AND ADOPTED this the 2nd day of June, 2026. ___________________________
Scott Matas, Mayor
Attest:
___________________________
Jerryl Soriano, CMC, City Clerk
Approved as to form:
___________________________
Jennifer Mizrahi, City Attorney
Item Number: 2.

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Stradling Yocca Carlson & Rauth
Draft of 5/26/2026
4937-0435-8563v3/200812-0006
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

PRELIMINARY OFFICIAL STATEMENT DATED JUNE __, 2026
NEW ISSUE – BOOK ENTRY ONLY NO RATING
In the opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See “TAX MATTERS” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations.

Item Number: 2.

Page 17 of 882 ends

4937-0435-8563v3/200812-0006
$9,545,000*
COMMUNITY FACILITIES DISTRICT NO. 2025-1
(SKYBORNE VILLAGE) OF THE CITY OF DESERT HOT SPRINGS
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS, SERIES 2026
Dated: Delivery Date Due: September 1, as shown on inside cover page The Community Facilities District No. 2025-1 (Skyborne Village) of the City of Desert Hot Springs Improvement Area No. 1 Special Tax Bonds, Series 2026 (the “Bonds”) are being issued by the Community Facilities District No. 2025-1 (Skyborne Village) of the City of Desert Hot Springs (the “District”) to: (i) finance certain public improvements needed with respect to the development of property located within the District, including public improvements to be owned by the City of Desert Hot Springs (the “City”) and water and sewer facilities to be owned and operated by the Mission Springs Water District, (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and pursuant to that certain Bond Indenture, dated as of June 1, 2026 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”).

The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels within Improvement Area No. 1 of the District (“Improvement Area No. 1”) and from certain other funds pledged under the Indenture, all as further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within Improvement Area No. 1. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”
The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on each March 1 and September 1, commencing September 1, 2026. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL

OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.

The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as set forth herein. See the caption “THE BONDS — Redemption.”
Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF THE SECURITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

MATURITY SCHEDULE
(See Inside Cover Page)
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Cole Huber LLP, Ontario, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery on or about June __, 2026.
[INSERT STIFEL LOGO]
Dated: June __, 2026
*
Preliminary, subject to change
Item Number: 2.

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4937-0435-8563v3/200812-0006
$9,545,000*
COMMUNITY FACILITIES DISTRICT NO. 2025-1
(SKYBORNE VILLAGE) OF THE CITY OF DESERT HOT SPRINGS
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS, SERIES 2026

MATURITY SCHEDULE
BASE CUSIP®†______
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price CUSIP No.†
$____ __% Term Bonds due September 1, 20__ Yield: _.__% Price: _____ CUSIP No.† ______________ *
Preliminary, subject to change
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright(c) 2026 CUSIP Global Services. All rights reserved.

CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.

Item Number: 2.

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4937-0435-8563v3/200812-0006

CITY OF DESERT HOT SPRINGS

COUNTY OF RIVERSIDE, CALIFORNIA
Scott Matas, Mayor
Dirk Voss, Mayor Pro Tem
Gary Gardner, Councilmember
Daniel Pitts, Councilmember
Jan Pye, Councilmember

CITY ADMINISTRATORS
Doria Wilms, City Manager
Daniel Porras, Deputy City Manager
Geoffrey Buchheim, Administrative Services Director
Jerryl Soriano, CMC, City Clerk

CITY ATTORNEY
Cole Huber LLP
Ontario, California

BOND AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California

MUNICIPAL ADVISOR
Urban Futures, Inc.

Walnut Creek, California

SPECIAL TAX CONSULTANT
Webb Municipal Finance, LLC
Riverside, California

APPRAISER
Integra Realty Resources
Los Angeles, California

TRUSTEE
Wilmington Trust, National Association
Costa Mesa, California
Item Number: 2.

Page 20 of 882 ends

4937-0435-8563v3/200812-0006
Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds.

Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

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 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,” “project,” “budget,” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the captions “THE DISTRICT AND IMPROVEMENT AREA NO. 1” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN

SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,

UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR

ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,

PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING

SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS

FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds.

Item Number: 2.

Page 21 of 882 ends

i
4937-0435-8563v3/200812-0006

TABLE OF CONTENTS
Page
INTRODUCTION .................................................................................................................................................1 The District and Improvement Area No. 1 ........................................................................................................1 Sources of Payment for the Bonds.....................................................................................................................3 Appraisal Report ................................................................................................................................................4 Description of the Bonds ...................................................................................................................................4 Tax Exemption...................................................................................................................................................5 Professionals Involved in the Offering ..............................................................................................................5 Continuing Disclosure .......................................................................................................................................5 Parity Bonds for Refunding Purposes Only.......................................................................................................6 Bond Owners’ Risks ..........................................................................................................................................6 Other Information ..............................................................................................................................................6 FINANCING PLAN ..............................................................................................................................................6 Estimated Sources and Uses of Funds ...............................................................................................................6 THE BONDS .........................................................................................................................................................7 General Provisions.............................................................................................................................................7 Debt Service Schedule .......................................................................................................................................8 Redemption........................................................................................................................................................8 Registration, Transfer and Exchange...............................................................................................................12 SOURCES OF PAYMENT FOR THE BONDS .................................................................................................12 Limited Obligations .........................................................................................................................................12 Special Taxes ...................................................................................................................................................13 Reserve Account of the Special Tax Fund.......................................................................................................20 No Teeter Plan .................................................................................................................................................21 Parity Bonds.....................................................................................................................................................21 Lennar Letter of Credit ....................................................................................................................................22 THE DISTRICT AND IMPROVEMENT AREA NO. 1 ....................................................................................22 General Description of the District and Improvement Area No. 1..................................................................22 Authorized Uses of Bond Proceeds .................................................................................................................23 Property Values and the Appraisal Report ......................................................................................................23 Estimated Value-to-Lien Ratios.......................................................................................................................25 Direct and Overlapping Debt...........................................................................................................................28 Delinquency History ........................................................................................................................................30 PROPERTY OWNERSHIP AND THE DEVELOPMENT................................................................................31 General.............................................................................................................................................................31 Planned Development Within Improvement Area No. 1.................................................................................32 Lennar ..............................................................................................................................................................34 SPECIAL RISK FACTORS ................................................................................................................................36 Risks of Real Estate Secured Investments Generally ......................................................................................36 Insufficiency of Special Tax Revenues............................................................................................................36 Increasing Mortgage Interest Rates .................................................................................................................38 Impact of Economic Conditions on the Development in Improvement Area No. 1........................................38 Concentration of Ownership............................................................................................................................38 Property Insurance ...........................................................................................................................................39 Property Values................................................................................................................................................39 Natural Disasters..............................................................................................................................................39 Hazardous Substances......................................................................................................................................40 Enforcement Delays – Bankruptcy ..................................................................................................................41 Item Number: 2.

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ii
4937-0435-8563v3/200812-0006
Special Tax Delinquencies...............................................................................................................................41 FDIC/Federal Government Interests in Parcels ...............................................................................................41 Direct and Overlapping Indebtedness..............................................................................................................42 Payment of Special Taxes is not a Personal Obligation of the Property Owners............................................43 No Acceleration Provision...............................................................................................................................43 Limited Obligations .........................................................................................................................................43 Ballot Initiatives...............................................................................................................................................44 Proposition 218 ................................................................................................................................................44 Litigation with Respect to Community Facilities Districts .............................................................................44 Loss of Tax Exemption....................................................................................................................................46 No Ratings – Limited Secondary Market ........................................................................................................46 Limitations on Remedies .................................................................................................................................46 Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds ....................................................................................................................................................46 Cybersecurity ...................................................................................................................................................46 CONTINUING DISCLOSURE...........................................................................................................................47 District Continuing Disclosure ........................................................................................................................47 Developer Continuing Disclosure....................................................................................................................47 TAX MATTERS..................................................................................................................................................48 LEGAL OPINION ...............................................................................................................................................49 ABSENCE OF LITIGATION .............................................................................................................................49 NO RATING........................................................................................................................................................50 UNDERWRITING ..............................................................................................................................................50 FINANCIAL INTERESTS..................................................................................................................................50 MUNICIPAL ADVISOR.....................................................................................................................................51 MISCELLANEOUS ............................................................................................................................................51 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX..........................A-1 APPENDIX B CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION.............................B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL.................................................................C-1 APPENDIX D APPRAISAL REPORT ...................................................................................................D-1 APPENDIX E SUMMARY OF THE INDENTURE ..............................................................................E-1 APPENDIX F FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE .......................F-1 APPENDIX G FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE .................G-1 APPENDIX H BOOK-ENTRY ONLY SYSTEM ..................................................................................H-1 Item Number: 2.

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4937-0435-8563v3/200812-0006
[INSERT VICINITY MAP]
Item Number: 2.

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4937-0435-8563v3/200812-0006
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Item Number: 2.

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1 4937-0435-8563v3/200812-0006
$9,545,000*
COMMUNITY FACILITIES DISTRICT NO. 2025-1
(SKYBORNE VILLAGE) OF THE CITY OF DESERT HOT SPRINGS
IMPROVEMENT AREA NO. 1
SPECIAL TAX BONDS, SERIES 2026

INTRODUCTION
The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by Community Facilities District No. 2025-1 (Skyborne Village) of the City of Desert Hot Springs (the “District”) of its Improvement Area No. 1 Special Tax Bonds, Series 2026 in the aggregate principal amount of $9,545,000* (the “Bonds”). The proceeds of the Bonds will be used to: (i) finance certain public improvements needed with respect to the development of property located within the District, including public improvements to be owned by the City of Desert Hot Springs (the “City”) and water and sewer facilities to be owned and operated by the Mission Springs Water District, (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), a resolution adopted on June 2, 2026, by the City Council of the City, acting as the legislative body of the District, and a Bond Indenture, dated as of June 1, 2026 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined herein) levied on parcels within Improvement Area No. 1 of the District (“Improvement Area No. 1”) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Indenture.

This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix E.

The District and Improvement Area No. 1
General. The City is located in the County of Riverside (the “County”), California (the “State”), approximately 110 miles east of the City of Los Angeles. The District currently consists of Improvement Area No. 1 and Improvement Area No. 2. The District comprises a portion of a master-planned community that has been marketed as “Skyborne.” Skyborne is located to the southeast of Mission Lakes Boulevard and Worsley Road.

Improvement Area No. 1 is generally located on the northwest corner of Karen Avenue and Promenade Drive in the City of Desert Hot Springs. The property in Improvement Area No. 1 is being developed by Lennar Homes of California, LLC, a California limited liability company (“Lennar”) and is part of Skyborne.

Improvement Area No. 1 includes approximately 74 gross acres planned for 286 single family detached homes. As of April 1, 2026, Lennar had completed and conveyed 114 homes within Improvement Area No. 1 to individual homeowners. As of such date, Lennar has pulled a total of 187 building permits, and *
Preliminary, subject to change
Item Number: 2.

Page 26 of 882 ends

2 4937-0435-8563v3/200812-0006
Lennar owned four completed model homes and seven homes under construction. The remaining 161 lots (of which 62 were under construction) were owned by AG EHC II (LEN) CA 2, L.P. (the “Landbank”), which is serving as Lennar’s landbank for the development of Improvement Area No. 1. Lennar has the option – but not the obligation – to acquire lots pursuant to a phased takedown schedule pursuant to an agreement with the Landbank, as described herein.

Between April 1, 2026 and May 15, 2026 Lennar completed and conveyed one home within Improvement Area No. 1 to an individual homeowner and pulled an additional 14 building permits. As of May 15, 2026, Lennar owned five completed model homes, 18 completed but unclosed homes, 41 homes under construction, and 7 finished lots. The remaining 100 lots (of which 16 were under construction and 84 were finished lots) were owned by the Landbank.

The major infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within Improvement Area No. 1 has been completed. Lennar expects to complete the remaining in-tract infrastructure within Improvement Area No. 1, which consists of landscaping and finishing of certain interior streets as construction of the related homes occurs.

See the captions “THE DISTRICT AND IMPROVEMENT AREA NO. 1” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT” for further information with respect to the District, Lennar and the development within Improvement Area No. 1.

Formation Proceedings. The District was formed, and Improvement Area No. 1 was designated therein on January 21, 2025 pursuant to the Act. The Act was enacted to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by twothirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.

Pursuant to the Act, on December 12, 2024 the City Council adopted Resolution No. 2024-047 (the “Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax on the taxable property within Improvement Area No. 1 and Improvement Area No. 2.

Subsequent to a noticed public hearing on January 21, 2025, the City Council adopted Resolution Nos. 2025-001 and 2025-002 (collectively the “Resolution of Formation”). The Resolution of Formation, with respect to Improvement Area No. 1: (i) established the District and designated Improvement Area No. 1 therein; (ii) authorized the levy of a special tax within Improvement Area No. 1 to finance certain facilities; (iii) determined the necessity to incur bonded indebtedness in an amount not to exceed $13,000,000 within Improvement Area No. 1; and (iv) called an election within Improvement Area No. 1 on the proposition of incurring bonded indebtedness, levying the special tax to finance facilities and setting an appropriations limit.

On January 21, 2025, an election was held within Improvement Area No. 1 in which the property owner within Improvement Area No. 1 approved the proposition authorizing the issuance of bonds in an amount not to exceed $13,000,000 for Improvement Area No. 1. A Notice of Special Tax Lien for Improvement Area No. 1 was recorded in the office of the County Recorder on February 5, 2025, as Document No. 2025-0035890. On February __, 2025, the City Council adopted Ordinance No. ________ (the “Ordinance”) which authorizes the levy of special taxes pursuant to the Rate and Method of Apportionment approved at the January 21, 2025, election (the “Rate and Method”), a copy of which is attached hereto as Appendix A.

Item Number: 2.

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3 4937-0435-8563v3/200812-0006
The Special Tax A (as defined in the Rate and Method) is the special tax that will be levied to pay debt service on the Bonds and any Parity Bonds. The Special Tax A is referred to in this Official Statement as the “Special Tax” or the “Special Taxes.” At the time of the establishment of Improvement Area No. 1, a Special Tax B (as defined in the Rate and Method) was also approved to be levied by the District within Improvement Area No. 1 to fund certain services permitted under the Act including, without limitation, maintenance of parks, parkways and open space; flood and storm protection services; and the operation of storm drainage systems. No amounts of the Special Tax B are not pledged to repay the Bonds or any Parity Bonds.

Pursuant to the formation proceedings described above, additional property may be annexed to the District as one or more improvement areas upon the unanimous approval of the owners of property to be annexed. Any special taxes levied within Improvement Area No. 2 or any future improvement area annexed to the District are not pledged to, and are not available to pay, debt service on the Bonds.

