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 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 a 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 prior to registration or qualification under the securities laws of such jurisdiction.
JH Draft: 6/22/2026 PRELIMINARY OFFICIAL STATEMENT DATED [______________], 2026 NEW ISSUE—BOOK-ENTRY ONLY NOT RATED In the opinion of Jones Hall LLP, San Mateo, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2026 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, such interest on the 2026 Bonds may be taken into account for the purpose of computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “LEGAL MATTERS – Tax Exemption.” $[_]* IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The bonds captioned above (the “2026 Bonds”) are being issued by the City of Fairfield (the “City”) for and on behalf of the “City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5)” (the “District”) with respect to its “Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5)” (“Improvement Area No. 1”), pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), the Resolution of Issuance and a Fiscal Agent Agreement dated as of December 1, 2024 (the “Master Fiscal Agent Agreement”), as supplemented by a First Supplement to Fiscal Agent Agreement dated August 1, 2026 (as supplemented, the “Fiscal Agent Agreement”), by and between the City, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”). Use of Proceeds. The 2026 Bonds are being issued to (i) finance the acquisition and construction of certain facilities and improvements to be owned and operated by the City, (ii) contribute additional funds to the debt service reserve fund established and held by the Fiscal Agent under the Fiscal Agent Agreement securing the 2026 Bonds and the 2024 Bonds, (iii) pay capitalized interest on the 2026 Bonds through _______________, 20__, and (iv) pay the costs of issuing the 2026 Bonds. Security and Sources of Payment. The 2026 Bonds are payable from proceeds of Special Tax Revenues levied on property within Improvement Area No. 1 according to the rate and method of apportionment of special tax approved by the City Council and the eligible landowner voters in Improvement Area No. 1, as amended. The 2026 Bonds are secured by a first pledge of all of the Special Tax Revenues and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement, on a parity with (i) the bonds previously issued by the District captioned “$36,500,000 City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) Special Tax Bonds, Series 2024A” (the “2024 Bonds”), and (ii) additional bonds that may be issued in the future (“Parity Bonds”) on a parity with the 2026 Bonds and the 2024 Bonds, subject to the conditions set forth in the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS” and “THE 2026 BONDS – Issuance of Future Parity Bonds.” Bond Terms; Redemption. Interest on the 2026 Bonds is payable on March 1, 2027, and semiannually thereafter on each March 1 and September 1. The 2026 Bonds will be issued in integral multiples of $5,000. The 2026 Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the 2026 Bonds. The 2026 Bonds are subject to optional redemption, mandatory sinking fund redemption and mandatory redemption from prepaid Facilities Special Taxes. See “THE 2026 BONDS – Redemption.” The 2026 Bonds, the interest thereon, and any premiums payable on the redemption of any of the 2026 Bonds, are not an indebtedness of the City (except to the limited extent described in this Official Statement), the State of California (the “State”) or any of its political subdivisions, and neither the City (except to the limited extent described in this Official Statement), the State nor any of its political subdivisions is liable on the 2026 Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Official Statement) or the State or any political subdivision thereof is pledged to the payment of the 2026 Bonds or interest thereon. Other than the Facilities Special Taxes, no taxes are pledged to the payment of the 2026 Bonds. The 2026 Bonds are not a general obligation of the City, but are limited obligations of the City payable solely from the Special Tax Revenues as more fully described in this Official Statement. MATURITY SCHEDULE (see inside cover) This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the 2026 Bonds involves risks which may not be appropriate for some investors. See “BOND OWNERS' RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2026 Bonds. The 2026 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Jones Hall LLP, San Mateo, California, Bond Counsel, and subject to certain other conditions. Jones Hall LLP is also serving as disclosure counsel to the City. Certain matters will be passed upon for the City by Richards, Watson and Gershon, San Francisco, California, acting as the City Attorney. Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, is serving as counsel to the Underwriter, and Cox, Castle Nicholson LLP, San Francisco, California, is serving as counsel to One Lake Holding LLC, the Master Developer. It is anticipated that the 2026 Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about [_], 2026.
The date of this Official Statement is: ___________, 2026. ¨ * Preliminary; subject to change.
MATURITY SCHEDULE* $_______ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A $_________ Serial Bonds Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP† (Base ______) $______ ___% Term Bond due September 1, 20__, Yield: ____%, Price: ____ CUSIP† No. _____ $______ ___% Term Bond due September 1, 20__, Yield: ____%, Price: ____ CUSIP† No. _____ C Priced to first optional redemption date of __________________ at _____. † CUSIP Global Services (CGS) is managed on behalf of American Bankers Association by FactSet Research Systems Inc. Copyright(C) 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(C) numbers are provided for convenience of reference only. Neither the City nor the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. * Preliminary; subject to change.
CITY OF FAIRFIELD CITY COUNCIL [Vacant], Mayor1 Pam Bertani, Vice Mayor K. Patrice Williams, Councilmember Scott Tonnesen, Councilmember Doug Carr, Councilmember Doriss Panduro, Councilmember Manveer Sandhu, Councilmember CITY EXECUTIVE STAFF David Gassaway, City Manager John Furtado, Director of Finance Sanjay Mishra, Public Works Director David Zellers, Director of Community Development CITY TREASURER Arvinda Krishnan CITY CLERK Karen L. Rees CITY ATTORNEY Richards, Watson & Gershon San Francisco, California ___________________________________ PROFESSIONAL SERVICES BOND AND DISCLOSURE COUNSEL Jones Hall LLP San Mateo, California MUNICIPAL ADVISOR PFM Financial Advisors LLC San Francisco, California SPECIAL TAX CONSULTANT Goodwin Consulting Group, Inc. Sacramento, California APPRAISER BBG, Inc. Sacramento, California FISCAL AGENT The Bank of New York Mellon Trust Company, N.A. San Francisco, California 1 [TO COME]
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2026 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2026 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, the District, any other parties described in this Official Statement, or in the condition of property within Improvement Area No. 1 of the District since the date of this Official Statement. Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2026 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2026 Bonds. Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents. Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2026 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934. Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking 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 “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The City does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement.
-i-
TABLE OF CONTENTS Page Page INTRODUCTION ............................................... 1 FINANCING PLAN ............................................ 7 Facilities Financing Plan ................................ 7 Estimated Sources and Uses of Funds ......... 7 THE 2026 BONDS ............................................ 8 Authority for Issuance .................................... 8 General Bond Terms ..................................... 8 Redemption ................................................... 9 Issuance of Future Parity Bonds ................. 11 Registration, Transfer and Exchange .......... 14 DEBT SERVICE SCHEDULE ......................... 16 SECURITY FOR THE BONDS ........................ 17 General ........................................................ 17 Limited Obligation ........................................ 18 Facilities Special Taxes ............................... 18 Amended Rate and Method ........................ 19 Covenant to Foreclose ................................ 25 Special Tax Fund ........................................ 27 Bond Fund ................................................... 29 2024 Reserve Fund ..................................... 31 Investment of Moneys in Funds .................. 32 THE DISTRICT AND IMPROVEMENT AREA NO. 1 ........................................................... 33 Formation and Background ......................... 33 Description and Location ............................. 34 Authorized Facilities .................................... 34 Projected Special Tax Revenues ................ 36 Appraised Values ........................................ 37 Appraised Value-to-Debt Ratios .................. 38 Direct and Overlapping Governmental Obligations .............................................. 42 Estimated Tax Burden on Single-Family Homes ..................................................... 43 History of Facilities Special Tax Collection and Delinquencies ................................... 44 Potential Consequences of Facilities Special Tax Delinquencies ...................... 44 PROPERTY OWNERSHIP AND DEVELOPMENT STATUS .......................... 46 The One Lake Project ................................. 46 Development Agreement ............................. 49 Conditions of Approval ................................ 50 Public Infrastructure Improvements Required for the One Lake Project .......... 53 Improvement Area No. 1 Development Status Summary ...................................... 54 Existing and Planned Sales to Merchant Builders ................................................... 56 Entitlements ................................................. 57 Environmental Matters ................................ 57 Master Developer Financing Plan for Improvement Area No. 1 .......................... 59 The Master Developer .................................. 63 Lennar Homes .............................................. 65 BOND OWNERS’ RISKS ................................. 81 Risks of Real Estate Secured Investments Generally .................................................. 81 Limited Obligation of the City to Pay Debt Service ..................................................... 81 Potential Early Redemption of Bonds from Facilities Special Tax Prepayments ......... 81 Concentration of Property Ownership .......... 82 Levy and Collection of the Facilities Special Tax ........................................................... 82 Property Tax Delinquencies ......................... 83 Future Property Development ...................... 84 Value to Lien Ratios ..................................... 84 Risks Related to Homeowners with High Loan to Value Ratios ................................ 85 Payment of Facilities Special Tax is not a Personal Obligation of the Property Owners ..................................................... 85 Appraised Values ......................................... 85 Property Values ............................................ 85 Other Possible Claims Upon the Value of Taxable Property ...................................... 88 Exempt Properties ........................................ 89 FDIC/Federal Government Interests in Properties ................................................. 89 Depletion of 2024 Reserve Fund ................. 91 Bankruptcy Delays ....................................... 91 Cyber Security .............................................. 92 Disclosure to Future Purchasers .................. 92 Public Health Emergencies .......................... 93 No Acceleration Provisions .......................... 93 Loss of Tax Exemption ................................. 93 IRS Audit of Tax-Exempt Bond Issues ......... 93 Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption .................... 93 Voter Initiatives ............................................. 94 No Ratings – Limited Secondary Market for Bonds ....................................................... 95 LEGAL MATTERS ........................................... 96 Legal Opinions ............................................. 96 Tax Exemption ............................................. 96 No Litigation ................................................. 97 CONTINUING DISCLOSURE .......................... 98 NO RATING ..................................................... 99 UNDERWRITING ............................................. 99 PROFESSIONAL FEES ................................. 100
-ii-
TABLE OF CONTENTS (continued) APPENDIX A – General Information About the City of Fairfield and Solano County APPENDIX B – Amended and Restated Rate and Method of Apportionment of Special Tax for Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) APPENDIX C – Summary of Certain Provisions of the Fiscal Agent Agreement APPENDIX D – DTC and the Book-Entry Only System APPENDIX E – Form of City Continuing Disclosure Certificate APPENDIX F – Form of Master Developer Continuing Disclosure Certificate APPENDIX G – Form of Merchant Builder Continuing Disclosure Certificate APPENDIX H – Form of Opinion of Bond Counsel APPENDIX I – Appraisal Report APPENDIX J – Community Facilities District Boundary Map
-iii-
[REGIONAL LOCATION MAP]
-iv-
AERIAL PHOTO IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5)
-1-
__________________________________ OFFICIAL STATEMENT __________________________________ $[_]* IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A INTRODUCTION 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, including the cover page, the inside cover and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the 2026 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the definitions given in the Fiscal Agent Agreement (as defined below). This Official Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “2026 Bonds”) to be issued by the City of Fairfield (the “City”) for and on behalf of the “City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5)” (the “District”) with respect to its “Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5)” (“Improvement Area No. 1”). The City. The City, which comprises approximately 37 square miles, is located in the County of Solano (the “County”) approximately 44 miles northeast of San Francisco and 42 miles west of Sacramento. For economic and demographic information regarding the City and County, see “APPENDIX A – GENERAL INFORMATION ABOUT THE CITY OF FAIRFIELD AND SOLANO COUNTY.” Authority for Issuance of the 2026 Bonds. The 2026 Bonds are issued under the Act, a resolution adopted by the City Council of the City on July 7, 2026 (the “Resolution of Issuance”), and a Fiscal Agent Agreement dated as of December 1, 2024 (the “Master Fiscal Agent Agreement”), as supplemented by a First Supplement to Fiscal Agent Agreement dated as of August 1, 2026, (as so supplemented, “Fiscal Agent Agreement”), by and between the City, for and on behalf of the District, and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”). See “THE 2026 BONDS – Authority for Issuance.” Purpose of the 2026 Bonds. The proceeds of the 2026 Bonds will be used primarily to finance the acquisition and construction of certain facilities to be owned and operated by the City. The proceeds of the 2026 Bonds will also be used to (i) contribute additional funds to the debt service reserve fund established and held by the Fiscal Agent under the Fiscal Agent Agreement (the “2024 Reserve Fund”) securing the 2026 Bonds and the 2024 Bonds (as defined below), (ii) * Preliminary; subject to change.
-2-
fund partial capitalized interest on the 2026 Bonds through March 1, 2027, and (iii) pay the costs of issuing the 2026 Bonds. See “FINANCING PLAN.” The District. The District and Improvement Area No. 1 were formed and established in February 2023 by the City Council of the City (the “City Council”), as legislative body of the District, under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), pursuant to a resolution adopted by the City Council following a public hearing, and a landowner election at which the qualified electors of Improvement Area No. 1 authorized the City to incur bonded indebtedness for the District with respect to Improvement Area No. 1 to be secured by the levy of the Facilities Special Taxes (as defined below), and approved the levy of special taxes for the purpose of financing authorized facilities (the “Facilities”) and authorized services in accordance with the Rate and Method of Apportionment of Special Tax for Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “Original Rate and Method”). On October 15, 2024, the City completed change proceedings for Improvement Area No. 1 in order to (among other things) amend the Original Rate and Method and approve the Amended and Restated Rate and Method of Apportionment of Special Tax for Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “Amended Rate and Method”). The change proceedings also increased the bonded indebtedness limit for Improvement Area No. 1 from $90,000,000 to $100,000,000. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Formation and Background.” Special Taxes. The Amended Rate and Method provides for a Facilities Special Tax (the “Facilities Special Tax”) to be levied for the payment of debt service on the Bonds and the costs of the Facilities, and a Services Special Tax (the “Services Special Tax”) which will be levied for certain public services after a Transition Event, which is generally defined as a determination that all Bonds have been fully repaid or defeased, and no further Facilities are intended to be funded with the proceeds of the Facilities Special Tax. Only the Facilities Special Tax is pledged toward the payment of debt service on the 2026 Bonds. Security and Sources of Payment for the 2026 Bonds. Pursuant to the Fiscal Agent Agreement, the 2026 Bonds are secured by and payable from a first pledge of all of net proceeds of the Facilities Special Taxes (as more particularly defined in the Fiscal Agent Agreement, the “Special Tax Revenues”), on a parity with (i) the bonds previously issued by the District captioned “$36,500,000 City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) Special Tax Bonds, Series 2024A” issued by the City under the Master Fiscal Agent Agreement (the “2024 Bonds”), and (ii) any additional bonds that may be issued in the future, subject to the conditions set forth in the Fiscal Agent Agreement (“Parity Bonds”). See “THE 2026 BONDS – Issuance of Future Parity Bonds.” The 2026 Bonds will be additionally secured by certain funds and accounts established and held under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.” The 2026 Bonds, the 2024 Bonds and any Parity Bonds issued in the future are referred to herein as the “Bonds.” The 2026 Bonds, the interest thereon, and any premiums payable on the redemption of any of the 2026 Bonds, are not an indebtedness of the City (except to the limited extent described in this Official Statement), the State of California (the “State”) or any of its political subdivisions, and neither the City (except to the limited extent described in this Official Statement), the State nor any of its political subdivisions is liable on the 2026 Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited
-3-
extent described in this Official Statement) or the State or any political subdivision thereof is pledged to the payment of the 2026 Bonds or interest thereon. Other than the Facilities Special Taxes, no taxes are pledged to the payment of the 2026 Bonds. The 2026 Bonds are not a general obligation of the City, but are limited obligations of the City payable solely from the Special Tax Revenues as more fully described in this Official Statement. Debt Service Reserve Fund. In order to further secure the payment of principal of and interest on the 2026 Bonds, the 2024 Bonds and any future series of 2024-Related Parity Bonds (as defined herein), a portion of the proceeds of the 2026 Bonds will be deposited into the 2024 Reserve Fund in an amount necessary to increase the amount on deposit therein to the 2024 Reserve Requirement (as defined herein). See “FINANCING PLAN – Estimated Sources and Uses of Funds” and “SECURITY FOR THE BONDS – 2024 Reserve Fund.” Redemption of 2026 Bonds before Maturity. The 2026 Bonds are subject to optional redemption, mandatory sinking fund redemption and mandatory redemption from prepaid Special Taxes. See “THE 2026 BONDS – Redemption.” Covenant to Foreclose. The City has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Facilities Special Taxes. See “SECURITY FOR THE BONDS – Covenant to Foreclose.” One Lake Project Overview. The property in Improvement Area No. 1 is part of a 358.5-acre master-planned community known as “One Lake” (the “One Lake Project”) being developed by One Lake Holding LLC, a Delaware limited liability company (the “Master Developer”). The One Lake Project comprises the property known as Planning Area 4 and Planning Area 5 of the Fairfield Train Station Specific Plan, adopted by the City Council on July 26, 2011, as amended (the “Specific Plan”). The One Lake Project is being developed in numerous phases that are anticipated to ultimately consist of 1,927 single-family and multi-family homes and a 190-unit apartment complex, with approximately 20,000 square feet of commercial/retail space. The Master Developer is not a homebuilder and is developing the property through the sale of finished lots to merchant builders. Improvement Area No. 1 comprises the majority of Planning Area 5. Planning Area 4 is within a separate community facilities district previously formed by the City and known as the City of Fairfield Community Facilities District No. 2019-1 (One Lake) (“CFD No. 2019-1”). The development of Planning Area 4 is now nearing build-out with more than 596 single-family homes owned by individuals in CFD No. 2019-1 and a 190-unit apartment complex on a 5-acre site (not part of CFD No. 2019-1). The One Lake Project contains a number of community amenities shared by Planning Area 4 and Planning Area 5, including a 10-acre lake and an 11-acre public park, and a community clubhouse and swimming pool open to One Lake Project homeowners. . Planning Area 4 is within CFD No. 2019-1, a separate community facilities district previously formed by the City, and not subject to the Facilities Special Tax securing the 2026 Bonds. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1” and “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS.”
-4-
Property Ownership and Proposed Development in Improvement Area No. 1. The property within Improvement Area No. 1 is anticipated to be improved with 932 residential units, 12.77 acres of public parks, and public street improvements. The residential units are anticipated to consist of 816 single-family detached homes and 116 single-family detached courtyard cluster homes. As of June 1, 2026, the following merchant builders (the “Merchant Builders”) and land-banking entities had acquired the following lots within Improvement Area No. 1: • Lennar Homes of California, LLC, a California limited liability company (“Lennar Homes”), had acquired 131 lots within Neighborhood O and Neighborhood R. • Tri Pointe Homes Holdings (formerly known as TRI Pointe Homes, Inc.), a Delaware corporation, or an affiliate thereof (“Tri Pointe”), had acquired 20 lots in Neighborhood L and 20 lots in Neighborhood K-1. • Century Communities of California, LLC, a Delaware limited liability company (“Century Communities”), had acquired all of the 69 lots in Neighborhood J. • KB HOME North Bay LLC, a Delaware limited liability company (“KB”), had acquired all of the 85 lots in Neighborhood C. • DRP CA4, LLC (the “K. Hovnanian Land Bank”), as assignee of K. Hovnanian Homes Northern California, Inc., a California corporation (“K. Hovnanian”), closed escrow on all of the 67 lots in Neighborhood A/B. The Master Developer will continue to market the other neighborhoods to merchant builders to be identified in the future.
-5-
The ownership and development status of Improvement Area No. 1 as of June 1, 2026, is summarized below in the following table. As of June 1, 2026, the date of value of the Appraisal (as defined below), the property in Improvement Area No. 1 consisted of 120 completed homes, 41 homes under construction, 52 parcels with building permits pulled, 191 finished lots, and 528 rough-graded lots. Property Ownership/Merchant Builder Number of Lots Development Type Development Status Lennar Homes 52 single family detached finished lots Tri Pointe 33 courtyard clusters finished lots Century Communities 61 single family detached finished lots K. Hovnanian (1) 67 single family detached finished lots KB 85 single family detached finished lots Individual Homeowners 94 single family detached and courtyard clusters completed homes Master Developer (2) 540 single family detached and courtyard clusters rough graded and finished lots 932 (1) All of these lots are currently held by the K. Hovnanian Land Bank. (2) Tri Pointe is scheduled to acquire the12 lots in neighborhood K-2 from the Master Developer on or about June 30, 2026. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1” and “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS.”
-6-
Appraisal. An appraisal of the property within Improvement Area No. 1 of the District dated June 10, 2026 (the “Appraisal”), was prepared by BBG, Inc., Sacramento, California (the “Appraiser”) in connection with the issuance of the 2026 Bonds. The purpose of the Appraisal was to estimate the fee simple market value of the properties within Improvement Area No. 1 by ownership, subject to the lien of the Facilities Special Tax, with the sum of values by ownership representing an aggregate value, as of a June 1, 2026 date of value. Subject to the assumptions and limiting conditions contained in the Appraisal, the Appraiser estimated that the taxable property within Improvement Area No. 1, as of the June 1, 2026, date of value, had the following estimated not-less-than market values: Neighborhoods Property Ownership Number of Lots Estimated Value R & O Lennar Homes 52 $21,400,000 (2) Individual homeowners 79 53,825,000 L & K-1 Tri Pointe 33 10,620,000 Individual homeowners 7 5,040,000 J Century Communities 61 13,310,000 Individual homeowners 8 5,280,000 A/B K. Hovnanian (1) 67 13,400,000 C KB 85 15,130,000 Various Master Developer 540 65,800,000 (2) Totals: 932 $203,805,000 (3) (1) All of these lots are currently held by the K. Hovnanian Land Bank. (2) Represents not-less than market value in bulk. (3) Represents not-less than aggregate value. Source: The Appraisal. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Appraised Values” and “APPENDIX I” for further information on the Appraisal. Risk Factors Associated with Purchasing the 2026 Bonds. Investment in the 2026 Bonds involves a significant degree of risk and each prospective investor should consider its financial condition and the risks involved to determine the suitability of investing in the 2026 Bonds. See “BOND OWNERS' RISKS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the 2026 Bonds.