Sources of Payment for the Bonds
Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within Improvement Area No. 1. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” See the caption “THE DISTRICT AND IMPROVEMENT AREA NO. 1.”
Under the Indenture, the District has pledged to repay the Bonds and any Parity Bonds (as defined herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District will covenant in the Indenture for the benefit of the owners of the Bonds and Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” There is no assurance that the property within Improvement Area No. 1 can be sold for the appraised or assessed values described herein, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within Improvement Area No. 1. See the caption “SPECIAL RISK FACTORS —Property Values.”

EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY

OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE

DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN.

Item Number: 2.

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4 4937-0435-8563v3/200812-0006
Appraisal Report
Integra Realty Resources (the “Appraiser”) has conducted an appraisal (the “Appraisal Report”) with a date of value of April 1, 2026 (the “Date of Value”) of the Taxable Property within Improvement Area 1 to provide an estimate of the market value of the such Taxable Property. The Appraisal Report provides an estimate of the approximate market value of the Taxable Property in Improvement Area 1 in its current condition, assuming that development of the property as currently planned will consist of 286 single-family detached residential units.

To arrive at the estimated value of the Taxable Property within Improvement Area 1, the Appraiser applied the following methodology: (i) for five completed single family homes owned by individual homeowners as shown on the County Assessor’s as having assessed values generally consistent with the appraised value of the other homes within Improvement Area No. 1, the Appraiser used the Fiscal Year 2025- 26 assessed values assigned by the County (totaling $2,108,122); and (ii) for the property relating to the remaining 281 planned homes in Improvement Area 1, the Appraiser appraised such property using the methodology as described under “IMPROVEMENT AREA 1 — Appraisal Report.” The property described in part (ii) of the foregoing sentence is referred to in this Official Statement as the “Appraised Property.” Based on the assumptions and limiting conditions in the Appraisal Report, the Appraiser concluded that the minimum market value of the Appraised Property was $65,343,000 as of the Date of Value. The total estimated value of the property based on the foregoing assessed and appraised values is $67,451,122.

The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in Appendix D. The District makes no representation as to the accuracy of the Appraisal Report.

See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Appraisal Report” and “— Estimated Appraised Value-to-Lien Ratios.” There is no assurance that property within Improvement Area No. 1 can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by a property owner. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1,” “SPECIAL RISK FACTORS — Property Values” herein and Appendix D.

Description of the Bonds
The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC.

Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described herein. See the caption “THE BONDS — Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix E — “SUMMARY OF THE INDENTURE.” Item Number: 2.

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Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX MATTERS.” Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to the ownership of the Bonds, see the caption “TAX MATTERS.” Professionals Involved in the Offering
Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee under the Indenture. Stifel, Nicolaus & Company, Incorporated, (the “Underwriter”) is the Underwriter of the Bonds.

Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel and Disclosure Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be passed on for the City and the District by Cole Huber LLP, Ontario, California, City Attorney, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Other professional services have been performed by Webb Municipal Finance, LLC, Riverside, California, as Special Tax Consultant (the “Special Tax Consultant”) and by Kitty Siino & Associates, Los Angeles, California, as Appraiser.

For information concerning circumstances in which certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.”
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the District (the “District Continuing Disclosure Certificate”), the District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), maintained on the Internet at http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated events. These covenants are being made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission (“Rule 15c2-12”).

The Underwriter does not consider Lennar or the Landbank to be “obligated persons” with respect to the Bonds for purposes of Rule 15c2-12. Notwithstanding the foregoing, to assist in the marketing of the Bonds, Lennar will agree to provide, or cause to be provided to EMMA, certain updates with respect to the development within Improvement Area No. 1 and notices of certain enumerated events. See Appendix G for a description of the specific nature of the semiannual reports and enumerated event notices to be filed by Lennar.

See “CONTINUING DISCLOSURE,” Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE” and Appendix G — “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.”
Item Number: 2.

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Parity Bonds for Refunding Purposes Only
Under the Indenture, the District may issue Parity Bonds secured by the Net Taxes on a parity with the Bonds but only to refund all or a portion of the Bonds or Parity Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds for Refunding Purposes Only.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within the District, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Direct and Overlapping Debt” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” Bond Owners’ Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors.

Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject to change.

Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix E.

Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 11999 Palm Drive, Desert Hot Springs, CA 92240, Attention: City Clerk.

FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the expected sources and uses of Bond proceeds.

Sources of Funds
Principal Amount of Bonds
[Plus/Less Net Original Issue Premium/Discount]
Total Sources
Uses of Funds:

Acquisition and Construction Fund
Costs of Issuance(1)
Reserve Account of the Special Tax Fund
Total Uses
(1) To pay costs of issuance of the Bonds, including legal fees, underwriter’s discount, printing costs, Appraiser, Special Tax Consultant and Trustee fees.

Item Number: 2.

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THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing September 1, 2026 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.

Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of such Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest will be payable from the dated date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date.

Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California.

The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. So long as DTC is the securities depository all payments of principal and interest on the Bonds will be made to DTC and will be paid to the Beneficial Owners in accordance with DTC’s procedures and the procedures of DTC’s Participants. See APPENDIX H — “BOOK-ENTRY-ONLY SYSTEM.” In the event the Bonds are not held in book-entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds or of any issue of Parity Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. [Remainder of Page Intentionally Left Blank]
Item Number: 2.

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Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption “— Redemption” below.

Year Ending
September 1 Principal Interest Total Debt Service
Redemption
Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds (other than prepayments of the Special Tax by property owners) on any Interest Payment Date on or after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:

Item Number: 2.

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Redemption Date Redemption Price
%
In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee.

Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:

Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
* Maturity.

If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture.

In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis.

Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on or after September 1, 2026, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in Improvement Area No. 1 made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:

Item Number: 2.

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Redemption Date Redemption Price
Interest Payment Dates through and including March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem Bonds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certificate of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Year.

See the caption “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds” for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes or proceeds of bonds of other community facilities districts.

Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be sent by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Trustee will give notice, in the name of the District, of the redemption of Bonds. Such notice of redemption will: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption.

Item Number: 2.

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In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.

Each further notice of redemption will be sent not later than the date that notice of redemption is given to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds.

Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if the District determines that such moneys will not be so received on or prior to the redemption date, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. If any condition stated in the redemption notice for an optional redemption shall not have been satisfied on or prior to the redemption date: (i) the redemption notice shall be of no force and effect, (ii) the District shall not be required to redeem such Bonds, (iii) the redemption shall not be made, and (iv) the Trustee shall within a reasonable time thereafter give notice to the persons in the manner in which the conditional redemption notice was given that such condition or conditions were not met and that the redemption was canceled.

Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds, as applicable, as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption.

Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity.

Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.

Item Number: 2.

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Registration, Transfer and Exchange
Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds.

The ownership of the Bonds will be established by the Bond registration books held by the Trustee.

Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney.

Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption.

SOURCES OF PAYMENT FOR THE BONDS
Limited Obligations
The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources.

The Special Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap (as defined in the Indenture)) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein). Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third-party or to the City for 100% of the delinquent amount will no longer be pledged under the Indenture to the payment of the Bonds or Parity Bonds.

In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE

COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS

OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM

THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.

Item Number: 2.

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Special Taxes
Authorization and Pledge. In accordance with the provisions of the Act, the City established the District and Improvement Area No. 1 therein on January 21, 2025, for the purpose of financing various public improvements required in connection with the proposed development within Improvement Area No. 1. At a special election held on January 21, 2025, the qualified elector within Improvement Area No. 1 authorized the District to incur indebtedness in an amount not to exceed $13,000,000 for Improvement Area No. 1 and the levy of the Special Taxes on property within Improvement Area No. 1 to repay such bonds and to finance the Facilities (as defined below). The qualified elector within Improvement Area No. 1 also voted to approve the Rate and Method which authorized the Special Tax to be levied to repay indebtedness of the District, including the Bonds.

The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepayment have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds.

The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See “— Rate and Method of Apportionment of Special Tax” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS — Insufficiency of Special Tax Revenues.” None of the special taxes levied within the Improvement Area No. 2 or any future improvement area annexed to the District are pledged to, or available to pay, debt service on the Bonds.

Rate and Method of Apportionment of Special Tax. The Rate and Method applicable to Improvement Area No. 1 is contained in Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The meaning of the defined terms used in this section are as set forth in Appendix A. All references to the Special Tax under this caption are to the Special Tax A under the Rate and Method and not Special Tax B.

Section C5 of the Rate and Method provides for the process by which the District shall, prior to the issuance of the Bonds, reduce the Special Tax A for any Land Use Category(ies) to the extent necessary to cause the Total Tax Burden applicable to Residential Units within such Land Use Category(ies) not to exceed

2.00% of the Minimum Sale Price of such Residential Units. Based on the Price Point Determination undertaken by the Special Tax Consultant in accordance with the Rate and Method, the Special Tax A for Land Use Categories 6 through 9 set forth in Table 1 of the Rate and Method have been reduced.

The Rate and Method also provides that, if the Special Tax A for any Land Use Category is reduced pursuant to the preceding paragraph, a reduced Maximum Special Tax A for Non-Residential, Approved and Undeveloped Property, as well as a reduced Backup Special Tax A for Developed Property shall be calculated.

The revised Maximum Special Tax A shall be equal to the Maximum Special Tax A as set forth in Table 1 of the Rate and Method, reduced by a percentage equal to the weighted average percentage reduction in the Special Tax A for all Land Use Categories of Residential Property. The weighted average percentage will be calculated by taking the sum of the products of the number of Residential Units constructed or expected to be constructed in each Land Use Category multiplied by the percentage change in the Special Tax A for each Land Use Category (or 0 for Land Use Categories that are not changing). This amount is then divided by the total number of Residential Units constructed or expected to be constructed and converted to a percentage.

The reduced Maximum Special Tax A shall be used to compute the reduced Backup Special Tax A.

Item Number: 2.

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The Special Tax A, Maximum Special Tax A and Backup Special Tax A rates, as revised, are included in the Rate and Method attached hereto as APPENDIX A.

In general, the Rate and Method imposes a different Maximum Special Tax on Taxable Property within Improvement Area No. 1 depending upon whether such Taxable Property is classified as:
(i) “Developed Property” (in general, Taxable Property that are included in a Final Map that was recorded prior to January 1st preceding the Fiscal Year in which the Special Tax is being levied and for which a Building Permit for new construction has been issued on or prior to April 1st preceding the Fiscal Year in which the Special Taxes are being levied), (ii) “Approved Property” (in general, parcels of Taxable Property:
(i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a Building Permit on or prior to the April 1st preceding the Fiscal Year in which the Special Tax is being levied), or (iii) “Undeveloped Property” (in general, Taxable Property that is not “Developed Property,” “Approved Property,” “Public Property” or “Property Owners’ Association Property”). Different Maximum Special Taxes are also applicable to Developed Property depending upon: (a) its status as either “Residential Property” or “Non-Residential Property,” (b) in the case of Residential Property, its status as “Single Family Property” or “Multifamily Residential Property” or (c) in the case of Single Family Property, the Residential Floor Area of the structure.

Pursuant to the Rate and Method the District is required to determine the “Special Tax A Requirement” for each Fiscal Year. The Special Tax A Requirement for Improvement Area No. 1 is the amount required in any Fiscal Year to pay: (i) to pay annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) to pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) to pay Administrative Expenses; (iv) to pay any anticipated shortfall due based on Special Tax delinquencies in the prior Fiscal Year; (v) to establish or replenish any reserve funds for the outstanding Bonds or with respect to Bonds expected to be issued in such Fiscal Year; (vi) until the final series of Bonds are issued as determined by the Board, to pay directly for acquisition or construction of the facilities eligible under the Act, provided that the inclusion of such amount does not increase the levy of Special Tax on Approved Property or Undeveloped Property as set forth in the Rate and Method; less (vii) a credit for funds available to reduce the annual Special Tax levy as determined pursuant to the Indenture.

The Special Tax Requirement A for Improvement Area No. 1 is to be satisfied first by levying the Special Tax Proportionately on each Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax A. If additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Parcel of Approved Property at up to 100% of the Maximum Special Tax A applicable to each such Assessor’s Parcel. If additional moneys are still needed to satisfy the Special Tax A Requirement, the Special Tax will be levied Proportionately on each Parcel of Undeveloped Property up to 100% of the Maximum Special Tax A applicable to each such Parcel. If additional moneys are needed to satisfy the Special Tax A Requirement, the Special Tax on each Assessor’s Parcel of Developed Property for which the Maximum Special Tax A is the Backup Special Tax A will be increased in equal percentages from the Assigned Special Tax A up to 100% of the Backup Special Tax A. Finally, if additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Parcel of Public Property or Property Owners’ Association Property at up to 100% of the Maximum Special Tax A applicable to each such Parcel. Notwithstanding the above, under no circumstances will the Special Tax levied against any Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax applicable to any other Parcel be increased by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default The Assigned Special Tax A for Developed Property within Improvement Area No. 1 that is classified as Single Family Property ranges from $2,140.00 per taxable unit with a Residential Floor Area of less than 1,450 square feet to $3,060 per taxable unit with a Residential Floor Area of greater than 2,499 square feet.

Item Number: 2.

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The Maximum Special Tax A for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Property shall be the Backup Special Tax A computed pursuant to the Rate and Method. The Maximum Special Tax A on Approved Property expected to be classified as Single Family Residential Property is $2,503 (as reduced pursuant to Section C5 of the Rate and Method as described above).

Table 1 below sets forth the Assigned Special Tax for Developed Property, the Maximum Special Tax for Approved Property, the estimated Fiscal Year 2026-27 Special Tax levy and the percent of such levy based on land use type.

Based on the number of building permits issued within Improvement Area No. 1 as of April 1, 2026 (the date pursuant to the Rate and Method for determining the number of parcels of Developed Property within Improvement Area No. 1 for the following year Fiscal Year), 187 parcels within Improvement Area No. 1 were classified as Developed Property and the remaining 99 parcels within Improvement Area No. 1 were classified as Approved Property for the Fiscal Year 2026-27 Special Tax levy. Annual Debt Service for the Bonds in each future Fiscal Year has been structured so that Special Taxes levied on Developed Property at buildout (286 parcels) at the Assigned Special Tax A rates, assuming no delinquencies, will generate in each future Fiscal Year not less than the Administrative Expenses Cap plus 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. Neither the Assigned Special Tax A rates nor the Administrative Expense Cap escalate annually.

Item Number: 2.

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TABLE 1

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1
ASSIGNED SPECIAL TAX RATES FOR FISCAL YEAR 2026-27
Land Use
Categories Land Use Residential Floor Area
No. of
Units
Assigned Special
Tax A Per
Unit / Maximum
Special Tax A
Per Unit(1)
Reduced
Special Tax
Per
Unit/Maximum
Special Tax
Per Unit(1)
Projected
Fiscal Year
2026-27
Special Tax
Levy Per
Parcel
Total
Projected
Fiscal Year
2026-27
Special Tax
Levy(2)
Percent of
Total
SFR-D1 Single Family Property Less than 1,450 sq. ft. 32 $ 2,140 $ 2,140 $ 2,140 $ 68,480 10.50% SFR-D2 Single Family Property 1,450 sq. ft. to 1,599 sq. ft. 31 2,255 2,255 2,255 69,905 10.72 SFR-D3 Single Family Property 1,600 sq. ft. to 1,749 sq. ft. 34 2,370 2,370 2,370 80,580 12.35 SFR-D4 Single Family Property 1,750 sq. ft. to 1,899 sq. ft. 20 2,485 2,485 2,485 49,700 7.62 SFR-D5 Single Family Property 1,900 sq. ft. to 2,049 sq. ft. 0 2,600 2,600 0 0 0.00 SFR-D6 Single Family Property 2,050 sq. ft. to 2,199 sq. ft. 20 2,715 2,602 2,602 52,040 7.98 SFR-D7 Single Family Property 2,200 sq. ft. to 2,349 sq. ft. 0 2,830 2,830 0 0 0.00 SFR-D8 Single Family Property 2,350 sq. ft. to 2,499 sq. ft. 30 2,945 2,916 2,916 87,480 13.41 SFR-D9 Single Family Property Greater than 2,499 sq. ft. 20 3,060 2,828 2,828 56,560 8.67 APP Approved Property N/A 99 2,533 2,503 1,894 187,505 28.75 Totals 286 $ 652,250 100.00%
(1) Maximum rate per unit for Approved Property based on the final tract maps. (2) Includes Administrative Expenses Cap of $30,000.

Source: Webb Municipal Finance, LLC.

Item Number: 2.

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Backup Special Tax Rates. When a Final Map is recorded, the Backup Special Tax A for a Parcel classified or to be classified as Single Family Property within such Final Map shall be determined by multiplying the Undeveloped Property Maximum Special Tax A per Acre by the total Acreage of Taxable Property within such Final Map, excluding the Acreage associated with Non-Residential Property, Multifamily Residential Property, Public Property and/or Property Owners’ Association Property that is not Exempt Property pursuant to Section I and dividing such amount by the number of Parcels within such Final Map classified as either (i) Single Family Property or (ii) Approved Property for which a Building Permit is expected to be issued for Single Family Property (i.e., the number of residential lots).

Notwithstanding the forgoing, if Parcels classified or to be classified as Single Family Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax A shall be recalculated using the methodology described in the preceding paragraph but only for the area that has been changed or modified.

The Backup Special Tax A shall not apply to Multifamily Residential Property, Non-Residential Property, Public Property, or Property Owners’ Association Property.

Prepayment of Special Taxes. The Maximum Special Tax A obligation may be prepaid and permanently satisfied for (i) Parcels of Developed Property, (ii) Parcels of Approved Property or Undeveloped Property for which a building permit has been issued, (iii) Approved Property or Undeveloped Property for which a building permit has not been issued, and (iv) Assessor’s Parcels of Public Property or Property Owners’ Association Property that are not Exempt Property pursuant to Section I of the Rate and Method attached as Appendix A. In addition, the Maximum Special Tax A obligation for an Assessor’s Parcel of Developed Property, Approved Property or Undeveloped Property may be partially prepaid. The Prepayment amount is calculated based on the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount, Administrative Fees and Expenses and less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all as specified in Section E of the Rate and Method attached as Appendix A. Prepayments of Special Taxes will be applied to effect an extraordinary redemption of Bonds and Parity Bonds. See “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.”
Estimated Debt Service Coverage. Based on the number of building permits issued within Improvement Area No. 1 as of April 1, 2026 (the date pursuant to the Rate and Method for determining the number of parcels of Developed Property within Improvement Area No. 1 for the following year Fiscal Year), 187 parcels within Improvement Area No. 1 were classified as Developed Property and the remaining 99 parcels within Improvement Area No. 1 were classified as Approved Property for the Fiscal Year 2026-27 Special Tax levy. Annual Debt Service for the Bonds in each future Fiscal Year has been structured so that Special Taxes levied on Developed Property at buildout (286 parcels) at the Assigned Special Tax A rates, assuming no delinquencies, will generate in each future Fiscal Year not less than the Administrative Expenses Cap plus 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. Neither the Assigned Special Tax A rates nor the Administrative Expense Cap escalate annually.

Limitation on Special Tax Levy and Potential Impact on Coverage. Pursuant to Section 53321(d) of the Government Code, the special tax levied against any assessor’s parcel for which an occupancy permit for private residential use has been issued will not be increased as a consequence of delinquency or default by the owner of any other assessor’s parcel within Improvement Area No. 1 by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax in all years.

Item Number: 2.

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Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within Improvement Area No. 1.

The District will covenant in the Indenture that each year it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses.

The District will make certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds and Administrative Expenses when due.

First, the District will covenant in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.

Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for Improvement Area No. 1, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area No. 1 to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.

Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the qualified electors within Improvement Area No. 1 which purports to reduce the maximum Special Tax below the levels specified in the preceding paragraph or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS — Proposition 218.” Fourth, the District will covenant in the Indenture that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due.

See Appendix E under the caption “COVENANTS AND WARRANTY.” Although the Special Taxes constitute liens on taxed parcels within Improvement Area No. 1, they do not constitute a personal indebtedness of the owners of property within Improvement Area No. 1. Moreover, other liens for taxes and assessments already exist on the property located within Improvement Area No. 1 and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in Improvement Area No. 1. See the captions “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Direct and Overlapping Debt” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.”
Item Number: 2.

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Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of property within Improvement Area No. 1 resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds and any Parity Bonds under the Indenture.

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant in the Indenture for the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement.

The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” herein.

If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS — Enforcement Delays – Bankruptcy.” Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS — Property Values.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.

Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within Improvement Area No. 1. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture.

Except for Prepayments, which will be deposited to the Redemption Account of the Special Tax Fund, the Trustee will, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee will transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to:

Item Number: 2.

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First: To the Administrative Expense Account in an amount up to the Administrative Expenses Cap.

Second: To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid.

Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.

Third: To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2027, is equal to the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.

Fourth: To the Redemption Account, the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency will be made up by an immediate transfer from the Reserve Account, if funded, pursuant to the Indenture; and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds.

Fifth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement.

Sixth: To the Administrative Expense Account of the Special Tax Fund the amount of any Administrative Expenses for the current Bond Year in excess of the Administrative Expenses Cap as directed by the City.

Seventh: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture.

Eighth: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1.

Reserve Account of the Special Tax Fund
In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. The term “Reserve Requirement” is defined in the Indenture to mean, that amount as of any date of calculation, equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and Parity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; provided, however, that the Reserve Requirement shall not exceed $____ except in connection with the issuance of Parity Bonds. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy (as defined in the Indenture), or a combination thereof.

On the date of issuance of the Bonds, the District will deposit $____ from proceeds of the Bonds into the Reserve Account to satisfy the Reserve Requirement.

Item Number: 2.

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Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, or any Parity Bonds, including Sinking Fund Payments, to the extent that other monies are not available therefor; (ii) to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes, to optionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, in accordance with the Indenture; and (iii) to pay any rebate requirements. See Appendix E under the caption “CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund.”
No Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within Improvement Area No. 1.

Parity Bonds
The Indenture provides that, upon satisfaction of certain conditions, the District may issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued; provided, however, Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. Parity Bonds may be issued subject to the following additional specific conditions:
(a) The District shall be in compliance with all covenants set forth in the Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly authorized, executed and delivered by the District which shall specify the following: (1) the purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited; (2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that: (i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number; (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; and (iv) the maturity of the Parity Bonds to be issued shall not exceed the maturity of the Bonds and Parity being refunded; (4) the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (5) the denominations and method of numbering of such Parity Bonds; (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (8) the form of such Parity Bonds; and (9) such other provisions as are necessary or appropriate and not inconsistent with the Indenture.

Item Number: 2.

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(c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall be directed by the District to accept any of such documents bearing a prior date): (1) a certified resolution of the City Council, acting as the legislative body of the District, authorizing the issuance of such Parity Bonds; (2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that: (i) the District has the right and power under the Act to execute and deliver the Supplemental Indenture relating to such Parity Bonds, and such Supplemental Indenture has been duly and lawfully executed by the District, and the Indenture and such Supplemental Indenture are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (ii) the Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in the Indenture, subject to the application thereof to the purposes and on the conditions permitted by the Indenture; and (iii) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of the Indenture and the Supplemental Indenture executed and delivered in connection with such Parity Bonds and are entitled to the benefits of the Indenture and such Supplemental Indenture, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and the Indenture and such Supplemental Indenture; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of the Indenture; (5) a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and (6) such further documents, money and securities as are required by the provisions of the Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds.

Lennar Letter of Credit
Lennar has provided an irrevocable letter of credit (the “Letter of Credit”) to secure payment of Special Taxes levied on the property in the District owned by it, which identifies the Trustee as beneficiary.

The amount available to be drawn under the Letter of Credit (the “Stated Amount”) calculated by multiplying the Special Tax A Requirement (as defined in the Rate and Method) for Fiscal Years 2026-27 and 2027-28, by the percentage of the Maximum Special Tax A for the current fiscal year allocable to the property owned by Lennar and the Landbank as of April 1, 2026 that is used to size the Bonds (i.e. 172 lots). The initial Stated Amount of the Letter of Credit shall be $360,120. The initial term of the Letter of Credit is one year from its date of issuance, and Lennar will maintain and cause the issuing bank to annually renew the Letter of Credit each year prior to the expiration date until the property then owned by Lennar and the Landbank is responsible for less than twenty percent (20%) of the Maximum Special Tax levy in Improvement Area No. 1.

Notwithstanding the foregoing, the District may elect to waive the requirement for Lennar to maintain the Letter of Credit or may release the Letter of Credit at any time without the consent of the Owners or Beneficial Owners of the Bonds. The Letter of Credit is not pledged to the repayment of debt service on the Bonds.

THE DISTRICT AND IMPROVEMENT AREA NO. 1
General Description of the District and Improvement Area No. 1 Improvement Area No. 1 is generally located on the northwest corner of Karen Avenue and Promenade Drive in the City of Desert Hot Springs. The property in Improvement Area No. 1 is being developed by Lennar and is part of a larger master-planned community named “Skyborne.” Improvement Area No. 1 includes approximately 74 gross acres planned for 286 single family detached homes. As of the Date of information in the appraisal, April 1, 2026, Lennar had completed and Item Number: 2.

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conveyed 114 homes within Improvement Area No. 1 to individual homeowners. As of such date, Lennar has pulled a total of 187 building permits, and Lennar owned four completed model homes and seven homes under construction. The remaining 161 lots (of which 62 were under construction) were owned by the Landbank, which is serving as Lennar’s landbank for the development of Improvement Area No. 1. Lennar has the option – but not the obligation – to acquire lots pursuant to a phased takedown schedule pursuant to an agreement with the Landbank, as described herein.

Between April 1, 2026 and May 15, 2026 Lennar had completed and conveyed 1 home within Improvement Area No. 1 to an individual homeowner and pulled an additional 14 building permits. As of May 15, 2026, Lennar owned five completed model homes, 18 completed but unclosed homes, 41 homes under construction, and 7 finished lots. The remaining 100 lots (of which 16 were under construction and 84 were finished lots) were owned by the Landbank.

Water and sewer service to the property within Improvement Area No. 1 is currently supplied by the Mission Springs Water District. Electricity is currently supplied by Southern California Edison and gas by Southern California Gas Company. Public education instruction is provided by the Palm Springs Unified School District.

The property within Improvement Area No. 1 is not located in an Alquist-Priolo Earthquake Study Zone and is not located within one-half mile of an active earthquake fault. Additionally, the District is not located in a flood plain area and is not located in an area that the Department of Forestry and Fire Protection of the State of California (“CalFire”) has designated as a very high fire hazard severity zone or a high fire hazard severity zone (based on Fire Hazard Severity Zone (FHSZ) maps that CalFire released in 2025).

Notwithstanding the foregoing, the property in Improvement Area No. 1 may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. See “SPECIAL RISK FACTORS — Natural Disasters.”
A map showing the location of Improvement Area No. 1 and an aerial photograph thereof appear following the Table of Contents.

Authorized Uses of Bond Proceeds
Proceeds of the Bonds are authorized to be used to pay for the costs of construction of City facilities, including certain storm drain and street improvements and the costs of certain water and sewer system improvements to be owned and operated by the Mission Springs Water District (collectively, the “Facilities”).

See the caption “FINANCING PLAN.”
Property Values and the Appraisal Report
General. The extent to which the Special Tax provides security for the Bonds is, at least in part, a function of the value of each parcel of land within Improvement Area 1 that is subject to the Special Tax because, in the event that a property owner defaults in the payment of the applicable Special Tax, such property owner will not have any personal liability for the payment of the Special Tax, and the principal remedy available to the City will be to take foreclosure proceedings with respect to the subject property.

Assessed Value. The assessed value of the property within Improvement Area 1 represents the secured assessed valuation established by the County Assessor. Assessed values do not necessarily represent market values. Article XIIIA of the California Constitution (Proposition 13) defines “full cash value” to mean Item Number: 2.

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24 4937-0435-8563v3/200812-0006
“the County assessor’s valuation of real property as shown on the 1975/76 roll under ‘full cash value’, or, thereafter, the appraised 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% 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. Because of the general limitation to 2% per year in increases in full cash value of properties which remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. There can be no assurance that the assessed valuations of the properties within Improvement Area 1 accurately reflect their respective market values, and the future fair market values of those properties may be lower than their current assessed valuations.

The estimated assessed value of the property within Improvement Area No. 1, as shown on the County’s assessment roll for Fiscal Year 2025-26 is approximately $16,356,438, which as a result of timing of the County’s determination of the assessed values for Fiscal Year 2025-26, does not reflect the substantial development activity that has taken place since such value was determined.

The table below sets forth historic secured assessed values of the parcels of Taxable Property within Improvement Area 1 from Fiscal Years 2021-22 through 2025-26.

TABLE 2

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1

ASSESSED VALUATION HISTORY
FISCAL YEARS 2021-22 THROUGH 2025-26
Fiscal Year
Total
Parcels
Parcels
with Structure
Value
Land
Assessed Value
Improvement
Assessed Value
Total Assessed
Valuation(1)
2021-22 286 0 $ 766,194 $ 0 $ 766,194
2022-23 286 0 2,145,000 0 2,145,000
2023-24 286 0 2,187,900 0 2,187,900
2024-25 286 0 11,984,000 0 11,984,000
2025-26(2) 286 13 14,066,438 2,290,000 16,356,438
(1) As of January 1 of each year as shown on the County Assessor’s Rolls. Total Assessed Value is calculated as the sum of Land Assessed Value and Improvement Assessed Value.
(2) Parcels with structure value shown differs from the Appraisal Report because the County assigns value to partially improved structures.