-7-
FINANCING PLAN Facilities Financing Plan The net proceeds of the 2026 Bonds will be used to construct or acquire various facilities authorized to be financed by the District. The City anticipates that the 2026 Bond proceeds will provide approximately $____ million to finance authorized facilities. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Authorized Facilities” for a description of the authorized facilities. For the current status of the construction of Facilities in Improvement Area No. 1 to be financed in part with the net proceeds of the 2026 Bonds, see “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS – Public Infrastructure Improvements Required for the One Lake Project.” Estimated Sources and Uses of Funds The estimated proceeds from the sale of the 2026 Bonds will be deposited into the following funds established under the Fiscal Agent Agreement: SOURCES Amount Principal Amount of 2026 Bonds Plus: Original Issue Premium Less: Underwriter’s Discount Total Sources USES Deposit into Capitalized Interest Account(1) Deposit into Bond Proceeds Account of Improvement Fund Deposit into 2024 Reserve Fund(2) Deposit into Costs of Issuance Fund(3) Total Uses (1) To fund partial capitalized interest on the 2026 Bonds through March 1, 2027, (2) Represents the amount required to be deposited in the 2024 Reserve Fund to satisfy the 2024 Reserve Requirement on the Closing Date. (3) Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel, costs of printing the preliminary and final Official Statements, and the fees and expenses of the Fiscal Agent, the Municipal Advisor, the Appraiser, and the Special Tax Consultant.
-8-
THE 2026 BONDS This section generally describes the terms of the 2026 Bonds contained in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT. Capitalized terms used but not defined in this section are defined in APPENDIX C -– SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT. Authority for Issuance The 2026 Bonds are issued under the Act, the Resolution of Issuance and the Fiscal Agent Agreement. Under the Resolution of Issuance, the 2026 Bonds may be issued in a maximum principal amount of $[__________________]. General Bond Terms Dated Date, Maturity and Authorized Denominations. The 2026 Bonds will be dated their date of delivery (the “Dated Date”), which is the Closing Date, and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The 2026 Bonds will be issued in fully registered form in the Authorized Denomination of $5,000 or any integral multiple thereof. Calculation of Interest. Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. The 2026 Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2027 (each, an “Interest Payment Date”). Each 2026 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Dated Date; provided, however, that if at the time of authentication of a 2026 Bond, interest is in default thereon, such 2026 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. “Record Date” means the 15th day of the calendar month next preceding the applicable Interest Payment Date, whether or not such day is a Business Day. DTC and Book-Entry Only System. DTC will act as securities depository for the 2026 Bonds. The 2026 Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). See “– Registration of Exchange or Transfer” below for a description of such release test, and “APPENDIX D – DTC AND THE BOOK-ENTRY ONLY SYSTEM” for a description of DTC and DTC’s book-entry system.
-9-
Payments of Interest and Principal. For so long as DTC is used as depository for the 2026 Bonds, principal of, premium, if any, and interest payments on the 2026 Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the 2026 Bonds, for distribution to the beneficial owners of the 2026 Bonds in accordance with the procedures adopted by DTC. Interest on the 2026 Bonds (including the final interest payment upon maturity or earlier redemption), is payable on the applicable Interest Payment Date by check of the Fiscal Agent mailed by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer to an account located in the United States of America made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2026 Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which will continue in effect until revoked in writing, or until such 2026 Bonds are transferred to a new Owner. The principal of and any premium on the 2026 Bonds are payable in lawful money of the United States of America, with principal and any premium payable upon surrender of the 2026 Bonds at the Principal Office of the Fiscal Agent. Redemption* Optional Redemption. The 2026 Bonds maturing on or before September 1, 20__, are not subject to optional redemption prior to their stated maturity. The 2026 Bonds maturing on or after September 1, 20__, are subject to redemption, as a whole or in part at the election of the City among maturities on such basis as designated by the City and by lot within a maturity, at the option of the City, on September 1, 20__, and on any date thereafter, at a redemption price equal to 100% of the principal amount of 2026 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The 2026 Bonds maturing on September 1, 20__ and September 1, 20__ (the “Term Bonds”), are subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts all as set forth in the following tables: 2026 Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1) Sinking Payments (Maturity) * Preliminary; subject to change.
-10-
2026 Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1) Sinking Payments (Maturity) Provided, however, if some but not all of the Term Bonds of a given maturity have been redeemed through optional redemption or mandatory prepayment redemption, the total amount of all future Sinking Fund Payments relating to such maturity will be reduced by the aggregate principal amount of Term Bonds of such maturity so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis in integral multiples of $5,000 as determined by the City, notice of which will be given by the City to the Fiscal Agent. Redemption from Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the 2024 Reserve Fund under the Fiscal Agent Agreement will be used to redeem 2026 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under the Fiscal Agent Agreement, among series and maturities as provided in the Fiscal Agent Agreement, at a redemption price (expressed as a percentage of the principal amount of the 2026 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Price Any Interest Payment Date on or before March 1, ____ September 1, ____and March 1, ____ September 1, ____and March 1, ____ September 1, ____and any Interest Payment Date thereafter Purchase in Lieu of Redemption. In lieu of redemption under the Fiscal Agent Agreement, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of 2026 Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may 2026 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2026 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. Any 2026 Bonds purchased pursuant to this provision of the Fiscal Agent Agreement will be treated as outstanding 2026 Bonds under the Fiscal Agent Agreement, except to the extent otherwise directed by the Finance Director. Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories, and to the respective registered Owners of any 2026 Bonds designated for redemption, at their addresses appearing on the registration books in the Principal Office of the Fiscal Agent; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2026 Bonds. In addition, the Fiscal Agent will file each notice of redemption with the MSRB through its EMMA system. The sole remedy for failure to file such notices through EMMA shall be an action by the holders of the Bonds in mandamus for specific performance or a similar remedy to compel performance.
-11-
However, while the 2026 Bonds are subject to DTC’s book-entry system, the Fiscal Agent will be required to give notice of redemption only to DTC as provided in the letter of representations executed by the City and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the Beneficial Owners of the 2026 Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any 2026 Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption set forth in the Fiscal Agent Agreement. Conditional Redemption Notice; Rescission of Redemption. Notices of optional redemption may be conditional. The City has the right to rescind any notice of the optional redemption of 2026 Bonds by written notice to the Fiscal Agent on or prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2026 Bonds then called for redemption, and such cancellation will not constitute a default under the Fiscal Agent Agreement. The City and the Fiscal Agent have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Fiscal Agent will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Fiscal Agent Agreement. Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all the Bonds of any maturity or any given portion thereof, unless otherwise directed by the City, the Fiscal Agent will select the Bonds to be redeemed from all Bonds or such given portion thereof not previously called for redemption as directed by the City or, in the absence of direction by the City, on a pro rata basis, among series and maturities, and, so as to maintain substantially the same Debt Service profile for the Bonds as in effect prior to such redemption, and by lot within a maturity, in any manner which the Fiscal Agent in its sole discretion deems appropriate. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2026 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2026 Bonds so called shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in the notice of redemption. Issuance of Future Parity Bonds Bonded Indebtedness Limit. As a result of the issuance of the 2024 Bonds ($36,500,000 initial principal amount), the remaining unissued amount of authorized bonded indebtedness of District has decreased from $100,000,000 to $63,500,000. As a result of the issuance of the 2026 Bonds, the remaining unissued amount of authorized bonded indebtedness of the District has further decreased to $___________________. Parity Bonds. In addition to the 2026 Bonds and the 2024 Bonds, but subject to the maximum bonded indebtedness limit for Improvement Area No. 1, the City may issue one or more additional series of bonds or other indebtedness (collectively, “Parity Bonds”) payable from the Special Tax Revenues on a parity with the 2026 Bonds and the 2024 Bonds, in such principal amount as may be determined by the City, under a Supplemental Agreement entered into by the City and the Fiscal Agent. Any such Parity Bonds will constitute Bonds under the Fiscal Agent
-12-
Agreement and will be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the 2026 Bonds and the 2024 Bonds under the Fiscal Agent Agreement on a parity with all other Bonds Outstanding thereunder, except as provided in the Fiscal Agent Agreement or in a Supplemental Agreement. The City may issue such Parity Bonds if the City complies with the following conditions precedent set forth in the Fiscal Agent Agreement: (A) Compliance. Following issuance of the Parity Bonds, the City must be in compliance with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements, and issuance of the Parity Bonds may not cause the City to exceed the bonded indebtedness limit of Improvement Area No. 1. (B) Same Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds must provide that interest thereon will be payable on the Interest Payment Dates, and principal thereof will be payable on the same date in any year in which principal is payable on the 2026 Bonds (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis). (C) Separate Funds; Debt Service Reserve Fund. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts. The Supplemental Agreement providing for issuance of the Parity Bonds will provide for one of the following: (i) a deposit to the 2024 Reserve Fund in an amount necessary such that the amount deposited therein shall equal the 2024 Reserve Requirement following issuance of the Parity Bonds, (ii) a deposit to a reserve account for the Parity Bonds (and such other series of Parity Bonds identified by the City) in an amount defined in such Supplemental Agreement, as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2024 Reserve Fund and that the Owners of the Bonds covered by the 2024 Reserve Fund will have no interest in or claim to such other reserve account or (iii) no deposit to either the 2024 Reserve Fund or another reserve account as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2024 Reserve Fund or any other reserve account. (D) Improvement Area No. 1 Value. The Improvement Area No. 1 Value must be at least three times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in Improvement Area No. 1 subject to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of land within Improvement Area No. 1 (the “Other District Bonds”) equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within Improvement Area No. 1, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum assigned special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year.