Source: Webb Municipal Finance, LLC
Appraised Value. A property’s assessed value is not necessarily indicative of its market value. In order to provide information with respect to the value of the taxable property within Improvement Area No. 1, the City engaged the Appraiser to prepare the Appraisal Report. The Appraiser has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City or the owners of the land within Improvement Area No. 1 other than the relationship represented by the engagement to prepare the Appraisal Report. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as Appendix D — “APPRAISAL REPORT” to this Official Statement.

Item Number: 2.

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25 4937-0435-8563v3/200812-0006
The purpose of the Appraisal Report was to estimate the market value of the property within Improvement Area No. 1 subject to the lien of the Special Taxes. With respect to five completed single family homes owned by individual homeowners as shown on the County Assessor’s as having assessed values generally consistent with the appraised value of the other homes within Improvement Area No. 1, the Appraiser used the Fiscal Year 2025-26 assessed values assigned by the County (totaling $2,108,122). In valuing the Appraised Property relating to the remaining 281 planned homes in Improvement Area No. 1, the Appraiser used a sales comparison approach and an extraction analysis that takes into account home prices, direct and indirect construction costs, accrued depreciation and developer’s incentive in order to arrive at an estimate of improved lot value.

Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of the Date of Value (April 1, 2026), the estimated market value of the Taxable Property within Improvement Area 1 was $67,451,122, consisting of $2,108,122 of the five homes with improvement value shown on the Fiscal Year 2025-26 County Assessor’s roll, and $65,343,000 of the appraised value of the Appraised Property relating to the remaining 281 homes/lots.

The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in Appendix D. The City, the Underwriter and the District make no representation as to the accuracy of the Appraisal Report. There is no assurance that the property within Improvement Area No. 1 can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “SPECIAL RISK FACTORS — Property Values,” Appendix D — “APPRAISAL REPORT”.

Estimated Value-to-Lien Ratios
The aggregate estimated value of property within Improvement Area No. 1 is $67,451,122. Dividing the aggregate estimate of value by the principal amount of the Bonds results in a value to lien ratio of

7.07-to-1* for Improvement Area No. 1. There is currently no overlapping public agencies that have authorized but unissued land-secured bonded indebtedness within Improvement Area No. 1. See Table 5 below and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” The assessed value of the property within Improvement Area No. 1 is $16,356,438 for Fiscal Year 2025-26, which as a result of timing of the County’s determination of the assessed values for Fiscal Year 2025-26, does not reflect the substantial development activity that has taken place since such value was determined. Dividing the assessed value by the principal amount of the Bonds results in an estimated assessed value-to-lien ratio of 1.71-to-1* for Improvement Area No. 1.

Based on ownership status as of April 1, 2026, individual homeowners and Lennar, and the Landbank are expected to be responsible for approximately 43.38%, 4.27% and 52.36%, respectively, of the estimated Fiscal Year 2026-27 Special Tax levy.

Table 3 below sets forth the appraised value-to-lien ratio of the Taxable Property within Improvement Area No. 1 based on the estimated values set forth in the Appraisal Report and the principal amount of the Bonds. Table 4 below sets forth the estimated appraised value-to-lien ratios for Taxable Property within Improvement Area No. 1 by various ranges based upon the principal amount of the Bonds. *
Preliminary, subject to change.

Item Number: 2.

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26 4937-0435-8563v3/200812-0006
TABLE 3

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1

ESTIMATED VALUE-TO-LIEN RATIOS
FISCAL YEAR 2026-27 ESTIMATED LEVY ON TAXABLE PROPERTY
Development Status /
Property Owner (1)
No. of
Parcels
Projected Fiscal
Year 2026-27
Special Tax
Levy(2)
Percent of
Projected
Fiscal Year
2026-27
Special Tax
Levy
Projected Fiscal
Year 2026-27
Maximum
Special Tax
Percent of
Projected Total
Maximum
Fiscal Year
2026-27 Special
Tax Levy
Assessed /
Appraised
Value(3)
Percent of
Assessed /
Appraised
Value
Allocation
of Bonds(4)*
Aggregate
Assessed /
Appraised Valueto-Lien Ratio(4)*
Developed Property
Individually-Owned 114 $ 282,916 43.38% $ 297,625 40.40% $ 42,755,000 63.39% $ 4,140,181 10.33:1 Landbank(5) 62 154,008 23.61 162,172 22.01 8,928,000 13.24 2,253,747 3.96:1 Lennar Homes 11 27,821 4.27 29,095 3.95 4,284,122 6.35 407,131 10.52:1 Subtotal Developed 187 $ 464,745 71.25% $ 488,892 66.37% $ 55,967,122 82.97% $ 6,801,059 8.23:1 Approved Property
Landbank(5) 99 $ 187,505 28.75% $ 247,764 33.63% $ 11,484,000 17.03% $ 2,743,941 4.19:1 Subtotal Approved 99 187,505 28.75 247,764 33.63 11,484,000 17.03 2,743,941 4.19:1 Totals 286 $ 652,250 100.00% $ 736,656 100.00% $ 67,451,122 100.00% $ 9,545,000 7.07:1 * Preliminary, subject to change.
(1) Property ownership status as of April 1, 2026.
(2) Based on 100% of the Assigned Special Tax A rate on Developed Property and 75.7% of the Maximum Special Tax A rate on Approved Property. Estimated Fiscal Year 2026-27 Special Tax Levy based upon development status as of April 1, 2026, and an Administrative Expense Cap of $30,000. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax.” (3) Based on the estimated value set forth in the Appraisal Report as of the April 1, 2026, the Date of Value. (4) Allocated based on estimated Fiscal Year 2026-27 Special Tax levy. (5) Lennar and the Landbank have entered into an agreement for Lennar to takedown lots within Improvement Area No. 1 in phases. During the term of the Option Agreement and the Construction Agreement (as defined below), Lennar is obligated to pay all taxes (including the Special Taxes) on the property subject to the Option Agreement in Improvement Area No. 1. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Source: County of Riverside Assessor’s Office; Webb Municipal Finance, LLC.

Item Number: 2.

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TABLE 4

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1
FISCAL YEAR 2026-27 PROJECTED VALUE-TO-LIEN STRATIFICATION FOR TAXABLE PROPERTY * Appraised
Value-to-Lien(1)
No of
Parcels
Percent
of Total
Parcels
Projected
Fiscal Year
2026-27
Special Tax
Levy(2)
Percent of
Fiscal Year
2026-27
Levy
Projected
Fiscal Year
2026-27
Maximum
Special Tax
Percent of
Projected
Total
Maximum
Special Tax
Assessed /
Appraised Value
Percent of
Appraised
Value
Allocation
of Bonds
Aggregate
Value-to-Lien
Less than 4.00:1(3) 30 10.49% $ 81,963 12.57% $ 82,087 11.14% $ 4,320,000 6.40% $ 1,199,443 3.60:1

4.00:1 to 5.99:1 131 45.80 259,550 39.79 327,849 44.51 16,092,000 23.86 3,798,244 4.24:1

6.00:1 to 7.99:1 0 0.00 0 0.00 0 0.00 0 0.00 0 N/A

8.00:1 to 9.99:1 42 14.69 109,914 16.85 112,965 15.33 15,647,000 23.20 1,608,477 9.73:1 Greater than 9.99:1(4) 83 29.02 200,823 30.79 213,755 29.02 31,392,122 46.54 2,938,836 10.68:1 Total 286 100.00% $ 652,250 100.00% $ 736,656 100.00% $67,451,122 100.00% $ 9,545,000 7.07:1 * Preliminary, subject to change.
(1) Based on the estimated values set forth in the Appraisal Report as of April 1, 2026, the Date of Value. (2) Allocated based on the estimated Fiscal Year 2026-27 Special Tax levy and reflects 187 building permits issued as of April 1, 2026 and an Administrative Expenses Cap of $30,000. (3) Minimum estimated assessed/appraised value-to-lien is 3.37:1* . The 30 parcels in this category are Developed Property but have a reduced appraised value as a result of being in the early stages of construction as of the date of value.
(4) Highest estimated assessed/appraised value-to-lien is 12.02:1* .

Source: County of Riverside Assessor’s Office; Webb Municipal Finance, LLC.

Item Number: 2.

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28 4937-0435-8563v3/200812-0006
Direct and Overlapping Debt
Improvement Area No. 1 is included within the boundaries of overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within Improvement Area No. 1 is shown in Table 5 below.

In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within Improvement Area No. 1; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments.
[Remainder of Page Intentionally Left Blank]
Item Number: 2.

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TABLE 5

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1

DIRECT AND OVERLAPPING DEBT
AS OF APRIL 1, 2026
I. ASSESSED/APPRAISED VALUE
Assessed/Appraised Valuation(1) $67,451,122
II. LAND SECURED BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt Type
Total
Parcels
Levied Issued Outstanding % Applicable
Amount
Applicable
City of Desert Hot Springs CFD No. 2025-1 IA No. 1 CFD 286 $ 9,545,000* $ 9,545,000* 100.00% $ 9,545,000* TOTAL OUTSTANDING LAND SECURED BONDED DEBT(3) $ 9,545,000* Authorized and Unissued Direct and Overlapping Bonded Debt Type Total
Parcels
Levied Authorized Unissued % Applicable
Amount
Applicable
City of Desert Hot Springs CFD No. 2025-1 IA No. 1 CFD 286 $ 13,000,000 $ 0 (2) 100.00% $ 0
TOTAL UNISSUED LAND SECURED INDEBTEDNESS(3) $ 0
TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS $ 9,545,000* III. GENERAL OBLIGATION BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt Type
Total
Parcels
Levied Issued Outstanding
%
Applicable(5)
Amount
Applicable
Palm Springs Unified School District GO Bonds (0.06071%) GO 286 $ 760,960,000 $ 404,205,000 0.033910% $ 137,067 Desert Community College GO Bonds (0.03950%) GO 286 924,358,444 775,585,000 0.013230 102,610 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT(3) $ 239,678 Authorized and Unissued Direct and Overlapping Indebtedness Type Total
Parcels
Levied Authorized Unissued
%
Applicable(5)
Amount
Applicable
Palm Springs Unified School District GO Bonds (0.06071%) GO 286 $ 996,960,000 $236,000,000 0.033910% $ 80,028 Desert Community College GO Bonds (0.03950%) GO 286 924,360,000 1,556 0.013230 0 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS(3) $ 80,029 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $ 319,706 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $ 9,784,678* TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS $ 9,864,706* IV. Ratios to Appraised Valuation
Outstanding Land Secured Bonded Debt ....................................7.07:1* Outstanding Direct and Overlapping Bonded Debt.....................6.89:1* * Preliminary, subject to change.
(1) Based on the Appraisal Report as of April 1, 2026, Date of Value. (2) Parity Bonds may only be issued for refunding purposes. (3) Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for Fiscal Year 2025-26. All parcels in Improvement Area No. 1 are also charged a 0.06000% ad valorem charge for the Desert Water Agency.

Based on current information, no general obligation bonds have been issued or authorized by the Desert Water Agency.

Source: County of Riverside Assessor’s Office; Webb Municipal Finance, LLC.

Table 6 below describes the estimated Fiscal Year 2026-27 effective tax burden for an individually owned home in Improvement Area No. 1 based on the average value of homes conveyed to individual homeowners, the estimated average Fiscal Year 2026-27 Special Tax levy and the estimated Fiscal Year 2026- 27 levies for all other overlapping taxing jurisdictions. Based on the foregoing, the City expects that, in Fiscal Year 2026-27, the projected effective tax rate to be levied on an individually owned home in Improvement Area No. 1 will be approximately 1.92%.

Item Number: 2.

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TABLE 6

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1
ESTIMATED FISCAL YEAR 2026-27 TAX OBLIGATION(1)
Average Home Value(2) $ 437,898
Ad Valorem Property Taxes:

Basic Levy (1.0000%) $ 4,378.98
Palm Springs Unified School District GO Bonds (0.06071%) 265.85 Desert Community College GO Bonds (0.03950%) 172.97
Desert Water Agency (0.06000%) 262.74
Total General Property Taxes $ 5,080.54
Assessment, Special Taxes & Parcel Charges:

City of Desert Hot Springs LMD $ 40.56
Flood Control Stormwater/Cleanwater 3.62
DHS Public Safety Measure Tax(3) 130.98
CSA 152 - DHTSPRINGS Stormwater 10.00
Coachella Valley Mosquito & RIFA 1.78
DHS Public Safety Service Parcel Tax(4) 371.40
DHS CFD 2025-1 IA 1 (Facilities) 2,481.72
DHS CFD 2025-1 IA 1 (Services)(5) 283.25
Total Assessment Charges $ 3,323.31
Average Total Property Tax $ 8,403.85
Average Effective Tax Rate 1.92%
(1) Average Fiscal Year 2026-27 tax rates based upon Fiscal Year 2025-26 Overlapping Taxes and Assessments. (2) Average Home Value is based upon average sales price for parcels of Developed Property indicated as being closed and conveyed to individuals per the Appraisal Report.
(3) Reflects average projected Fiscal Year 2026-27 DHS Public Safety Measure Special Tax for parcels of Developed Property.

The maximum special tax for this line item increases annually by the lesser of the annual percentage increase in CPI or 3%. (4) Reflects average projected Fiscal Year 2026-27 DHS Public Safety Service Parcel Tax for parcels of Developed Property.

The maximum special tax for this line item increases annually by the lesser of the annual percentage increase in CPI or 3%. (5) Reflects average projected Fiscal Year 2026-27 Special Tax B for parcels of Developed Property. The Maximum Special Tax B increases annually by the lesser of the annual percentage increase in CPI or 3%.

Source: County of Riverside Assessor’s Office; Webb Municipal Finance, LLC.

Delinquency History
Table 7 summarizes the Special Tax delinquencies for property within the boundaries of Improvement Area No. 1 for Fiscal Year 2025-26, which was the first year of the Special Tax levy. Future delinquencies could increase as a result of factors such as changes in the local or national economy, increases in the mortgage rates and/or increases in the unemployment rate in the area. See “SPECIAL RISK FACTORS — Special Tax Delinquencies.”
Item Number: 2.