-13-
(E) Unimproved Property Value. The Unimproved Property Value must be at least three times the sum of: (i) the proportionate share of the amounts described in clauses (i) and (ii) of the preceding subsection (D) determined by multiplying the aggregate of the amounts described in such clauses (i) and (ii) by a fraction, the numerator of which is the amount of Special Taxes to be levied on Unimproved Property in the Fiscal Year following the then current Fiscal Year (without regard to any capitalized interest for any Parity Bonds), and the denominator of which is the total amount of Special Taxes to be levied on property in Improvement Area No. 1 in the Fiscal Year following the then current Fiscal Year, based upon information from the most recent available Fiscal Year, plus (ii) the aggregate principal amount of any fixed assessment liens on the Unimproved Property, plus (iii) a portion of the aggregate principal amount of any Other District Bonds (as defined in the preceding subsection (D)) equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on Unimproved Property, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of real property against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum assigned special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. If 100% of the debt service on the Bonds after the issuance of the proposed Parity Bonds is expected to be derived from Special Taxes levied on Developed Property, then the provisions of this subsection (E) will not apply to the proposed issuance of Parity Bonds. For purposes of this test, “Unimproved Property” is defined as the property in Improvement Area No. 1 subject to the levy of the Special Taxes that is classified as Undeveloped Property or Final Map Property pursuant to the Rate and Method. (F) Coverage. The amount of the maximum Special Taxes that may be levied in each Fiscal Year under the Ordinance, the Agreement and any Supplemental Agreement must be no lower than (i) 110% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and (ii) 100% of the total Annual Debt Service of the then Outstanding Bonds and the proposed Parity Bonds and the amount of the levy for Administrative Expenses in the current fiscal year. In addition, the aggregate Special Tax Prepayments that could occur after the issuance of the Parity Bonds must be not less than the principal amount of the Outstanding Bonds and the proposed Parity Bonds. (G) Certificates. The City must deliver to the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of such Parity Bonds set forth in subsections (A), (B), (C), (D), (E), and (F) above have been satisfied. Limitation on Principal Amount of Parity Bonds. Pursuant to the Fiscal Agent Agreement, the City will covenant, following issuance of the 2026 Bonds, not to issue more than $[_]* initial principal amount of Parity Bonds (exclusive of any Refunding Bonds). See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Formation and Background.” Refunding Bonds. Notwithstanding the foregoing, the City may issue Refunding Bonds as Parity Bonds without the need to satisfy the requirements of clauses (D), (E), or (F) above, and, in connection therewith, the Officer’s Certificate in clause (G) above need not make reference to said clauses (D), (E), and (F). * Preliminary; subject to change.
-14-
Under the Fiscal Agent Agreement, the term “Refunding Bonds” is defined as bonds issued by the City with respect to Improvement Area No. 1, the net proceeds of which are used to refund all or a portion of the then-Outstanding Bonds; provided that the principal and interest on the Refunding Bonds to their final maturity date is less than the principal and interest on the Bonds being refunded to their final maturity date, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. Subordinate Bonds. Nothing in the Fiscal Agent Agreement prohibits the City from issuing any other bonds or otherwise incurring debt secured by a pledge of the Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement. Registration, Transfer and Exchange The following provisions regarding the exchange and transfer of the 2026 Bonds apply only during any period in which the 2026 Bonds are not subject to DTC’s book-entry system. While the 2026 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See “APPENDIX D – DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Registration. The Fiscal Agent will keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the 2026 Bonds, which will show the series number, date, amount, rate of interest and last known owner of each 2026 Bond and will at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the 2026 Bonds as provided in the Fiscal Agent Agreement. The City and the Fiscal Agent will treat the Owner of any 2026 Bond whose name appears on the Bond register as the absolute Owner of such 2026 Bond for any and all purposes, and the City and the Fiscal Agent will not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the Owner as it appears in the Bond register for any and all purposes. Registration of Exchange or Transfer. Any 2026 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 such person’s duly authorized attorney, upon surrender of such 2026 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. 2026 Bonds may be exchanged at the Principal Office of the Fiscal Agent solely for a like aggregate principal amount of 2026 Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange will be paid by the City from amounts in the Administrative Expense Fund. The Fiscal Agent will collect from the Owner requesting such transfer or exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. Whenever any 2026 Bonds are surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver new 2026 Bonds for a like aggregate principal amount. No transfers or exchanges of 2026 Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of 2026 Bonds for redemption or (ii) with respect to a 2026 Bond after such 2026 Bond has been selected for redemption; or (iii) between a Record Date and the succeeding Interest Payment Date. Prior to any transfer of the 2026 Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall provide or cause to be provided to the Fiscal Agent all
-15-
information necessary to allow the Fiscal Agent to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Internal Revenue Code Section 6045, as amended. The Fiscal Agent shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.
-16-
DEBT SERVICE SCHEDULE The following table presents the annual Debt Service on the 2026 Bonds, assuming there are no optional redemptions or special redemptions from Facilities Special Tax prepayments. Year Ending September 1 2024 Bonds Total 2026 Bonds Principal 2026 Bonds Interest [1] 2026 Bonds Total Total 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 Total: (1) A portion of the interest on the 2026 Bonds due on March 1, 2027, is anticipated to be paid from proceeds of the 2026 Bonds to be deposited in the Capitalized Interest Account.
-17-
SECURITY FOR THE BONDS This section generally describes the security for the Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX C. Capitalized terms used but not defined in the section are defined in APPENDIX C. General The 2026 Bonds, the 2024 Bonds and any Parity Bonds (collectively, the “Bonds”) are secured by a first pledge (which will be effected in the manner and to the extent provided in the Fiscal Agent Agreement) of all of the Special Tax Revenues and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account and Capitalized Interest Account therein), and, until disbursed as provided therein, in the Special Tax Fund. The Special Tax Revenues and all moneys deposited into such funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement. The 2026 Bonds, the 2024 Bonds and all future 2024-Related Parity Bonds will be secured by a first pledge (which will be effected in the manner and to the extent provided in the Fiscal Agent Agreement) of all moneys deposited in the 2024 Reserve Fund. The moneys in the 2024 Reserve Fund (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2026 Bonds, the 2024 Bonds and all future 2024-Related Parity Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the 2026 Bonds, the 2024 Bonds and all future 2024-Related Parity Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement. Under the Fiscal Agent Agreement, “2024-Related Parity Bonds” means any series of Parity Bonds for which (i) the proceeds are deposited into the 2024 Reserve Fund so that the balance therein is equal to the 2024 Reserve Requirement following issuance of such Parity Bonds and (ii) the related Supplemental Agreement specifies that the 2024 Reserve Fund shall act as a reserve for the payment of the principal of, and interest and any premium on, such series of Parity Bonds. The 2026 Bonds constitute “2024-Related Parity Bonds” under the Fiscal Agent Agreement and are secured on a parity basis with the 2024 Bonds by a first pledge of all moneys deposited in the 2024 Reserve Fund. Amounts in the Improvement Fund (and all subaccounts therein), the Administrative Expense Fund and the Costs of Issuance Fund are not pledged to the repayment of the Bonds. The facilities being financed with the proceeds of the 2026 Bonds are not pledged to the repayment of the Bonds, nor are the proceeds of any condemnation or insurance award received by the City with respect to the facilities being financed with the proceeds of the 2026 Bonds. “Special Tax Revenues” are defined in the Fiscal Agent Agreement as the proceeds of the Facilities Special Taxes received by the City, including any scheduled payments thereof and any Facilities Special Tax Prepayments, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Facilities Special Taxes to the amount of said lien and interest thereon. However, Special Tax Revenues do not include any interest in excess of the interest due on the Bonds, or any penalties collected in connection with any such foreclosure.
-18-
Limited Obligation The 2026 Bonds, the interest thereon, and any premiums payable on the redemption of any of the 2026 Bonds, are not an indebtedness of the City (except to the limited extent described in this Official Statement), the State or any of its political subdivisions, and neither the City (except to the limited extent described in this Official Statement), the State nor any of its political subdivisions is liable on the 2026 Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Official Statement) or the State or any political subdivision thereof is pledged to the payment of the 2026 Bonds or interest thereon. Other than the Facilities Special Taxes, no taxes are pledged to the payment of the 2026 Bonds. The 2026 Bonds are not a general obligation of the City, but are limited obligations of the City payable solely from the Special Tax Revenues as more fully described in this Official Statement. Facilities Special Taxes Covenant to Levy Facilities Special Taxes. Under the Fiscal Agent Agreement, the Finance Director will fix and levy the amount of Facilities Special Taxes within Improvement Area No. 1 required for the payment of principal of and interest on any outstanding Bonds of the District with respect to Improvement Area No. 1 becoming due and payable during the ensuing calendar year, including any necessary replenishment or expenditure of the 2024 Reserve Fund and any other reserve account for Parity Bonds that are not 2024-Related Parity Bonds, and an amount estimated to be sufficient to pay the Administrative Expenses, including amounts necessary to discharge any rebate obligation, during such year, taking into account the balances in the applicable funds established under the Fiscal Agent Agreement and funds in the Special Tax Fund. The Facilities Special Taxes so levied may not exceed the authorized amounts as provided in the proceedings under the Resolution of Formation. Manner of Collection. Except as set forth in the Ordinance, the Fiscal Agent Agreement provides that the Facilities Special Taxes will be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. The City is authorized to employ consultants to assist in computing the levy of the Facilities Special Taxes under the Fiscal Agent Agreement and any reconciliation of amounts levied to amounts received. The fees and expenses of such consultants and the costs and expenses of the City (including a charge for staff time) in conducting its duties under the Fiscal Agent Agreement will be an Administrative Expense. Because the Facilities Special Tax levy is limited to the maximum Facilities Special Tax rates set forth in the Amended Rate and Method, no assurance can be given that, in the event of Facilities Special Tax delinquencies, the receipts of Facilities Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay Debt Service on the Bonds. Further, under no circumstances will the Facilities Special Tax levied against any parcel of residential property for which an occupancy permit for private residential use has been issued be increased by more than 10% as a consequence of delinquency or default by the owner of any other parcel within the District. In addition, in no event shall Facilities Special Taxes be levied after the earlier of (i) the Fiscal Year prior to the Transition Year (as hereinafter defined) or (ii) Fiscal Year 2073-74. See “BOND OWNERS’ RISKS – Property Tax Delinquencies.”