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TABLE 7

CITY OF DESERT HOT SPRINGS
COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1

SPECIAL TAX LEVIES, DELINQUENCIES AND DELINQUENCY RATES FISCAL YEAR 2025-26
Delinquencies at Fiscal Year End Delinquencies as of May 18, 2026 Fiscal
Year
Amount
Levied
Parcels
Levied
Parcels
Delinquent
Amount
Delinquent
Percent
Delinquent
Parcels
Delinquent
Amount
Delinquent
Percent
Delinquent
2025-26 $172,545.00 68 N/A N/A N/A 2 $3,842.50 2.23%
Source: County of Riverside Assessor’s Office; Webb Municipal Finance, LLC.

PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information about the property in Improvement Area No. 1 under this caption has been provided by representatives of Lennar and has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adverse changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds and any Parity Bonds are personal obligations of Lennar or any affiliate thereof, the Landbank, or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of Lennar or any affiliate thereof, the Landbank, or any property owner or any affiliate thereof. See the caption “SPECIAL RISK FACTORS.”
Notwithstanding the belief of Lennar that it will have sufficient funds to complete its planned development in Improvement Area No. 1, no assurance can be given that amounts necessary to fund the remaining planned development by Lennar in Improvement Area No. 1 will be available when needed. None of Lennar, the Landbank, or any other entity or person, is under any legal obligation of any kind to expend funds for the development of the property as planned by Lennar in Improvement Area No. 1. Any contributions by Lennar or any other entity or person to fund the costs of its development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by Lennar within Improvement Area No. 1, the remaining portions of such development may not be completed.

Lennar has no legal obligation to Bondholders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes. See the caption “SPECIAL RISK FACTORS.”
General
Improvement Area No. 1 is generally located on the northwest corner of Karen Avenue and Promenade Drive in the City of Desert Hot Springs. The property in Improvement Area No. 1 is being developed by Lennar Homes of California, LLC, a California limited liability company (previously defined as “Lennar”) and is part of a larger master-planned community named “Skyborne.” Improvement Area No. 1 includes approximately 74 gross acres planned for 286 single family detached homes. As of the Date of Value of the Appraisal Report (April 1, 2026), Lennar had completed and conveyed 114 homes within Improvement Area No. 1 to individual homeowners. As of such date, Lennar has pulled a total of 187 building permits, and Lennar owned four completed model homes and seven homes under construction. The remaining 161 lots (of which 62 were under construction) were owned by AG EHC II (LEN) CA 2, L.P. (previously defined as the “Landbank”), which is serving as Lennar’s landbank for the Item Number: 2.

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32 4937-0435-8563v3/200812-0006
development of Improvement Area No. 1. Lennar has the option – but not the obligation – to acquire lots pursuant to a phased takedown schedule pursuant to an agreement with the Landbank, as described herein.

Final tract maps have been recorded for all 286 planned homes within Improvement Area No. 1. As of May 15, 2026, all lots in Improvement Area No. 1 owned by Lennar and the Landbank were in a finished condition. Lennar currently expects to complete and convey all remaining planned homes within Improvement Area No. 1 by February, 2028.

Planned Development Within Improvement Area No. 1
The property within Improvement Area No. 1 is planned for 286 residential units within two product lines/neighborhoods – Ara and Nova. The following tables summarize the status of development within the two neighborhoods planned within Improvement Area No. 1 as of May 15, 2026.

COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1
ARA
(As of May 15, 2026)
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings to
Individual
Homeowners
Completed
Homes Not
Closed to
Homeowners(1)
Homes Under
Construction(1) Finished Lots
Base Home
Prices(2)
1 32 1,784 12 2 7 11 $418,090
2 27 2,084 14 2 5 6 420,490
3 46 2,409 17 3 12 14 449,190
4 40 2,583 13 3 8 16 437,267
145 56 10 32 47
(1) Includes 3 model homes, 7 completed production homes, and 32 homes under construction. (2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.

Source: Lennar.

Item Number: 2.

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COMMUNITY FACILITIES DISTRICT NO. 2025-1 (SKYBORNE VILLAGE) IMPROVEMENT AREA NO. 1
NOVA
(As of May 15, 2026)
Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings as of
May 15, 2026
Completed
Homes Not
Closed to
Homeowners(1)
Homes Under
Construction(1) Finished Lots
Base Home
Prices(2)
1 45 1,229 20 4 8 13 $384,349
2 45 1,494 18 6 7 14 392,523
3 51 1,692 21 3 10 17 409,018
141 59 13 25 44
(1) Includes 2 model homes, 11 completed production homes, and 25 homes under construction. (2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.

Source: Lennar.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. Lennar continuously evaluates its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.

Landbank Arrangement. Lennar is acquiring the property within Improvement Area No. 1 in phased takedowns from the Landbank under an Option Agreement dated November 22, 2023 (the “Option Agreement”) pursuant to which Lennar has the option, but not the obligation, to purchase lots from the Landbank. Lennar originally purchased all of the property in Improvement Area No. 1 from the master developer of Skyborne, and subsequently conveyed such property to the Landbank.

In addition to the Option Agreement, Lennar Communities, Inc. (the “Contractor”), Lennar and the Landbank entered into a Construction Agreement dated November 22, 2023 (the “Construction Agreement”) granting Contractor the right to enter upon the land in Improvement Area No. 1, for the purpose of, among other things, constructing model homes and related subdivision improvements thereon before Lennar acquires the land subject to the Option Agreement from the Landbank. Pursuant to the Option Agreement, Lennar has the right to enter upon the land subject to the Option Agreement for the purpose of constructing production homes thereon before Lennar acquires the subject land.

Under the terms of the Option Agreement, the Landbank granted Lennar the exclusive right and option to purchase all 286 residential lots within Improvement Area No. 1 in consideration for (a) the covenants of Lennar to timely pay monthly option payments; and (b) upon exercise of the option, the payment of the purchase price for each set of lots acquired.

As of the date of this Official Statement, Lennar is in good standing under both the Option Agreement and the Construction Agreement. As of May 15, 2026, Lennar has acquired a total of 186 residential lots under the Option Agreement. The remaining 100 residential lots are scheduled to be acquired by Lennar pursuant to the takedown schedule, typically on the fourteenth (14th) business day of each month through March, 2027, subject to extension rights as provided in the Option Agreement and further subject to Lennar’s right to acquire more lots than scheduled and at earlier times so long as the lots identified in the takedown schedule are acquired by the applicable takedown date and Lennar complies with the terms under Item Number: 2.

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the Option Agreement for such accelerated closings. The failure to timely acquire lots could result in a termination of the Option Agreement which could result in Lennar no longer having a right to purchase any of the remaining lots under the Option Agreement. No assurance can be given that the acquisition of the remaining residential lots Lennar plans to acquire under the Option Agreement will occur as expected.

As of May 15, 2026, Lennar had acquired 186 lots from the Landbank, leaving 100 owned by the Landbank:

Date Option Period
Expires
Nova
Lot A
Ara
Lot B Total Lots Acquired
10-14-24* 3 3 6
12-14-24* 10 10 20
2-14-25* 10 10 20
4-14-25* 10 10 20
6-14-25* 10 10 20
8-14-25* 10 10 20
10-14-25* 10 10 20
12-14-25* 10 10 20
2-14-26* 10 10 20
4-14-26* 10 10 20
6-14-26 10 10 20
8-14-26 10 10 20
10-14-26 10 10 20
12-14-26 10 10 20
2-14-27 8 10 18
3-14-27 0 2 2
141 145 286
* Denotes takedown has occurred.

Source: Lennar
During the term of the Option Agreement and the Construction Agreement, Lennar is obligated to pay all taxes (including the Special Taxes) on the property subject to the Option Agreement in Improvement Area No. 1.

Lennar
General. Lennar is based in Irvine, California, and has been in the business of developing residential real estate communities in California since 1996. Lennar is wholly-owned by U.S. Home, LLC, a Delaware limited liability company (“U.S. Home”). U.S. Home is wholly-owned by Lennar Corporation, which is based in Miami, Florida (“Lennar Corporation”). Founded in 1954, Lennar Corporation completed its initial public offering in 1971 and listed its common stock on the New York Stock Exchange in 1972. Lennar Corporation’s Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B.” respectively. Lennar Corporation is one of the largest homebuilders in the United States based on home sales revenues and net earnings, and operates under a number of brand names, including Lennar and U.S.

Home. Lennar Corporation primarily develops residential communities both within the Lennar Corporation family of builders and through consolidated and unconsolidated partnerships in which Lennar Corporation maintains an interest.

Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly Lennar Corporation’s annual report on Form 10-K and its most recent quarterly report on Form 10- Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, Item Number: 2.

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N.W., Washington, D.C. 20549 at prescribed rates. Such filings can also be accessed over the internet at the SEC’s website at www.sec.gov.

Copies of Lennar Corporation’s Annual Report on Form 10-K and related financial statements are available from Lennar Corporation’s website at www.lennar.com. The foregoing website addresses and references to filings with the SEC are given for reference and convenience only, and the information on such websites and on file with the SEC does not form a part of this Official Statement and is not incorporated by reference herein. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. Lennar is not obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes and investors should not rely on the information and financial statements contained on such websites in evaluating whether to buy, hold or sell the Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the City, the District or the Underwriter.

Financing Plan. To date, Lennar has financed its land acquisition and various site development costs related to its property in Improvement Area No. 1 through internally generated funds. As of May 15, 2026, Lennar has expended approximately $23.3 million on land acquisition and development and homebuilding costs in Improvement Area No. 1. Lennar expects to incur approximately $5.6 million on remaining land development, homebuilding, marketing, and sales costs for its project in Improvement Area No. 1. Lennar is using home sales revenues and internal funding to complete its development within Improvement Area No. 1, and believes that it will have sufficient funds available to complete its planned development as described in this Official Statement.

Although Lennar expects to have sufficient funds available to complete its development in Improvement Area No. 1 as described in this Official Statement, there can be no assurance that amounts necessary to finance the development costs will be available from Lennar, or any other source when needed.

Neither Lennar nor any of its subsidiaries or related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 1.

Any contributions by Lennar to fund the costs of such development are entirely voluntary.

If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by Lennar within Improvement Area No. 1 and other financing is not put into place, there could be a shortfall in the funds required to complete the planned development by Lennar in Improvement Area No. 1.

Except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, a representative of Lennar represented in a certificate delivered to the Underwriter that he has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within Improvement Area No. 1 as described in the Official Statement.

Although the information in this Official Statement reflects the current development expectations of Lennar, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth herein will not change after the date of this Official Statement. Lennar reserves the right to change its development at any time without notice. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation. See “SPECIAL RISK FACTORS – Concentration of Property Ownership.”
Landbank. The Landbank an affiliate of, and managed by, Angelo Gordon & Co., L.P. (“Angelo Gordon”). Angelo Gordon is a privately-held alternative investment firm founded in 1988 and headquartered in New York, with associated offices across the United States, Europe and Asia. Angelo Gordon manages Item Number: 2.

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approximately $73 billion across a broad range of credit and real estate strategies. Affiliates of the Lennar Land Bank have entered into land banking arrangements with Lennar Corporation and its affiliated entities on more than 200 residential development projects. Neither the Landbank nor Angelo Gordon are affiliated entities of Lennar.

SPECIAL RISK FACTORS
The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in Improvement Area No. 1 to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in Improvement Area No. 1. See “— Property Values” below.

Risks of Real Estate Secured Investments Generally
The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of Improvement Area No. 1, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.

No assurance can be given that the property owners within Improvement Area No. 1 will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— Enforcement Delays — Bankruptcy” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels.

Insufficiency of Special Tax Revenues
As discussed below, the Special Taxes may not produce revenues sufficient to pay the debt service on the Bonds due to nonpayment of the amounts levied.

In order to pay debt service on the Bonds, it is generally necessary that the Special Taxes be paid in a timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account under the Indenture to be maintained in an amount equal to the Reserve Requirement to pay debt service on the Bonds to the extent other funds are not available. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” The District will covenant in the Indenture to maintain in the Reserve Account an amount equal to the Reserve Requirement, subject, however, to the availability of Net Taxes in amounts sufficient to do so and to the limitation that the District may not levy the Special Tax in any Fiscal Year at a rate in excess of the maximum amounts permitted under the Rate and Method. See Appendix A and Appendix E hereto. As a result, if a significant number of Special Tax delinquencies occurs within Improvement Area No. 1, the District could be unable to replenish the Reserve Account to the Reserve Requirement due to the limitations on the amount of the Special Tax that may be levied. If such defaults were to continue in successive years, the Reserve Account could be depleted and a default on the Bonds could occur.

Item Number: 2.

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The Act provides that, if any property within Improvement Area No. 1 not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for example, property owned by the federal government. If for any reason property within Improvement Area No. 1 becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Special Tax, the Special Tax will be reallocated to the remaining taxable parcels within Improvement Area No. 1. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon their willingness and/or ability to pay the Special Tax. Moreover, if a substantial portion of additional land within Improvement Area No. 1 became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest.

The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales” for provisions which apply in the event of such foreclosure and which the District is required to follow in the event of delinquencies in the payment of the Special Tax.

In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds (if the Reserve Account has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City on behalf of the District of the proceeds of sale. The District may adjust the future Special Tax levied on taxable parcels in Improvement Area No. 1, subject to limitations described above under the caption “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Rate and Method of Apportionment,” to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement, and to pay all current expenses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in Improvement Area No. 1 will be at all times sufficient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See “— Enforcement Delays — Bankruptcy.” No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for ad valorem property taxes in the case of delinquency. 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 post judgment interest and authorized costs, unless the consent of the owners of 75% of the Outstanding Bonds and any Parity Bonds is obtained.

Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside Item Number: 2.

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such sale. The constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation will be upheld. (Section 701.680 of the Code of Civil Procedure of the State.) Increasing Mortgage Interest Rates
Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in Improvement Area No. 1 described herein. With respect to entry-level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes.

Such considerations may decrease the desire for move-up households to purchase a new home. The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned for-sale homes within Improvement Area No. 1 as described herein.

Impact of Economic Conditions on the Development in Improvement Area No. 1 Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the current or any future developers in Improvement Area No. 1 can complete the remaining infrastructure and future homes, and demand by, and the ability of individuals to purchase homes within Improvement Area No. 1. Such events and factors could include rising inflation and interest rates, persistent supply chain issues and global market instability caused by geopolitical events. Any adverse impact of the foregoing and other economic factors on the projects in Improvement Area No. 1 and the real estate market in general cannot be predicted.

Concentration of Ownership
Based on development and ownership status as of April 1, 2026 (and assuming none of the homes in escrow close to individual homeowners), the homes owned by individual homeowners, Lennar and the Landbank are expected to be responsible for approximately 43.38%, 4.27% and 52.36%, respectively, of the estimated Fiscal Year 2026-27 Special Tax levy. However, during the term of the Option Agreement and the Construction Agreement, Lennar is obligated to pay the Special Taxes on the property subject to the Option Agreement in Improvement Area No. 1.

The timely payment of principal of and interest on the Bonds depends upon the willingness and ability of the current and future property owners in Improvement Area No. 1 to pay the Special Taxes prior to delinquency. General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pay such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within Improvement Area No. 1, a failure by Lennar or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the Bonds. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
See “SOURCES OF PAYMENT FOR THE BONDS – Lennar Letter of Credit” for a description of the letter of credit provided by Lennar to secure the payment of Special Taxes levied on property within Improvement Area No. 1 owned by Lennar and the Landbank.

Item Number: 2.

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Property Insurance
In recent years, homeowners in many areas in the State have experienced significant increases in premiums for property and homeowners’ insurance policies as well as difficulty in obtaining such insurance from commercial insurance companies. The increases have been driven by, among other factors, the risk of wildfire damage to property in the State. Such increases in the overall cost of homeownership could have a material adverse effect on the rate of absorption of the remaining units in Improvement Area No 1 and on a homeowner’s willingness and/or ability to pay the Special Taxes.

In addition, no assurances can be made that adequate homeowners’ insurance coverage will be available in the future from reputable insurance companies, with premiums comparable to historical rates, or at all. The inability to obtain adequate insurance coverage could impact the ability of the homeowners in Improvement Area No 1 to reconstruct their homes in the event of damage.

Property Values
The value of the property within Improvement Area No. 1 is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Appraisal Report” and Appendix D — “APPRAISAL REPORT.” The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in the Appraisal Report, that as of the Date of Value, the market value of the land and improvements within Improvement Area No. 1 was approximately $67,451,122. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Appraisal.” The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future.

Prospective purchasers of the Bonds should not assume that the taxable land within Improvement Area No. 1 could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the property in Improvement Area No. 1, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix D for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within Improvement Area No. 1 from the market value estimated by the Appraiser.

No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.”
Natural Disasters
Improvement Area No. 1, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within Improvement Item Number: 2.

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Area No. 1. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The property within Improvement Area No. 1 is not located in an Alquist-Priolo Earthquake Study Zone and is not located within one-half mile of an active earthquake fault. Additionally, Improvement Area No. 1 is in Flood Hazard Zone X (shaded), which is an area of within a 500-year floodplain.

In recent years, wildfires have caused extensive damage throughout the State, including within the County. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events.

The District is not located in an area which CalFire has designated as a very high fire hazard severity zone or a high fire hazard severity zone. However, there is a risk of property within Improvement Area No. 1 being destroyed by wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of Improvement Area No. 1. Additionally, property located adjacent to burn areas can be subject to mudslides and flooding, which can cause significant damage and destruction to property.

In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in Improvement Area No. 1. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in Improvement Area No. 1 could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.

Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Super Fund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect.

Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels within Improvement Area No. 1 be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition.

The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within Improvement Area No. 1. However, it is possible that such materials do currently exist and that the District is not aware of them.

It is possible that property in Improvement Area No. 1 may be liable for hazardous substances in the future as a result of the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance. All of these possibilities could have the effect of reducing the value of the applicable property.

Item Number: 2.

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Enforcement Delays – Bankruptcy
In the event of a delinquency in the payment of the Special Taxes, the District is required to commence enforcement proceedings under the circumstances described under the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” However, prosecution of such proceedings could be delayed due to crowded local court calendars or by bankruptcy, insolvency and other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State relating to judicial and non-judicial foreclosure. Although bankruptcy proceedings would not cause the liens of the Special Taxes to become extinguished, bankruptcy of a person or entity with an interest in the applicable property could result in a delay in the enforcement proceedings because federal bankruptcy laws provide for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the likelihood of delay or default in payment of the principal of and interest on the applicable Bonds.

The various legal opinions to be delivered in connection with the issuance of the Bonds, including Bond Counsel’s approving legal opinion, are qualified as to the enforceability of the Bonds and the Indenture by reference to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of creditors generally or against public entities such as the District.

Special Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within Improvement Area No. 1 on the regular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. 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 valorem property tax installments.

See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See “— FDIC/Federal Government Interests in Parcels” for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes and assessment and limitations on the District’s ability to foreclose on the lien of the Special Taxes in certain circumstances.

FDIC/Federal Government Interests in Parcels
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.

In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.

Item Number: 2.

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The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.

The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.

In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution “this Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding.” In the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. For a discussion of risks associated with taxable parcels within Improvement Area No. 1 becoming owned by the federal government, federal government entities or federal government sponsored entities, see “—Insufficiency of Special Tax Revenues.”
The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.

Direct and Overlapping Indebtedness
The ability of an owner of property within Improvement Area No. 1 to pay the applicable Special Taxes could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 — Direct and Overlapping Debt” herein. The City and other public agencies whose boundaries overlap those of Improvement Area No. 1 could impose additional taxes or assessment liens on the property within Improvement Area No. 1 in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within Improvement Area No. 1 through the levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property within Improvement Area No. 1.

The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes.

Item Number: 2.

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The Indenture provides that, upon satisfaction of certain conditions, the District may issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expenses Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued; provided, however, Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or any Parity Bonds then Outstanding. See the caption “SOURCES OF PAYMENTS FOR THE BONDS – Parity Bonds.”
Payment of Special Taxes is not a Personal Obligation of the Property Owners An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.

No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.

Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture.

The District’s legal obligations with respect to any delinquent Special Taxes are limited to:
(i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default.

The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “— Payment of the Special Tax is Not a Personal Obligation of the Property Owners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so.

Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “— Enforcement Delays — Bankruptcy.” Item Number: 2.

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Ballot Initiatives
Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitutional initiative process. From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations.

Proposition 218
An initiative measure entitled “The Right to Vote on Taxes Act” (“Proposition 218”) was approved by the voters at the November 5, 1996 statewide general election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds.

It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for Improvement Area No. 1, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area No. 1 to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.

Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego (“San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.

The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be Item Number: 2.

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apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.

Horizon. The Sacramento County Superior Court issued a ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661), which was a case involving an election to approve the levy of a special tax within a community facilities district (“CFD”) formed under the Act.

In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.

Petitioners Horizon Capital Investments, LLC et al. filed a writ of mandate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.

The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Taxes, or the Bonds. The City of Sacramento did not appeal the superior court’s ruling.

The Special Tax Election in the District. With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in San Diego). The election held in Improvement Area No. 1 had less than 12 registered voters at the time of the election to authorize the Special Taxes. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in Improvement Area No. 1. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election. Voters in Improvement Area No. 1 approved the Special Tax on January 21, 2025. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the District believes that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. In connection with the issuance of the Bonds, Bond Counsel expects to deliver its opinion in the proposed form attached hereto as Appendix C.

Item Number: 2.

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Loss of Tax Exemption
As discussed under the heading “TAX MATTERS,” interest on the Bonds could cease to be excluded from gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District or the City. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.

No Ratings – Limited Secondary Market
The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future.

There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance.

Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

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 Bonds or to preserve the tax-exempt status of interest on the Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.

Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds
Property owners within Improvement Area No. 1 are permitted to prepay their Special Taxes at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping community facilities district. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.”
Cybersecurity
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. The City is potentially subject to multiple cyber threats, including Item Number: 2.

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without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the efforts of the City to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, or the administration of the Bonds.

The City is also reliant on other entities and service providers in connection with the administration of the Bonds, including without limitation, the County tax collector for the levy and collection of Special Taxes and the Trustee. No assurance can be given that the City and these other entities will not be affected by cyber threats and attacks in a manner that may affect the levy and collection of Special Taxes or the payment of debt service on the Bonds.

CONTINUING DISCLOSURE
District Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate, dated as of June 1, 2026 (the “Disclosure Certificate”), to be executed and delivered by the District at the time of issuance of the Bonds, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by March 31 following the end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing with the Annual Report for the Fiscal Year ending June 30, 2026, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with EMMA.

The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12.

The City has retained Webb Municipal Finance, LLC to serve as Dissemination Agent for the continuing disclosure undertaking related to the Bonds, and has adopted policies and procedures with respect to its continuing disclosure practices.

Pursuant to its continuing disclosure undertakings entered into in accordance with Rule 15c2-12, the City has been required to file certain financial information in its annual reports which are derived from its annual audited financial statements. The City’s audited financial statements for Fiscal Year 2021-22 were not available at the time the annual report for Fiscal Year 2021-22 was due. As a result, the City’s annual report for Fiscal Year 2021-22 omitted information that was required to be included therein. The City filed unaudited financial statements for Fiscal Year 2021-22 in a timely manner and filed its audited financial statements for Fiscal Year 2021-22 in October 2023.

Developer Continuing Disclosure
The Underwriter does not consider Lennar to be an “obligated person” with respect to the Bonds for purposes of the Rule. Notwithstanding the foregoing, to provide updated information with respect to the development within Improvement Area No. 1, Lennar will execute a continuing disclosure certificate (the “Developer Continuing Disclosure Certificate”) pursuant to which it will covenant to provide semiannual reports until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Certificate.

The semiannual reports to be provided by Lennar will contain updates regarding the development within Improvement Area No. 1 as outlined in Section 4 of the Developer Continuing Disclosure Certificate attached hereto as APPENDIX G. In addition to its semiannual reports, Lennar will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate. Lennar’s obligations under the Developer Continuing Disclosure Certificate will terminate as set forth in Section 7 of the Developer Continuing Disclosure Certificate,
Lennar has advised the District that, except as described in this paragraph, based on a review of prior continuing disclosure obligations in California, Lennar is not aware of any material failures by it or any entity Item Number: 2.

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under managerial control of Lennar to comply in all material respects with previous continuing disclosure undertakings in a written certificate or agreement executed by it or any entity under the managerial control of Lennar to provide periodic continuing disclosure reports or notices of material events respecting securities offerings in California within the past five years. However, (i) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, Lennar inadvertently failed to file the initial semi-annual report by the due date of May 1, 2021, but filed a curative report on May 21, 2021; and (ii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 2018-1 Special Tax Bonds, Series 2021B, Lennar inadvertently failed to file the initial annual report by the due date of April 1, 2022, but filed a curative report on January 21, 2025.

TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. However, it should be noted that, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), generally certain corporations with more than $1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.

The excess of the stated redemption price at maturity of a Bond over the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the applicable Bond.

Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District will covenant to comply with all such requirements.

The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of taxexempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of taxexempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected Item Number: 2.

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for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar Bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value.

SUBSEQUENT TO THE ISSUANCE OF THE BONDS THERE MIGHT BE FEDERAL, STATE,

OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR

INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL,

STATE, OR LOCAL TAX TREATMENT OF THE BONDS INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAXEXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE

CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES

WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF

THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS

REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR

INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The authorizing resolutions and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth LLP.

Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.

A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.

LEGAL OPINION
The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Cole Huber LLP, Ontario, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement.

ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney will deliver an opinion to the effect that, to their actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or Item Number: 2.

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investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the District, which would adversely impact the District’s ability to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Taxes, or the transactions described herein.

NO RATING
The District has not made, and does not contemplate making, an application to any rating organization for the assignment of a rating on the Bonds.

UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”).

The Underwriter has agreed to purchase the Bonds at a price of $________ (being the $_______ aggregate principal amount of the Bonds, less an Underwriter’s discount of _______, less net original issue discount of $_________). The Bond Purchase Agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.

Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.

The Underwriter and its affiliates comprise a full-service financial institution engaged in activities which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and nonfinancial activities and services. The Underwriter and its affiliates may have provided, and may in the future provide, a variety of these services to the City and to persons and entities with relationships with the City, for which they received or will receive customary fees and expenses.

In the ordinary course of these business activities, the Underwriter and its affiliates may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the City (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the City.

The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire such assets, securities and instruments. Such investment and securities activities may involve securities and instruments of the City.

FINANCIAL INTERESTS
The fees being paid to the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Stradling Yocca Carlson & Rauth LLP, represents the Underwriter on matters unrelated to the Bonds.

Item Number: 2.

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MUNICIPAL ADVISOR
The District has retained Urban Futures, Inc., Walnut Creek, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

Urban Futures, Inc., is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds.

The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City.

The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City acting in its capacity as the legislative body of the District.

COMMUNITY FACILITIES DISTRICT NO. 2025-1
(SKYBORNE VILLAGE) OF THE CITY OF DESERT

HOT SPRINGS
By:

Doria Wilms
City Manager of the City of Desert Hot Springs
Item Number: 2.

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APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
COMMUNITY FACILITIES DISTRICT NO. 2025-1
(SKYBORNE VILLAGE) OF THE CITY OF DESERT HOT SPRINGS
IMPROVEMENT AREA NO. 1
An Annual Special Tax A and an Annual Special Tax B (all capitalized terms are defined in Section A, “Definitions”, below) shall be applicable to each Parcel of Taxable Property located within the boundaries of Improvement Area No. 1 of Community Facilities District No. 2025-1 (Skyborne Village). The amount of Annual Special Tax A and Annual Special Tax B to be levied in each Fiscal Year, on a Parcel, shall be determined by the City Council of The City of Desert Hot Springs (“City”), acting in its capacity as the legislative body of the CFD by applying the appropriate Annual Special Tax A and Annual Special Tax B for Developed Property, Approved Property, Undeveloped Property and Public Property and/or Property Owners’ Association Property that is not Exempt Property as set forth in Sections B, C, D, F and G, below. All of the real property within Improvement Area No. 1, unless exempted by law or by the provisions hereof in Section I, shall be taxed for the purposes, to the extent and in the manner herein provided.

A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre” or “Acreage” means the acreage of a Parcel as indicated on the most recent Assessor’s Parcel Map, or if the land area is not shown on the Assessor’s Parcel Map, the land area shown on the applicable Final Map, parcel map, condominium plan, or other similar instrument. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1 of Division 2 of Title 5 of the California Government Code of the State of California. “Administrative Expenses” means all actual or reasonably estimated costs and expenses of the CFD related to Improvement Area No. 1 including but not limited to the following: (i) the costs of computing Special Tax A and Special Tax B (the “Special Taxes”) and of preparing the annual Special Tax A and Special Tax B collection schedules (whether by the Administrator or designee thereof, or both); (ii) the costs of collecting the Special Taxes (whether by the County, City, or otherwise); (iii) the costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; (iv) the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Tax A; (v) the costs of the fiscal agent or trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; (vi) the costs of the City, or designee of complying with arbitrage rebate, mandated reporting and disclosure requirements of applicable federal and State of California laws, and responding to property owner or Bond owner inquiries regarding the Special Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the costs of the City, or designee related to any appeal of a Special Tax; and (ix) an allocable share of the salaries of the City staff and City overhead expense directly relating to the foregoing. Administrative Expenses shall also include amounts advanced by the City for any administrative purposes of the CFD. “Administrator” means an official of the City, or designee thereof, responsible for determining the annual amount of the levy and collection of the Special Taxes. “Annual Special Tax A” means for each Assessor’s Parcel, the Special Tax A actually levied in a given Fiscal Year on any Assessor’s Parcel.
“Annual Special Tax B” means for each Assessor’s Parcel, the Special Tax B actually levied in a given Fiscal Year on any Assessor’s Parcel.