-19-
Amended Rate and Method General. The District is legally authorized and has covenanted in the Fiscal Agent Agreement to cause the levy of the Facilities Special Taxes in Improvement Area No. 1 in an amount determined according to the Amended Rate and Method. The Amended Rate and Method apportions the total amount of the Facilities Special Tax to be collected among the Taxable Property in Improvement Area No. 1 as more particularly described below. The Services Special Tax may only be levied and collected after the Transition Event (as defined below), and therefore will not be collected while Bonds are outstanding. Following is a summary of the provisions of the Amended Rate and Method, which should be read in conjunction with the complete text of the Amended Rate and Method, including its attachments, which is attached as APPENDIX B. Capitalized terms used but not defined in this section have the meanings as set forth in APPENDIX B. Facilities Special Tax Requirement. Annually, at the time of levying the Facilities Special Tax within Improvement Area No. 1, the Administrator will determine the “Facilities Special Tax Requirement,” which is defined as the amount necessary in any Fiscal Year to: (i) to pay principal and interest on Bonds which are due in the calendar year which begins in such Fiscal Year, (ii) to replenish reserve funds to the extent such replenishment has not been included in a computation of the Facilities Special Tax Requirement in a previous Fiscal Year, (iii) to cure any delinquencies in the payment of principal or interest on Bonds which have occurred in the prior Fiscal Year, (iv) to pay Administrative Expenses, and (v) to pay the costs of Authorized Facilities to be funded directly from Facilities Special Tax proceeds to the extent that paying directly for such costs does not increase the Facilities Special Taxes levied on Final Map Property or Undeveloped Property. The amounts referred to in clauses (i) and (ii) above may be reduced in any Fiscal Year by (A) interest earnings on or surplus balances in funds and accounts for Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to the Fiscal Agent Agreement, (B) proceeds from the collection of penalties associated with delinquent Facilities Special Taxes, and (C) any other revenues available to pay debt service on the Bonds as determined by the Administrator. Annual Determination of Property Categories for Administration of Special Tax. Each Fiscal Year, the Administrator shall: (i) categorize each Parcel of Taxable Property as Developed Property, Final Map Property, Undeveloped Property, Taxable Owners Association Property, Taxable Public Property, Taxable Affordable Housing Unit, or Taxable Welfare Exemption Property; (ii) for Developed Property, categorize each Parcel as Single Family Attached Property, Single Family Detached Property, Multi-Family Property, or Non-Residential Property;
-20-
(iii) assign each Residential Unit to the appropriate Special Tax Category; (iv) determine if any of the Residential Units are Affordable Housing Units; (v) determine if the Transition Event occurred in the prior Fiscal Year; and (vi) determine the Facilities Special Tax Requirement or Services Special Tax Requirement for the Fiscal Year, as applicable. In addition, the Administrator shall, on an ongoing basis, monitor changes to the Tentative Map, track all Building Permits that have been issued, and review all condominium plans that have been recorded to determine if there are any proposed Land Use Changes that would affect the Expected Maximum Facilities Special Tax Revenues. If the Expected Maximum Facilities Special Tax Revenues will be revised pursuant to a proposed Land Use Change, the Administrator shall apply the steps set forth in Section D of the Amended Rate and Method (see “– Changes to Maximum Facilities Special Tax” below). In any Fiscal Year, if it is determined that: (i) a parcel map for property in Improvement Area No. 1 was recorded after January 1 of the prior Fiscal Year (or any other date after which the Assessor will not incorporate the newly-created Parcels into the then current tax roll), (ii) because of the date the parcel map was recorded, the Assessor does not yet recognize the new Parcels created by the parcel map, and (iii) one or more of the newly-created Parcels is in a different Development Class than other Parcels created by the subdivision, the Administrator shall calculate the Special Tax for the property affected by recordation of the parcel map by determining the Special Taxes that apply separately to the property within each Development Class, then applying the sum of the individual Special Taxes to the Parcel that was subdivided by recordation of the parcel map. The following terms are defined in the Amended Rate and Method as follows: “Developed Property” means, in any Fiscal Year, all Parcels of Taxable Property that are not Taxable Owners Association Property, Taxable Public Property, or Taxable Welfare Exemption Property for which a Building Permit for new construction was issued prior to June 30 of the preceding Fiscal Year. Taxable Affordable Housing Units on Parcels of Developed Property shall be taxed, if required, pursuant to the Amended Rate and Method. “Final Map Property” means, in any Fiscal Year, all property for which a Final Map had recorded prior to June 30 of the preceding Fiscal Year and which has not yet become Developed Property, not including Taxable Owners Association Property, Taxable Welfare Exemption Property, or Taxable Public Property. “Multi-Family Property” means, in any Fiscal Year, all Parcels of Developed Property for which Building Permits were issued for construction of a residential structure with five or more Residential Units that are offered for rent to the general public and cannot be purchased by individual homebuyers. “Non-Residential Property” means, in any Fiscal Year, all Parcels of Developed Property that are not Single Family Attached Property, Single Family Detached Property, Multi-Family Property, Taxable Owners Association Property, Taxable Public Property, or Taxable Welfare Exemption Property.
-21-
“Single Family Attached Property” means, in any Fiscal Year, all Parcels of Developed Property for which a Building Permit was issued for construction of a residential structure consisting of two or more Residential Units that share common walls, have separate Assessor’s Parcel numbers assigned to them (except for a duplex unit, which may share a Parcel with another duplex unit), and may be purchased by individual homebuyers (which shall still be the case even if the Residential Units are purchased and subsequently offered for rent by the owner), including such residential structures that meet the statutory definition of a condominium contained in Civil Code Section 1351. “Single Family Detached Property” means, in any Fiscal Year, all Parcels of Developed Property for which Building Permits were issued for construction of a Residential Unit that does not share a common wall with another Residential Unit. “Taxable Owners Association Property” means, in any Fiscal Year after the First Bond Sale, any Parcel of Owners Association Property that satisfies all three of the following conditions: (i) the Parcel had not been Owners Association Property on the date of the First Bond Sale; (ii) based on reference to Attachments 1 and 2 to the Amended Rate and Method (as may be updated pursuant to Section D of the Amended Rate and Method), the Parcel was not anticipated to be Owners Association Property based on the Expected Land Uses, as determined by the Administrator; and (iii) if the Parcel were to be exempt from the Facilities Special Tax because it has become Owners Association Property, the Expected Maximum Facilities Special Tax Revenues would be reduced to a point at which Required Coverage could not be maintained. “Taxable Property” means all Parcels within Improvement Area No. 1 that are not exempt from the Special Tax pursuant to law or Section G of the Amended Rate and Method. “Taxable Affordable Housing Unit” means in any Fiscal Year after the First Bond Sale, any Residential Unit that satisfies both of the following conditions: (i) based on reference to Attachments 1 and 2 (as may be updated pursuant to Section D of the Amended Rate and Method), the Residential Unit was not anticipated to be an Affordable Housing Unit based on the Expected Land Uses, as determined by the Administrator; and (ii) if the Parcel were to be exempt from the Facilities Special Tax because it has become an Affordable Housing Unit, the Expected Maximum Facilities Special Tax Revenues would be reduced to a point at which Required Coverage could not be maintained. “Taxable Public Property” means in any Fiscal Year after the First Bond Sale, any Parcel of Public Property that satisfies all three of the following conditions: (i) the Parcel had not been Public Property on the date of issuance of the First Bond Sale; (ii) based on reference to Attachments 1 and 2 to the Amended Rate and Method (as may be updated pursuant to Section D of the Amended Rate and Method), the Parcel was not anticipated to be Public Property based on the Expected Land Uses, as determined by the Administrator; and (iii) if the Parcel were to be exempt from the Facilities Special Tax because it has become Public Property, the Expected Maximum Facilities Special Tax Revenues would be reduced to a point at which Required Coverage could not be maintained. “Taxable Welfare Exemption Property” means in any Fiscal Year after the First Bond Sale, any Parcel of Welfare Exemption Property that satisfies all three of the following conditions: (i) the Parcel had not been Welfare Exemption Property on the date of issuance of the First Bond Sale; (ii) based on reference to Attachments 1 and 2 (as may be updated pursuant to Section D of the Amended Rate and Method), the Parcel was not
-22-
anticipated to be Welfare Exemption Property based on the Expected Land Uses, as determined by the Administrator; and (iii) if the Parcel were to be exempt from the Special Tax because it has become Welfare Exemption Property, the Expected Maximum Facilities Special Tax Revenues would be reduced to a point at which Required Coverage could not be maintained. “Transition Event” shall be deemed to have occurred when the Administrator determines that the following events have occurred: (i) all Bonds secured by the levy and collection of Facilities Special Taxes have been fully repaid, or there are sufficient revenues available to fully repay the Bonds in funds and accounts that, pursuant to the Fiscal Agent Agreement, will require such revenues to be applied to repay the Bonds; (ii) all Administrative Expenses from prior Fiscal Years have been paid or reimbursed to the City; and (iii) there are no other Authorized Facilities that the City intends to fund with Bonds and Facilities Special Taxes. “Transition Year” means the first Fiscal Year in which the Administrator determines that the Transition Event occurred in the prior Fiscal Year. “Undeveloped Property” means, in any Fiscal Year, all Parcels of Taxable Property that are not Final Map Property, Developed Property, Taxable Owners Association Property, Taxable Public Property, or Taxable Welfare Exemption Property. Maximum Facilities Special Tax. Developed Property. The Maximum Facilities Special Tax for Parcels of Single Family Attached Property, Single Family Detached Property, Multi-Family Property, and Non-Residential Property shall be the greater of (i) the Target Facilities Special Tax described in the table below, or (ii) the Maximum Facilities Special Tax determined pursuant to Section D of the Amended Rate and Method (see “– Changes to Maximum Facilities Special Tax” below). Target Facilities Special Tax Developed Property Facilities Special Tax Category
Target Facilities Special Tax Before Transition Year (As of Fiscal Year 2026-27)* Per Residential Unit Single Family Detached Property Greater than or Equal to 3,000 Square Feet 2,800 – 2,999 Square Feet 2,600 – 2,799 Square Feet 2,400 – 2,599 Square Feet 2,200 – 2,399 Square Feet Less than 2,200 Square Feet $5,967 $5,450 $5,007 $4,749 $4,564 $4,232 Single Family Attached Property Greater than or Equal to 1,800 Square Feet Less than 1,800 Square Feet $4,177 $3,992 Per Acre Multi-Family Property $66,518 Non-Residential Property $66,518 * On each July 1, each Target Facilities Special Tax shown above shall be increased by an amount equal to 2.0% of the amount in effect for the prior Fiscal Year.
-23-
See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Projected Special Tax Revenues” for a summary of the Fiscal Year 2026-27 Target Facilities Special Tax and the Fiscal Year 2026-27 expected maximum Facilities Special Tax revenues based on expected land uses at buildout. Once a Facilities Special Tax has been levied on a Parcel of Developed Property, the Maximum Facilities Special Tax applicable to that Parcel shall not be reduced in future Fiscal Years regardless of changes in land use on the Parcel, except (i) in the event of a partial prepayment pursuant to Section H of the Amended Rate and Method, and (ii) pursuant to Section D of the Amended Rate and Method. Notwithstanding the foregoing, the actual Facilities Special Tax levied on the Parcel in any Fiscal Year may be less than the Maximum Facilities Special Tax if a lower Facilities Special Tax is calculated pursuant to Step 1 in Section E of the Amended Rate and Method, as described under “– Method of Levy of the Facilities Special Tax” below. Final Map Property, Undeveloped Property, Taxable Owners Association Property, Taxable Public Property, and Taxable Welfare Exemption Property. Prior to the Transition Year, the Maximum Facilities Special Tax for Final Map Property, Undeveloped Property, Taxable Owners Association Property, Taxable Public Property, and Taxable Welfare Exemption Property is $66,518 per Acre for Fiscal Year 2026-27, which shall be increased on each July 1 by an amount equal to 2.0% of the amount in effect for the prior Fiscal Year. In the Transition Year and each Fiscal Year thereafter, no Facilities Special Tax shall be levied on Final Map Property, Undeveloped Property, Taxable Owners Association Property, Taxable Public Property, or Taxable Welfare Exemption Property unless there are delinquent Facilities Special Taxes on a Parcel, in which case such delinquent Facilities Special Taxes can continue to be levied against the Parcel until they are collected. Changes to Maximum Facilities Special Tax. 1. Land Use Changes. The Expected Maximum Facilities Special Tax Revenues shown in Attachment 2 to the Amended Rate and Method were originally calculated based on the Expected Land Uses at the CFD Update. Attachment 2 to the Amended Rate and Method is subject to modification upon the occurrence of Land Use Changes, as described in the Amended Rate and Method. The Administrator shall review all Land Use Changes and compare the revised land uses to the Expected Land Uses to evaluate the impact on the Expected Maximum Facilities Special Tax Revenues. See APPENDIX B. 2. Increase in the Number of Affordable Housing Units. Attachment 2 to the Amended Rate and Method is subject to modification if there is an increase in the number of Affordable Housing Units expected within Improvement Area No. 1, as described in the Amended Rate and Method. See APPENDIX B. It should noted that no Affordable Housing Unit are currently planned for Improvement Area No. 1. Method of Levy of the Facilities Special Tax. Each Fiscal Year, the Administrator shall determine the Facilities Special Tax Requirement and levy the Facilities Special Tax on all Parcels of Taxable Property as follows: Step 1: The Facilities Special Tax shall be levied Proportionately on each Parcel of Developed Property up to 100% of the Maximum Facilities Special Tax for each Parcel of Developed Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement prior to applying any available Capitalized Interest.