Item Number: 2.

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“Appraisal” a report prepared by a MAI Certified Appraiser setting forth at least the minimum market value of Residential Units within each Land Use Category of Residential Property. “Approved Property” means all Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax A is being levied, and (ii) that have not been issued a Building Permit on or prior to the April 1st preceding the Fiscal Year in which the Special Tax A is being levied.
“Assessor’s Parcel Map” means an official map of the Assessor of the County of Riverside designating parcels by Assessor’s Parcel number.
“Assigned Annual Special Tax A” means the Special Tax for each Land Use Category of Developed Property, as determined in accordance with Section C.1.a., below. “Backup Special Tax A” means the Special Tax amount set forth in Section C.1.b., below. “Bonds” means any bonds or other indebtedness (as defined in the Act), whether in one or more series, issued by the CFD and secured by the levy of Special Tax A in Improvement Area No. 1 of the CFD. “Boundary Map” means a recorded map, as amended, of the CFD which indicates the boundaries of Improvement Area No. 1 of the CFD.
“Building Permit” means the first legal document issued by a local agency giving official permission for new construction within Improvement Area No. 1. For purposes of this definition, “Building Permit” may or may not include any subsequent building permits issued or changed after the first issuance, as determined by the Administrator.
“CFD” means Community Facilities District No. 2025-1 (Skyborne Village) of the The City of Desert Hot Springs established pursuant to the Act.
“City” means The City of Desert Hot Springs.
“City Council” means the City Council of The City of Desert Hot Springs. “Consumer Price Index” or “CPI” means the index published monthly by the U.S. Department of Labor, Bureau of Labor Statistics for all urban consumers in the Riverside-San Bernardino-Ontario area. In the event this index ceases to be published, the Consumer Price Index shall be another index as determined by the Administrator that is reasonably comparable to the Consumer Price Index for the Riverside-San BernardinoOntario area. “County” means the County of Riverside.
“Developed Property” means all Parcels of Taxable Property that are included in a Final Map that was recorded prior to January 1st preceding the Fiscal Year in which the Special Tax A and Special Tax B are being levied and for which a Building Permit for new construction has been issued on or prior to April 1st preceding the Fiscal Year in which the Special Taxes are being levied. “Dwelling Unit” or “(D/U)” means a residential unit that is used or permitted to be used as a domicile by one or more persons, as determined by the Administrator.
“Exempt Property” means any Parcel which is exempt from Special Taxes pursuant to Section I below. “Final Map” means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 4285 that creates individual lots for which Building Permits may be issued without further subdivision.

Item Number: 2.

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“Fiscal Year” means the 12 month period starting on July 1 of any calendar year and ending on the following June 30.
“Improvement Area No. 1” or “IA No. 1” means the property in the CFD designated as Improvement Area No. 1 on the Boundary Map.
“Indenture” means the bond indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.
“Land Use Category” means any of the categories listed in Table 1 under Section C below. “Maximum Special Tax A” means for each Parcel, the maximum Special Tax A, determined in accordance with Section C, which can be levied in any Fiscal Year on such Parcel. “Maximum Special Tax B” means for each Parcel, the maximum Special Tax B, determined in accordance with Section F, which can be levied in any Fiscal Year on such Parcel. “Minimum Sale Price” means the minimum price at which Residential Units of a given Land Use Category have sold or are expected to be sold in a normal marketing environment and shall not include prices for such Residential Units that are sold at a discount to expected sales prices for the purpose of stimulating the initial sales activity with respect to such Land Use Category.
“Multifamily Residential Property” means all Parcels of Developed Property for which a Building Permit has been issued for the purpose of constructing a building or buildings comprised of attached Dwelling Units available for rental by the general public, not for sale to an end user, and under common management, as determined by the Administrator.
“Non-Residential Property” means all Parcels of Developed Property for which a Building Permit was issued for any type of non-residential use.
“Parcel(s)” means a lot or parcel shown on an Assessor’s Parcel Map with an assigned parcel number valid as of July 1st for the Fiscal Year for which the Special Tax is being levied. “Price Point Determination” means the determination of the Minimum Sales Price of Residential Units in Improvement Area No. 1 using actual sales price data; provided, however, if there is no actual sales price data within the Improvement Area, then a Price Point Study will be conducted to determine the Minimum Sales Price. In utilizing actual sales price data, if there are not actual sales prices available for certain products or product types, then the base pricings for such product or product types as set forth in the appraisal report to be used in connection with the sale of Bonds shall apply.
“Property Owners’ Association Property” means all Parcels which, as of July 1st of the Fiscal Year in which the Special Tax is being levied, have been conveyed, dedicated to, or irrevocably offered for dedication to a property owner association, including any master or sub-association. “Proportionately” means for Special Tax A that the ratio of the Annual Special Tax A levy to the applicable Assigned Annual Special Tax A is equal for all applicable Assessor’s Parcels. In the case of Special Tax B, “Proportionately” means that the ratio of the Annual Special Tax B levy to the applicable Maximum Special Tax B is equal for all applicable Assessor’s Parcels. In the case of Developed Property subject to the apportionment of the Annual Special Tax A under Step Four of Section F “Public Property” means all Parcels which, as of July 1st of the Fiscal Year in which the Special Tax is being levied, are used for rights-of-way or any other purpose and is owned by, dedicated to, or irrevocably offered for dedication to the federal government, the State of California, the County, or any other local jurisdiction, provided, however, that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use.

Item Number: 2.

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“Residential Floor Area” means all of the square footage of living area of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio or similar area on a Parcel. The determination of Residential Floor Area shall be made by reference to the original Building Permit issued for the Parcel or, if the Building Permit is not available by reference to a similar official document as selected by the Administrator.
“Residential Property” means all Parcels of Developed Property for which a Building Permit has been issued for purposes of constructing one or more Dwelling Units. “Residential Unit” means each separate residential dwelling unit that comprises an independent facility capable of conveyance or rental, separate from adjacent residential dwelling units. "Services" means services permitted under the Mello-Roos Community Facilities Act of 1982 including, without limitation, maintenance of parks, parkways and open space; flood and storm protection services; and the operation of storm drainage systems. All of the services financed must be provided within the boundaries of or for the benefit of CFD No. 2025-1.
“Single Family Property” means all Parcels of Residential Property, other than Multifamily Residential Property.
“Special Tax A” means any of the Special Taxes authorized to be levied on Taxable Property within Improvement Area No. 1 and by the CFD pursuant to the Act to fund the Special Tax A Requirement. “Special Tax B” means any of the Special Taxes authorized to be levied on Taxable Property within Improvement Area No. 1 and by the CFD pursuant to the Act to fund the Special Tax B Requirement. “Special Tax A Requirement” means that amount required in any Fiscal Year: (i) to pay annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) to pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) to pay Administrative Expenses; (iv) to pay any anticipated shortfall due based on Special Tax delinquencies in the prior Fiscal Year; (v) to establish or replenish any reserve funds for the outstanding Bonds or with respect to Bonds expected to be issued in such Fiscal Year; (vi) until the final series of Bonds are issued as determined by the Board, to pay directly for acquisition or construction of the facilities eligible under the Act, provided that the inclusion of such amount does not increase the levy of Special Tax on Approved Property or Undeveloped Property as set forth in Step 2 or Step 3 of section D below; less (vii) a credit for funds available to reduce the annual Special Tax levy as determined pursuant to the Indenture as determined by the Administrator.
“Special Tax B Requirement” means, subject to the Maximum Special Tax B, that amount to be collected in any Fiscal Year to pay for certain Services as required to meet the needs of the CFD. The costs of Services to be covered shall be the direct costs for (i) Services, and (ii) Administrative Expenses (apportioned between Special Tax A and Special Tax B); less (iii) a credit for funds available to reduce the Annual Special Tax B levy, if any, as determined by the Administrator. Under no circumstances shall the Special Tax B Requirement include funds for Bonds.
“Special Tax” or “Special Taxes” means, as applicable, either or both of Special Tax A and/or Special Tax B. “Taxable Property” means all Parcels for which the Special Taxes have not been prepaid in full pursuant to Section E. or that are not exempt from the Special Tax pursuant to law or Section I. “Taxable Unit” means either a Dwelling Unit or an Acre, as shown in Table 1. “Total Tax Burden” means for any Residential Unit, the annual Special Tax, together with ad valorem property taxes, special assessments, special taxes for any overlapping community facilities district, and any other taxes, fees, and charges which are levied on the County secured tax roll and imposed on such Residential Item Number: 2.

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Unit and the real property on which it is located and collected by the County on ad valorem tax bills and which are secured by such Residential Unit and the real property on which it is located, assuming such Residential Unit had been completed, sold, and subject to such levies and impositions, excluding (i) PACE Charges (or any other charge entered into voluntarily by the property owner), (ii) homeowners association assessments, and (iii) service charges such as those related to sewer and trash that may be collected on the County secured tax roll.
“Undeveloped Property” means all Parcels of Taxable Property not classified as Developed Property, Approved Property, Public Property or Property Owners’ Association Property.

B. ASSIGNMENT TO LAND USE CATEGORY
Each Fiscal Year, commencing with the 2025-2026 Fiscal Year, all Parcels of Taxable Property shall be classified as Developed Property, Approved Property, Undeveloped Property, Public Property and/or Property Owners’ Association Property, and subject to the levy of Special Taxes in accordance with this Rate and Method of Apportionment as determined pursuant to Sections C, D, F, and G.

Parcels of Developed Property shall further be classified as Residential Property or Non-Residential Property. Parcels of Residential Property shall further be classified as Single Family Property or Multifamily Residential Property. Parcels of Single Family Property shall be further categorized into the applicable Land Use Category based on the Residential Floor Area for such Parcel.

C. MAXIMUM SPECIAL TAX A RATE

1. Developed Property
The Maximum Special Tax A for each Parcel of Single Family Property shall be the greater of: (i) the applicable Assigned Annual Special Tax A described in Table 1 or (ii) the amount derived by application of the Backup Special Tax A.

The Maximum Special Tax A for each Parcel of Non-Residential Property or Multifamily Residential Property shall be the Assigned Annual Special Tax A described in Table 1. a. Assigned Annual Special Tax A
The Assigned Annual Special Tax A for each Parcel of Developed Property is shown in Table 1.

TABLE 1
Assigned Annual Special Tax A for Developed Property
Land Use Category
Taxable
Unit Residential Floor Area
Assigned Annual
Special Tax A Per
Taxable Unit

1. Single Family Property D/U Less than 1,450 sq. ft. $2,140

2. Single Family Property D/U 1,450 sq. ft. – 1,599 sq. ft. $2,255

3. Single Family Property D/U 1,600 sq. ft. – 1,749 sq. ft. $2,370

4. Single Family Property D/U 1,750 sq. ft. – 1,899 sq. ft. $2,485

5. Single Family Property D/U 1,900 sq. ft. – 2,049 sq. ft. $2,600

6. Single Family Property D/U 2,050 sq. ft. – 2,199 sq. ft. $2,602

7. Single Family Property D/U 2,200 sq. ft. – 2,349 sq. ft. $2,830

8. Single Family Property D/U 2,350 sq. ft. – 2,499 sq. ft. $2,916

9. Single Family Property D/U Greater than 2,499 sq. ft. $2,828 Item Number: 2.

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10. Multifamily Residential Property Acre N/A $16,917

11. Non-Residential Property Acre N/A $16,917
b. Backup Special Tax A
When a Final Map is recorded, the Backup Special Tax A for a Parcel classified or to be classified as Single Family Property within such Final Map shall be determined by multiplying the Undeveloped Property Maximum Special Tax A per Acre by the total Acreage of Taxable Property within such Final Map, excluding the Acreage associated with Non-Residential Property, Multifamily Residential Property, Public Property and/or Property Owners’ Association Property that is not Exempt Property pursuant to Section I and dividing such amount by the number of Parcels within such Final Map classified as either (i) Single Family Property or (ii) Approved Property for which a Building Permit is expected to be issued for Single Family Property (i.e., the number of residential lots).

The Backup Special Tax A shall not apply to Multifamily Residential Property, Non-Residential Property, Public Property, or Property Owners’ Association Property.

2. Approved Property
The Maximum Special Tax A for each Parcel of Approved Property expected to be classified as Single Family Property shall be the Backup Special Tax A computed pursuant to Section C.1.b above.

The Maximum Special Tax A for each Parcel of Approved Property expected to be classified as Multifamily Residential Property or Non-Residential Property shall be $16,917 per Acre.

3. Undeveloped Property
The Maximum Special Tax A for each Parcel of Undeveloped Property is shown in Table 2 below.

TABLE 2
Undeveloped Property Maximum Special Tax A
Maximum Special Tax A Per
Acre
$16,917

4. Public Property and/or Property Owners’ Association Property that is not Exempt Property pursuant to the provisions of Section I.

The Maximum Special Tax A for each Parcel of Public Property and/or Property Owners’ Association Property that is not Exempt Property shall be equal to the product of the applicable Undeveloped Property Maximum Special Tax A rate per Acre in Table 2 multiplied by the Acreage of such Parcel.

5. Prior to the issuance of the Bonds, the CFD shall determine the Minimum Sales Price of Residential Units within each Land Use Category through a Price Point Determination. If, based upon such Price Point Determination, the Administrator calculates that the Total Tax Burden applicable to Residential Units within one or more Land Use Categories of Residential Property to be constructed within Improvement Area No. 1 exceeds 2.00% of the Minimum Sale Price of such Residential Units, the Special Tax A shall Item Number: 2.

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be reduced to the extent necessary to cause the Total Tax Burden applicable to Residential Units within such Land Use Category(ies) not to exceed 2.00% of the Minimum Sale Price of such Residential Units.

Each Special Tax A reduction for a Land Use Category shall be calculated by the Administrator separately, and it shall not be required that such reduction be proportionate among Land Use Categories.

If the Special Tax A for any Land Use Category is reduced pursuant to the preceding paragraph, the Administrator shall calculate a reduced Maximum Special Tax A for Non-Residential, Approved and Undeveloped Property, as well as a reduced Backup Special Tax A for Developed Property. The revised Maximum Special Tax A shall be equal to the Maximum Special Tax A as set forth in Table 1 above, reduced by a percentage equal to the weighted average percentage reduction in the Special Tax A for all Land Use Categories of Residential Property. The weighted average percentage will be calculated by taking the sum of the products of the number of Residential Units constructed or expected to be constructed in each Land Use Category multiplied by the percentage change in the Special Tax A for each Land Use Category (or 0 for Land Use Categories that are not changing). This amount is then divided by the total number of Residential Units constructed or expected to be constructed and converted to a percentage. The reduced Maximum Special Tax A shall be used to compute the reduced Backup Special Tax A.

The Special Tax A reductions, if required pursuant to this section, shall be reflected in an amended notice of Special Tax lien, which CFD No. 2025-1 shall cause to be recorded by executing a certificate in substantially the form attached herein as Exhibit A.

D. METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX A
Commencing with Fiscal Year 2025-2026 and for each following Fiscal Year, the City Council shall levy the Special Tax A on all Taxable Property until the amount of Special Tax A equals the applicable Special Tax A Requirement in accordance with the following steps:

First: The Special Tax A shall be levied Proportionately on each Parcel of Developed Property at up to 100% of the applicable Assigned Annual Special Tax A rate as needed to satisfy the Special Tax A Requirement;
Second: If additional moneys are needed to satisfy the Special Tax A Requirement after the first step has been completed, the Special Tax A shall be levied Proportionately on each Parcel of Approved Property at up to 100% of the Maximum Special Tax A for Approved Property; Third: If additional moneys are needed to satisfy the Special Tax A Requirement after the first two steps have been completed, the Special Tax A shall be levied Proportionately on each Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property; Fourth: If additional moneys are needed to satisfy the Special Tax A Requirement after the first three steps have been completed, the Special Tax A to be levied on each Parcel of Developed Property for which the Maximum Special Tax A is derived by the application of the Backup Special Tax A shall be increased in equal percentages from the Assigned Annual Special Tax A up to the Maximum Special Tax A for such Parcel;
Fifth: If additional moneys are needed to satisfy the Special Tax A Requirement after the first four steps have been completed, the Special Tax A shall be levied Proportionately on each Parcel of Taxable Property that is Public Property or Property Owners’ Association Property at up to 100% of the Maximum Special Tax A for such Parcel.

Notwithstanding the above, under no circumstances will the Special Tax A levied in any Fiscal Year against any Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax A Item Number: 2.

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applicable to any other Parcel be increased by more than ten percent (10%) above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default.

E. PREPAYMENT OF SPECIAL TAX A
The following definitions apply to this Section E:
“CFD Public Facilities” means $8,140,436, expressed in 2024 dollars, which shall increase by the Construction Inflation Index on July 1, 2025, and on each July 1 thereafter, or such lower number as (i) shall be determined by the Administrator as sufficient to provide the public facilities under the authorized bonding program, or (ii) shall be determined by the City Council concurrently with a covenant that the CFD will not issue any more Bonds.
“Construction Fund” means, collectively, an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct public facilities eligible under the Act and any account established prior to the issuance of Bonds for such purpose. “Construction Inflation Index” means the annual percentage change in the Engineering News-Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the Administrator that is reasonably comparable to the Engineering News-Record Building Cost Index for the City of Los Angeles.
“Future Facilities Costs” means the CFD Public Facilities minus (i) Bond proceeds deposited in Construction Funds and accounts and (ii) other amounts (Special Tax A, interest earnings, etc.) allocated to Construction Funds and accounts that were available to fund such CFD Public Facilities prior to the date of prepayment. “Outstanding Bonds” means all previously issued Bonds, which will remain outstanding after the payment of principal from the amount of Special Tax A that have been levied, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Maximum Special Tax A.

1. Prepayment in Full
The Maximum Special Tax A obligation may be prepaid and permanently satisfied for (i) Parcels of Developed Property, (ii) Parcels of Approved Property or Undeveloped Property for which a Building Permit has been issued, (iii) Approved Property or Undeveloped Property for which a Building Permit has not been issued, and (iv) Parcels of Public Property or Property Owners’ Association Property that are not Exempt Property pursuant to Section I. The Maximum Special Tax A obligation applicable to a Parcel may be fully prepaid and the obligation to pay the Special Tax A for such Parcel permanently satisfied as described herein; provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to such Parcel at the time of prepayment. An owner of a Parcel intending to prepay the Maximum Special Tax A obligation for such Parcel shall provide the Administrator with written notice of intent to prepay, and within 5 business days of receipt of such notice, the Administrator shall notify such owner of the amount of the nonrefundable deposit determined to cover the cost to be incurred by the CFD in calculating the Prepayment Amount (as defined below) for the Parcel. Within 15 days of receipt of such non-refundable deposit, the Administrator shall notify such owner of the Prepayment Amount for the Parcel. Prepayment must be made not less than 60 days prior to the redemption date for any Bonds to be redeemed with the proceeds of such prepaid Special Tax A.

The Prepayment Amount shall be calculated as follows (capitalized terms are defined below):

Bond Redemption Amount
plus Redemption Premium
Item Number: 2.

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plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
Equals: Prepayment Amount
The Prepayment Amount shall be determined as of the proposed prepayment date as follows:

1. Confirm that no Special Tax A delinquencies apply to such Parcel.

2. For a Parcel of Developed Property, compute the Maximum Special Tax A for the Parcel.

For a Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax A for the Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Parcel. For a Parcel of Approved Property or Undeveloped Property for which a Building Permit has not been issued, and for a Parcel of Public Property or Property Owners’ Association Property to be prepaid, compute the Maximum Special Tax A for the Parcel.

3. Divide the Maximum Special Tax A derived pursuant to paragraph 2 by the total amount of Special Tax A that could be levied at the Maximum Special Tax A at build out of all Parcels of Taxable Property based on the applicable Maximum Special Tax A for Parcels of Developed Property not including any Parcels for which the Special Tax A obligation has been previously prepaid.

4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the “Bond Redemption Amount”).

5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the “Redemption Premium”).

6. Determine the Future Facilities Costs.

7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the amount of Future Facilities Costs for the Parcel (the “Future Facilities Amount”).

8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax A prepayments.

9. Determine the Special Tax A levied on the Parcel in the current Fiscal Year which have not yet been paid.

10. Determine the amount the Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount.

11. Add the amounts derived pursuant to paragraphs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the “Defeasance Amount”).

12. Verify the administrative fees and expenses of the CFD, including the cost of computation of the Prepayment Amount, the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Maximum Special Tax A obligation for the Parcel and the redemption of Outstanding Bonds (the “Administrative Fees and Expenses”).

Item Number: 2.

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13. The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.

14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit.

15. From the Prepayment Amount, the Bond Redemption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments. The Future Facilities Amount shall be deposited into the Construction Fund. The Administrative Fees and Expenses shall be retained by the CFD.

The Prepayment Amount may be sufficient to redeem other than a $5,000 increment of Bonds. In such event, the increment above $5,000 or an integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next redemption from other Special Tax A prepayments of Outstanding Bonds or to make debt service payments.

As a result of the payment of the current Fiscal Year’s Special Tax A levy as determined pursuant to paragraph 9 above, the Administrator shall remove the current Fiscal Year’s Special Tax A levy for the Parcel from the County tax roll. With respect to any Parcel for which the Maximum Special Tax A obligation is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Maximum Special Tax A obligation and the release of the Special Tax A lien for the Parcel, and the obligation to pay the Special Tax A for such Parcel shall cease.

Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless the amount of Maximum Special Tax A that may be levied on all Parcels of Taxable Property after the proposed prepayment will be at least 1.1 times maximum annual debt service on the Bonds that will remain outstanding after the prepayment plus the estimated annual Administrative Expenses.

Tenders of Bonds in prepayment of the Maximum Special Tax A obligation may be accepted upon the terms and conditions established by the City Council pursuant to the Act. However, the use of Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the City Council.

2. Prepayment in Part
The Maximum Special Tax A obligation for a Parcel of Developed Property, Approved Property or Undeveloped Property may be partially prepaid. For purposes of determining the partial prepayment amount, the provisions of Section E.1 shall be modified as provided by the following formula:

PP = ((PE –A) x F) +A
These terms have the following meaning:

PP = Partial Prepayment
PE = the Prepayment Amount calculated according to Section E.1 F = the percent by which the owner of the Parcel(s) is partially prepaying the Maximum Special Tax A obligation
A = the Administrative Fees and Expenses determined pursuant to Section E.1 Item Number: 2.

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The owner of a Parcel who desires to partially prepay the Maximum Special Tax A obligation for the Parcel shall notify the Administrator of (i) such owner’s intent to partially prepay the Maximum Special Tax A obligation, (ii) the percentage of the Maximum Special Tax A obligation such owner wishes to prepay, and (iii) the company or agency that will be acting as the escrow agent, if any. Within 5 days of receipt of such notice, the Administrator shall notify such property owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the amount of a partial prepayment. Within 15 business days of receipt of such non-refundable deposit, the Administrator shall notify such owner of the amount of the Partial Prepayment for the Parcel. A Partial Prepayment must be made not less than 60 days prior to the redemption date for the Outstanding Bonds to be redeemed with the proceeds of the Partial Prepayment.

With respect to any Parcel for which the Maximum Special Tax A obligation is partially prepaid, the Administrator shall (i) distribute the Partial Prepayment as provided in Paragraph 15 of Section E.1, and (ii) indicate in the records of the CFD that there has been a Partial Prepayment for the Parcel and that a portion of the Special Tax A obligation equal to the remaining percentage (1.00 - F) of Special Tax A obligation will continue on the Parcel pursuant to Section D.

F. MAXIMUM SPECIAL TAX B RATE

1. Developed Property
The Maximum Special Tax B for Fiscal Year 2025-2026 for each Parcel of Single Family Property, NonResidential Property or Multifamily Residential Property, classified as Developed Property, shall be shall be the Maximum Special Tax B described in Table 3.

TABLE 3
Maximum Special Tax B for Developed Property
(Fiscal Year 2025-2026)
Land Use Category
Taxable
Unit
Maximum Special
Tax B Per Taxable
Unit
(FY 2025-2026)

1. Single Family Property D/U $275.00

2. Multifamily Residential Property Acre $1,836.76

3. Non-Residential Property Acre $1,836.76
On each July 1, commencing July 1, 2026, the Maximum Special Tax B shall be increased by an amount equal to CPI or two percent (2%), whichever is greater, of the amount in effect for the previous Fiscal Year.

2. Approved Property
The Maximum Special Tax B for Fiscal Year 2025-2026 for each Parcel of Single Family Property, NonResidential Property or Multifamily Residential Property, classified as Approved Property, shall be the Maximum Special Tax B described in Table 4.

Item Number: 2.

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TABLE 4
Maximum Special Tax B for Approved Property
(Fiscal Year 2025-2026)
Land Use Category
Taxable
Unit
Maximum Special
Tax B Per Taxable
Unit
(FY 2025-2026)

1. Single Family Property D/U $196.94

2. Multifamily Residential Property Acre $1,315.39

3. Non-Residential Property Acre $1,315.39
On each July 1, commencing July 1, 2026, the Maximum Special Tax B shall be increased by an amount equal to CPI or two percent (2%), whichever is greater, of the amount in effect for the previous Fiscal Year.

3. Undeveloped Property
No Special Tax B shall be levied on Undeveloped Property.

G. METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX B
Commencing Fiscal Year 2025-2026 and for each subsequent Fiscal Year, the City Council shall levy Special Tax B on all Taxable Property until the amount of Special Tax B equals the Special Tax B Requirement in accordance with the following steps:

Step One: The Special Tax B shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax B as needed to satisfy the Special Tax B Requirement.

Step Two: If additional moneys are needed to satisfy the Special Tax B after the first step has been completed, the Special Tax B shall be levied Proportionately on each Assessor’s Parcel of Approved Property, at up to 100% of the Maximum Special Tax B applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax B Requirement.

H. PREPAYMENT OF SPECIAL TAX B
No prepayments of Annual Special Tax B are permitted.

I. EXEMPTIONS
The Administrator shall classify as Exempt Property all Parcels of (i) Public Property or (ii) Property Owners’ Association Property; provided that such classification shall not reduce the Acreage of all Taxable Property within Improvement Area No. 1 to fewer than 42.82 Acres. The Administrator shall not classify a Parcel of Public Property or Property Owners’ Association Property as Exempt Property if such classification would reduce the Acreage of all Parcels of Taxable Property to fewer than 42.82 Acres. Such Parcels that cannot be classified as Exempt Property because such classification would reduce the Acreage of all Parcels of Taxable Property to fewer than 42.82 Acres will be classified as Property Owners’ Association Property or Public Property, and will continue to be subject to Special Tax A. The Administrator shall classify such Parcels as Exempt Property in the chronological order in which property becomes Public Property or Property Owners’ Association Property.

Item Number: 2.

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I. MANNER OF COLLECTION
The Special Tax A and Special Tax B shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Administrator may directly bill the Special Tax A and Special Tax B, may collect Special Tax A and Special Tax B at a different time or in a different manner if necessary to meet the financial obligations of Improvement Area No. 1, and provided further that the CFD may covenant to foreclose and may actually foreclose on Parcels having delinquent Special Tax A and Special Tax B as permitted by the Act.

J. APPEALS
Any taxpayer may file a written appeal of the Special Tax on his/her Parcel(s) with the Administrator, provided that the appellant is current in his/her payments of Special Tax. During pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The Administrator shall review the appeal, meet with the appellant if the Administrator deems necessary, and advise the appellant of its determination. If the Administrator agrees with the appellant, the Administrator shall grant a credit to eliminate or reduce future Special Tax on the appellant’s Parcel(s). No refunds of previously paid Special Taxes shall be made.

The Administrator shall interpret this Rate and Method of Apportionment and make determinations relative to the annual levy and administration of the Special Taxes and any taxpayer who appeals, as herein specified.

The City Council may interpret this Rate and Method of Apportionment of Special Tax for purposes of clarifying any ambiguity and make determinations relative to the amount of Administrative Expenses.

K. TERM OF THE SPECIAL TAX A AND SPECIAL TAX B
For each year that any Bonds are outstanding the Special Tax A shall be levied on all Parcels subject to Special Tax A. If any delinquent Special Taxes remain uncollected prior to or after all Bonds are retired, the Special Tax A may be levied to the extent necessary to reimburse the CFD for uncollected Special Tax A associated with the levy of such Special Tax A, but the Special Tax A shall not be levied after 2068-2069 Fiscal Year.

For each Fiscal Year, Special Tax B shall be levied in perpetuity as long as the Services are being provided.

Item Number: 2.

Page 89 of 882 ends

Desert Hot Springs City CouncilJune 2, 2026

Desert Hot Springs City Council
June 2, 2026