-24-
Step 2: If additional revenue is needed after Step 1 and after applying Capitalized Interest to the Facilities Special Tax Requirement, the Facilities Special Tax shall be levied Proportionately on each Parcel of Final Map Property up to 100% of the Maximum Facilities Special Tax for each Parcel of Final Map Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Step 3: If additional revenue is needed after Step 2, the Facilities Special Tax shall be levied Proportionately on each Parcel of Undeveloped Property up to 100% of the Maximum Facilities Special Tax for Undeveloped Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Step 4: If additional revenue is needed after Step 3, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable Welfare Exemption Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable Welfare Exemption Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Step 5: If additional revenue is needed after Step 4, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable Owners Association Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable Owners Association Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Step 6: If additional revenue is needed after Step 5, the Facilities Special Tax shall be levied Proportionately on each Taxable Affordable Housing Unit, up to 100% of the Maximum Facilities Special Tax for each Taxable Affordable Housing Unit for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Step 7: If additional revenue is needed after Step 6, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable Public Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable Public Property for such Fiscal Year until the amount levied is equal to the Facilities Special Tax Requirement. Manner of Collection; Final Year of Levy. The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that partial prepayments of the Facilities Special Tax are permitted as set forth in Section H of the Amended Rate and Method, and provided further that the City may directly bill the Special Tax, may collect the Special Tax at a different time or in a different manner, and may collect delinquent Special Taxes through foreclosure or other available methods. The Facilities Special Tax shall be levied and collected through and including the earlier of (i) the Fiscal Year prior to the Transition Year or (ii) Fiscal Year 2073-74. Under no circumstances may the Facilities Special Tax on a Parcel in private residential use be increased in any Fiscal Year as a consequence of delinquency or default in payment of the Facilities Special Tax levied on another Parcel or Parcels 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. Exemptions. Notwithstanding any other provision of the Amended Rate and Method, no Special Tax shall be levied on the following:
-25-
(i) Owners Association Property, Public Property, or Welfare Exemption Property except Taxable Owners Association Property, Taxable Public Property, and Taxable Welfare Exemption Property, as defined in the Amended Rate and Method; (ii) Affordable Housing Units except Taxable Affordable Housing Units; and (iii) Parcels that are: (a) designated as permanent open space or common space on which no structure is permitted to be constructed, (b) owned by a public utility for an unmanned facility, or (c) subject to an easement that precludes any other use on the Parcels. Notwithstanding the foregoing, if a Maximum Facilities Special Tax was assigned to a Parcel, and the entire Parcel meets the criteria in (a), (b) or (c) above, the Parcel shall remain subject to the levy of the Facilities Special Tax, unless the First Bond Sale has not occurred, or the Administrator determines that, if such Parcel becomes exempt from the Facilities Special Tax, the corresponding reduction in the Expected Maximum Facilities Special Tax Revenues would not reduce debt service coverage on outstanding Bonds below the Required Coverage. In either case, such property shall be categorized as Public Property, and the Administrator shall recalculate the Expected Maximum Facilities Special Tax Revenues to reflect the corresponding loss in revenues. Prepayment of Facilities Special Tax. A property owner may prepay up to 75% of the Facilities Special Tax obligation applicable to a Parcel, provided that a prepayment may be made only if there are no delinquent Facilities Special Taxes with respect to such Parcel at the time of prepayment. An owner of a Parcel intending to prepay a portion of the Facilities Special Tax obligation shall provide the City with (i) written notice of intent to prepay, which shall identify the percentage of the Maximum Facilities Special Tax that is to be prepaid, (ii) payment of fees established by the City to process the prepayment request, and (iii) written evidence that there are no delinquent Facilities Special Taxes against the Parcel. Within 30 days of receipt of such written notice, the City or its designee shall notify such owner of the prepayment amount for such Parcel. Prepayment must be made not less than 50 days prior to any redemption date for Bonds to be redeemed with the proceeds of such prepaid Facilities Special Taxes. Under no circumstance shall a prepayment be allowed that would reduce debt service coverage below the Required Coverage. The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Facilities Amount and other costs, all as specified in APPENDIX B. Covenant to Foreclose Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that Facilities Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property, except as provided in the special covenant for foreclosure described below, the Ordinance and in the Act. Under these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County. Foreclosure Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in the payment of the Facilities Special Tax, the City may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale.
-26-
While judicial foreclosure is not mandatory under the Act, the City has covenanted in the Fiscal Agent Agreement that on or about March 30 and July 30 of each Fiscal Year, the Finance Director will: (1) compare the amount of Facilities Special Taxes previously levied in Improvement Area No. 1 to the amount of Special Tax Revenues received by the City, and (2) because it is the County’s practice under the Guidelines (as hereinafter defined) to apportion Facilities Special Taxes to the City as if the Facilities Special Taxes were covered by the Teeter Plan (as hereinafter defined) even though Facilities Special Taxes are not covered by the County’s Teeter Plan as further described below (see “ – Facilities Special Taxes Are Not Covered By Teeter Plan”), the City will make a good faith effort at the time of each apportionment of Facilities Special Taxes to obtain information from the County as to the Facilities Special Tax delinquencies represented by such apportionment. Thereafter, if delinquencies have occurred, the City will proceed as follows: Individual Parcel Delinquencies. If the Finance Director determines that any single parcel subject to the Facilities Special Tax in Improvement Area No. 1 is delinquent in the payment of four or more installments of Facilities Special Taxes, then the Finance Director will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the City within 90 days of such determination. Notwithstanding the foregoing, the City may defer any such actions with respect to a delinquent parcel if (1) the Facilities Special Taxes are covered by the County’s Teeter Plan, or an equivalent procedure, but only to the extent that the City cannot be required to repay the County for amounts apportioned by the County to the City that represent delinquent Facilities Special Taxes, (2) the amount in the 2024 Reserve Fund is at least equal to the 2024 Reserve Requirement, (3) the amount in the reserve account for any Parity Bonds that are not 2024-Related Parity Bonds is at least equal to the required amount and (4) the subject parcel is not delinquent with respect to more than $20,000 of Facilities Special Taxes. Aggregate Delinquencies. If the Finance Director determines that (i) the total amount of delinquent Facilities Special Tax for the prior Fiscal Year for the entire Improvement Area No. 1 (including the total of delinquencies under the two paragraphs above), exceeds 5% of the total Facilities Special Tax due and payable for the prior Fiscal Year, or (ii) there are 10 or fewer owners of real property within Improvement Area No. 1, determined by reference to the latest available secured property tax roll of the County, the Finance Director shall notify or cause to be notified property owners who are then delinquent in the payment of Facilities Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and shall commence foreclosure proceedings within 90 days of such determination against each parcel of land in Improvement Area No. 1 with a Facilities Special Tax delinquency. Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Facilities Special Tax
-27-
installment. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale. Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post-judgment interest and authorized costs, unless the consent of the owners of 75% of the Outstanding Bonds is obtained. However, under Section 53356.5 of the Act, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Facilities Special Taxes. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale. Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the City to foreclose the lien of delinquent unpaid Facilities Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the “FDIC”). See “BOND OWNERS’ RISKS – Bankruptcy Delays.” Facilities Special Taxes Are Not Covered By Teeter Plan. The County has adopted written guidelines for its Alternative Method of Tax Apportionment (“Teeter Plan”), as set forth in the “County of Solano Guideline - Solano County Teeter Program” dated March 25, 2004 (the “Guidelines”). Under the Guidelines, (i) Facilities Special Taxes are not covered by the County’s Teeter Plan, (ii) notwithstanding that Facilities Special Taxes are not covered by the County’s Teeter Plan, for administrative convenience, the County will apportion Facilities Special Taxes to the City as if the Facilities Special Taxes were covered by the Teeter Plan, and (iii) the County may demand the repayment by the City of apportionments that represent delinquent Facilities Special Taxes when the County determines that the collection of the delinquent Facilities Special Taxes is unlikely. As a result, the City is permitted under the Fiscal Agent Agreement to use Facilities Special Taxes at any time to repay the County for amounts apportioned by the County to the City that represent delinquent Facilities Special Taxes if failure to do so will cause the County to withhold property tax revenues (other than Facilities Special Taxes) that would otherwise be apportioned to the City; provided, however, that in the event the County asks the City to repay the County for the apportionment of amounts that represent delinquent Facilities Special Taxes, the City will make a good faith effort to negotiate a payment plan with the County that will not require the City to repay the County with Facilities Special Taxes if doing so will result in there being insufficient Special Tax Revenues to pay debt service on the Bonds when due. Therefore, the District’s receipt of Facilities Special Taxes will be impacted by delinquencies in payment, as well as by the collection of interest and penalties on past delinquencies in the future. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Potential Consequences of Facilities Special Tax Delinquencies” and “BOND OWNERS’ RISKS – Property Tax Delinquencies.” Special Tax Fund Deposits. Under the Fiscal Agent Agreement, the Special Tax Fund is established as a separate fund to be held by the Fiscal Agent, to the credit of which the Fiscal Agent will deposit amounts received from or on behalf of the City consisting of Special Tax Revenues and amounts transferred from the Administrative Expense Fund and the Bond Fund. The City will promptly remit
-28-
any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund. Notwithstanding the foregoing, (i) Special Tax Revenues in an amount not to exceed the amount included in the Special Tax levy for such Fiscal Year for Administrative Expenses shall be separately identified by the Finance Director and shall be deposited by the Fiscal Agent in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Finance Director and shall be disposed of by the Fiscal Agent first, for transfer to the Bond Fund to pay any past due Debt Service on the Bonds; second, without preference or priority, for transfer to the 2024 Reserve Fund to the extent needed to increase the amount then on deposit in the 2024 Reserve Fund up to the then 2024 Reserve Requirement and for transfer to the reserve account for any Parity Bonds that are not 2024-Related Parity Bonds to the extent needed to increase the amount then on deposit in such reserve account up to the amount then required to be deposited therein (and in the event the collection of delinquencies in payment of Facilities Special Taxes is not sufficient for the purposes of this clause, such amounts shall be applied to the 2024 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds); and third, to be held in the Special Tax Fund for use as described in “– Disbursements” below; and (iii) any proceeds of Facilities Special Tax Prepayments will be separately identified by the Finance Director and will be deposited by the Fiscal Agent as follows (as directed in writing by the Finance Director): (a) that portion of any Facilities Special Tax Prepayment constituting a prepayment of construction costs (which otherwise could have been included in the proceeds of Parity Bonds) will be deposited by the Fiscal Agent to the Improvement Fund and (b) the remaining Facilities Special Tax Prepayment shall be deposited by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to the Fiscal Agent Agreement. Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the City and Owners of the Bonds, will be disbursed as provided below and, pending disbursement, will be subject to a lien in favor of the Owners of the Bonds. Disbursements. On the fifth Business Day prior to each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority: (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the 2024 Reserve Fund and any reserve account for Parity Bonds that are not 2024-Related Parity Bonds, the 2024 Capitalized Interest Account and the Special Tax Prepayments Account to the Bond Fund such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date or redemption date and any past
-29-
due principal or interest on the Bonds not theretofore paid from a transfer described in the Fiscal Agent Agreement, and (ii) without preference or priority (a) to the 2024 Reserve Fund an amount, taking into account amounts then on deposit in the 2024 Reserve Fund, such that the amount in the 2024 Reserve Fund is equal to the 2024 Reserve Requirement, and (b) to the reserve account for any Parity Bonds that are not 2024-Related Parity Bonds, taking into account amounts then on deposit in the such reserve account, such that the amount in such reserve account is equal to the amount required to be on deposit therein (and in the event that amounts in the Special Tax Fund are not sufficient for the purposes of this paragraph, such amounts will be applied to the 2024 Reserve Fund and any other reserve accounts ratably based on the then Outstanding principal amount of the Bonds). (iii) between each September 2 and the immediately succeeding December 31, the City may direct the Fiscal Agent to transfer any of the moneys remaining in the Special Tax Fund to (A) the Remainder Taxes Account or (B) the Administrative Expense Fund. As described above, because it is the County’s practice under the Guidelines to apportion Facilities Special Taxes to the City as if the Facilities Special Taxes were covered by the Teeter Plan even though Facilities Special Taxes are not covered by the County’s Teeter Plan, the City may use Facilities Special Taxes at any time to repay the County for amounts apportioned by the County to the City that represent delinquent Facilities Special Taxes if failure to do so will cause the County to withhold property tax revenues (other than Facilities Special Taxes) that would otherwise be apportioned to the City. See “– Facilities Special Taxes Are Not Covered By Teeter Plan.” Bond Fund Deposits. The Fiscal Agent will hold the moneys in the Bond Fund for the benefit of the City and the Owners of the Bonds, and will disburse those funds for the payment of the principal of, and interest and any premium on, the Bonds as described below. Capitalized Interest Account. Under the Fiscal Agent Agreement, within the Bond Fund there is established a separate account designated as the “Capitalized Interest Account” to be held in trust by the Fiscal Agent for the benefit of the City and the Owners of the 2026 Bonds into which a portion of the proceeds of the 2026 Bonds will be deposited on the Closing Date. Amounts on deposit in the Capitalized Interest Account will be used and withdrawn by the Fiscal Agent solely for the payment of a portion of the interest on the Bonds on March 1, 2027. When the amount in the Capitalized Interest Account is fully expended for the payment of interest, the account will be closed. Special Tax Prepayments Account. There is also created in the Bond Fund a separate account to be held by the Fiscal Agent, designated the “Special Tax Prepayments Account,” to the credit of which deposits will be made from Facilities Special Tax Prepayments as provided in the Fiscal Agent Agreement.
-30-
Disbursements. At least 10 Business Days before each Interest Payment Date, the Fiscal Agent will notify the Finance Director in writing as to the principal and premium, if any, and interest due on the Bonds on the next Interest Payment Date (whether as a result of scheduled principal of and interest on the Bonds, optional redemption of the Bonds or a mandatory sinking fund redemption). On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, due and payable on such Interest Payment Date on the Bonds. Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer pursuant to the Fiscal Agent Agreement will be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. At least 5 Business Days prior to each Interest Payment Date, the Fiscal Agent will determine if the amounts then on deposit in the Bond Fund are sufficient to pay the Debt Service due on the Bonds on the next Interest Payment Date. In the event that amounts in the Bond Fund are insufficient for such purpose, the Fiscal Agent promptly will notify the Finance Director by telephone (and confirm in writing) of the amount of the insufficiency. In the event that amounts in the Bond Fund are insufficient for the purpose set forth in the preceding paragraph with respect to any Interest Payment Date, the Fiscal Agent will do the following: (i) Withdraw from the 2024 Reserve Fund, in accordance with the provisions of the Fiscal Agent Agreement, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to the 2026 Bonds and any other 2024-Related Parity Bonds. Amounts so withdrawn from the 2024 Reserve Fund will be deposited in the Bond Fund. (ii) Withdraw from the reserve funds, if any, established under a Supplemental Agreement related to Parity Bonds that are not 2024-Related Parity Bonds, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to such Parity Bonds. Amounts so withdrawn from any such reserve fund will be deposited in the Bond Fund. If, after the foregoing transfers and application of such funds for their intended purposes, there are insufficient funds in the Bond Fund to make the payments provided for in the second sentence of the first paragraph under “Bond Fund – Disbursements” above, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, if any, and then to payment of principal due on the bonds by reason of sinking payments. Each such payment will be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, if there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds, subject to the restrictions on the uses of any funds as set forth in the Fiscal Agent Agreement. Any sinking payment not made as scheduled will be added to the sinking payment to be made on the next sinking payment date. Any failure by the Fiscal Agent to provide the notices required by the Fiscal Agent Agreement will not alter the obligation of the City to make the scheduled payments from amounts in the Bond Fund. Disbursements from the Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under the Fiscal Agent Agreement, and notice to the Fiscal Agent can timely be given under the Fiscal Agent Agreement, and will be used (together with any amounts transferred pursuant to the Fiscal Agent Agreement) to redeem Bonds on the redemption date selected in accordance the Fiscal Agent Agreement.
-31-
2024 Reserve Fund General. In order to further secure the payment of principal of and interest on the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds issued in the future, a portion of the proceeds of the 2026 Bonds will be deposited into the 2024 Reserve Fund in an amount necessary to increase the amount on deposit therein to the “2024 Reserve Requirement” (as defined below). See “FINANCING PLAN – Estimated Sources and Uses of Funds.” 2024 Reserve Requirement. The “2024 Reserve Requirement” is defined in the Fiscal Agent Agreement as the amount as of any date of calculation equal to the least of (a) Maximum Annual Debt Service on the 2026 Bonds, the 2024 Bonds and any future 2024-Related Parity Bonds, if any, (b) 125% of average Annual Debt Service on the 2026 Bonds, the 2024 Bonds and any 2024-Related Parity Bonds, and (c) 10% of the outstanding principal of the 2026 Bonds, the 2024 Bonds and any 2024-Related Parity Bonds; provided, however: (A) that with respect to the calculation of clause (c), the issue price of the 2026 Bonds, the 2024 Bonds or any 2024-Related Parity Bonds excluding accrued interest will be used rather than the outstanding principal amount, if (i) the net original issue discount or premium of the 2026 Bonds, the 2024 Bonds or any 2024-Related Parity Bonds was less than 98% or more than 102% of the original principal amount of the 2026 Bonds, the 2024 Bonds or any 2024-Related Parity Bonds and (ii) using the issue price would produce a lower result than using the outstanding principal amount; (B) that in no event shall the amount calculated exceed the amount on deposit in the 2024 Reserve Fund on the date of issuance of the most recently issued series of 2024-Related Parity Bonds (if any 2024-Related Parity Bonds are covered by the 2024 Reserve Fund) except in connection with any increase associated with the issuance of 2024-Related Parity Bonds; and (C) that in no event will the amount required to be deposited into the 2024 Reserve Fund in connection with the issuance of a series of 2024-Related Parity Bonds exceed the maximum amount under the Tax Code that can be financed with tax-exempt bonds and invested an unrestricted yield. Use of 2024 Reserve Fund. Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in the 2024 Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds or, in accordance with the provisions of the Fiscal Agent Agreement, for the purpose of redeeming the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds from the Bond Fund. Whenever a transfer is made from the 2024 Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund for payment of the principal of, and interest and any premium on, the 2026 Bonds, the 2024 Bonds and any 2024-Related Parity Bonds, the Fiscal Agent will provide written notice thereof to the Finance Director, specifying the amount withdrawn. Qualified Reserve Fund Credit Instruments. The City has the right at any time to direct the Fiscal Agent to release funds from the 2024 Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (i) a Qualified Reserve Account Credit Instrument (as defined in the Fiscal Agent Agreement), and (ii) an opinion of Bond Counsel stating that neither the release of such funds nor the acceptance of such Qualified Reserve Account Credit Instrument will cause interest on the 2026 Bonds, the 2024 Bonds or any other 2024-Related Parity Bonds the interest on which
-32-
is excluded from gross income of the owners thereof for federal income tax purposes to become includable in gross income for purposes of federal income taxation. The City will have no obligation to replace a Qualified Reserve Account Credit Instrument or to fund the 2024 Reserve Fund with cash if, at any time that the 2026 Bonds, the 2024 Bonds or any other 2024-Related Parity Bonds are Outstanding, amounts are not available to be drawn upon under the Qualified Reserve Account Credit Instrument. The City and the Fiscal Agent will comply with the terms of the Qualified Reserve Account Credit Instrument as will be required to receive payments thereunder in the event and to the extent required under the Fiscal Agent Agreement. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” for a complete description of the timing, purpose and manner of disbursements from the 2024 Reserve Fund. Investment of Moneys in Funds Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, which in any event by their terms mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT”.
-33-
THE DISTRICT AND IMPROVEMENT AREA NO. 1 Formation and Background Formation. The District was established by the City Council under the Act, following a noticed public hearing, pursuant to Resolution No. 2023-31 (the “Resolution of Formation”) on February 21, 2023. On the same date, an election was held in which the qualified electors within Improvement Area No. 1 approved a ballot proposition authorizing the City to incur bonded indebtedness for Improvement Area No. 1 of the District of up to $90,000,000 (as subsequently increased to $100,000,000 pursuant to the change proceedings described below) to finance the acquisition and construction of the authorized Facilities, to levy the Special Taxes, and to establish an appropriations limit for Improvement Area No. 1 of the District. The Master Developer originally intended to annex Planning Area 5 into CFD No. 2019-1, but due to changing market conditions and changes to the Development Agreement (as defined herein), the Master Developer asked the City to form the District and the Future Annexation Area (defined below) over the Planning Area 5 property. The District is intended to continue the financing of the facilities and services for the One Lake Project as a whole. The District is authorized to finance the construction of authorized Facilities. See “FINANCING PLAN – Facilities Financing Plan.” The Amended Rate and Method by which Special Taxes may be levied is attached as APPENDIX B. See “SECURITY FOR THE BONDS – Amended Rate and Method” for a summary of the Amended Rate and Method. Future Annexation Area. The District was formed to include Improvement Area No. 1 and “City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (Future Annexation Area)” (the “Future Annexation Area”). The Future Annexation Area enables properties to annex into the District with fewer procedural requirements than would otherwise be required under the Act. Property owners in the Future Annexation Area annex into the District by executing a unanimous approval. Under the Act, a unanimous approval constitutes the vote of a qualified elector in favor of the matters addressed in the unanimous approval for purposes of the California Constitution. Property within the Future Annexation Area may be annexed into the District as improvement areas to be designated in the future separate and apart from Improvement Area No. 1 (such future improvement areas, the “Future Improvement Areas”), or into Improvement Area No. 1. For Future Improvement Areas, a different rate and method may be adopted if the annexed territory is designated as a separate improvement area. No supplements to the Amended Rate and Method in connection with the annexation of territory to Improvement Area No. 1 (if any), and no new rate and method for any Future Improvement Area, may cause an increase in the maximum Special Tax rate in the territory that was in the District prior to the annexation (including Improvement Area No. 1). The property in the Future Annexation Area consists of Neighborhood P and Neighborhood Q, and is currently designated for potential development of up to 172 attached multifamily units. No assurance can be given as to whether this will be annexed into the District or Improvement Area No. 1 in the future.
-34-
The 2026 Bonds are currently secured only by the Facilities Special Taxes levied within Improvement Area No. 1. The property in the Future Annexation Area is not currently subject to the lien of the Facilities Special Tax and will not be subject to the Facilities Special Tax unless such property is annexed to Improvement Area No. 1 in the future. Change Proceedings. On October 15, 2024, the City completed change proceedings for Improvement Area No. 1 in order to (i) amend the Original Rate and Method and adopt the Amended Rate and Method to increase the rate of the Special Taxes, (ii) increase the bonded indebtedness limit for Improvement Area No. 1 from $90,000,000 to $100,000,000, and (iii) increase the bonded indebtedness limit for the remaining property in the District from $15,000,000 to $20,000,000. Description and Location One Lake Project. The property in Improvement Area No. 1 is part of the larger One Lake Project, a 358.5-acre master-planned community being developed by the Master Developer. The One Lake Project is located in the northeastern area of the City along the north side of Vanden Road at One Lake Drive. Improvement Area No. 1 is the most northern portion of the One Lake Project. The One Lake Project is being developed in numerous phases that are anticipated to ultimately consist of 1,927 single-family and multi-family homes and a 190-unit apartment complex, with approximately 20,000 square feet of commercial/retail space. The One Lake Project comprises the property known as Planning Area 4 and Planning Area 5 of the Specific Plan. Improvement Area No. 1 comprises the majority of Planning Area 5. Planning Area 4 is within CFD No. 2019-1, a separate community facilities district previously formed by the City, and not subject to the Facilities Special Tax securing the 2026 Bonds. Improvement Area No. 1. The property within Improvement Area No. 1 is anticipated to be improved with 932 residential units, 12.77 acres of public parks, and public street improvements. The residential units are anticipated to consist of 816 single-family detached homes and 116 single-family detached courtyard cluster homes. As of June 1, 2026, the date of value of the Appraisal (as defined below), the property in Improvement Area No. 1 consisted 120 completed homes, 41 homes under construction, 52 parcels with building permits pulled, 191 finished lots, and 528 rough-graded lots . See “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS” for additional information regarding the property ownership and development status within Improvement Area No. 1, the One Lake Project, and the Specific Plan. Boundary Map. The boundary map showing the boundaries of Improvement Area No. 1 is attached as APPENDIX J. See “APPENDIX A – GENERAL INFORMATION ABOUT THE CITY OF FAIRFIELD AND SOLANO COUNTY” for demographic and other information regarding the area in and around the District. Authorized Facilities General. Under the Resolution of Formation, the District (and each improvement area therein) is authorized to finance all or a portion of the costs of acquisition, construction and improvement of facilities permitted under the Act and that are required as conditions of
-35-
development of property in the One Lake Project. The facilities authorized to be financed (the “Facilities”) include, among others, the following: • Offsite sewer improvements. • Offsite potable water improvements and facilities, including but not limited to pump stations, buildings, water lines, and storage facilities. • Offsite non-potable water improvements and facilities, including but not limited to pump stations, water lines, and street work. • Storm drain/non-potable water pump station improvements, buildings, and facilities. • Backbone street and road improvements and facilities, including sewer, water, storm drain, street lights signage and striping, traffic signals, medians, curb, gutter, City fiber lines, pavement and bridges. • ln-tract Improvements including sewer, water, storm drain, street lights signage and striping, curb, gutter, and pavement. • Storm drain basins, bio-retention and storm drain improvements to meet storm management needs, including maintenance roads, fencing and other improvements. • Fire station that will serve property in the One Lake Project, including land, building, and associated site improvements. The Facilities may be located within or outside the District. Status of Construction of Facilities. For the current status of the construction of Facilities in Improvement Area No. 1, see “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS – Public Infrastructure Improvements Required for the One Lake Project.” Acquisition Agreement. In connection with the formation of the District, the Master Developer and the City entered into the Acquisition Agreement dated as of February 21, 2023 (the “Acquisition Agreement”). The Acquisition Agreement authorized the financing of the Facilities with the proceeds of the Bonds, prepayments of Facilities Special Taxes collected prior to the issuance of the Bonds, prepayments of Facilities Special Taxes otherwise allocated for Facilities under the Amended Rate and Method, and Facilities Special Taxes collected to directly finance Facilities under the Amended Rate and Method and which are allocated to fund such Facilities. The Master Developer will remain responsible for any Facilities costs not funded from these sources.
-36-
Projected Special Tax Revenues The following table shows the Fiscal Year 2026-27 Target Facilities Special Tax and the Fiscal Year 2026-27 expected maximum Facilities Special Tax revenues based on expected land uses at buildout. However, because home sizes have not yet been determined for most of the lots in Improvement Area No. 1, the Fiscal Year 2026-27 maximum Facilities Special Tax revenues are anticipated to be $7,976,950, which reflects per-unit target tax rates for the 213 lots with building permits and the per-acre rate of $66,518 for the remaining property without a building permit. Table 1 Expected Land Uses and Expected Maximum Special Tax Revenues at Buildout Special Tax Category FY 2026-27 Target Facilities Special Tax Before Transition Year Expected Residential Units(1) FY 2026-27 Expected Maximum Facilities Special Tax Revenues at Buildout Single Family Detached Property 3,000 Square Feet or greater $5,967 per unit 147 $877,175 2,800 - 2,999 Square Feet 5,450 per unit 108 588,639 2,600 - 2,799 Square Feet 5,007 per unit 79 395,536 2,400 - 2,599 Square Feet 4,749 per unit 243 1,153,983 2,200 - 2,399 Square Feet 4,564 per unit 201 917,416 Less than 2,200 Square Feet 4,232 per unit 154 651,743 Subtotal 932 $4,584,492 Single Family Attached Property Greater than or Equal to 1,800 Square Feet $4,177 per unit 0 $0 Less than 1,800 Square Feet $3,992 per unit 0 0 Subtotal $0 Multi-Family Property $66,518 per acre 0 $0 Non-Residential Property $66,518 0 0 Total 932 $4,584,492 (1) Based on the land uses expected within each Special Tax category as of May 6, 2026, per the Master Developer. Source: Goodwin Consulting Group, Inc.
-37-
Appraised Values General. The purpose of the Appraisal was to estimate the fee simple market value of the taxable property within Improvement Area No. 1, subject to the Facilities Special Taxes levy, by ownership, with the sum of values by ownership representing an aggregate value, as of a June 1, 2026, date of value. The Appraisal was prepared in compliance with Uniform Standards of Professional Appraisal Practice (USPAP), the Code of Ethics of the Appraisal Institute, and the Appraisal Standards for Land Secured Financing as promulgated by the California Debt and Investment Advisory Commission. Assumptions and Limiting Conditions. In addition to the conditions described above, the value conclusions contained in the Appraisal are subject to the following extraordinary assumptions and hypothetical conditions: • The Appraiser relied on land development cost and fees provided by the Master Developer and the Merchant Builders, and states that the budgeted site costs and fees appear reasonable relative to costs at other projects in the area (and costs of comparables analyzed). It is an extraordinary assumption of the Appraisal that the said costs and fees are reasonably true and correct. Any substantial changes in costs and fees could have an effect on the value conclusions and the feasibility of development. The Appraiser assumed that competent and professional engineering has been completed and that the cost estimates were prepared by a qualified, professional service. • As of the date of value of the Appraisal, the 2026 Bonds had not been sold. The values estimated in the Appraisal are based on the hypothetical condition that, as of the date of inspection, the 2026 Bonds had just been sold and the property was encumbered by Facilities Special Taxes, as described therein. The value accounts for the impact of the lien of the Facilities Special Tax securing the 2026 Bonds.
-38-
Value Estimates. The Appraiser estimated that, as of the June 1, 2026, date of value, the estimated market values of the taxable property in Improvement Area No. 1, representing not-less-than market values, were as follows: Neighborhoods Property Ownership Number of Lots Estimated Value R & O Lennar Homes 52 $ 21,400,000 (1) Individual homeowners 79 53,825,000 L & K-1 Tri Pointe 33 10,620,000 Individual homeowners 7 5,040,000 J Century Communities 61 13,310,000 Individual homeowners 8 5,280,000 A/B K. Hovnanian 67 13,400,000 C KB 85 15,130,000 Various Master Developer 540 65,800,000 (1) Totals: 932 $ 203,805,000 (2) (1) Represents not-less than market value in bulk. (2) Represents not-less than aggregate value. Source: The Appraisal. Valuation Methods. The Appraisal used the sales comparison approach, which considers area bulk lot sales, with adjustments applied accordingly relative to the subject property. The home prices used in this approach were derived from the home sales and offering prices in Improvement Area No. 1. The conclusions from these approaches were then reconciled into final lot values. For the valuation of the partially completed lots in bulk, the estimated lot values were incorporated into a discounted cash flow analysis that considers the time and cost of selling the lots over an estimated absorption period. For each component analyzed, the Appraiser reconciled the value indications of each approach to value. Neither the City nor the Underwriter makes any representation as to the accuracy or completeness of the Appraisal. See APPENDIX I for a complete copy of the Appraisal Report, including a description of the valuation process that the Appraiser undertook to arrive at an estimate of value of the appraised property within Improvement Area No. 1. Development Status, Projected Special Tax Levy and Appraised Value-to-Debt Ratios The table below shows the Fiscal Year 2026-27 maximum Facilities Special Tax revenues, appraised values by property ownership and development status, based on the appraised values set forth in the Appraisal, the outstanding principal amount of the 2024 Bonds and estimated principal amount of the 2026 Bonds allocated by the projected Fiscal Year 2026-27 Special Tax Levy, and value-to-lien ratios for the taxable parcels in Improvement Area No. 1. It should be noted that, because home sizes have not yet been determined for most of the lots in Improvement Area No. 1, the Fiscal Year 2026-27 maximum Facilities Special Tax
-39-
revenues of $7,976,950 shown in the table below reflect per-unit target tax rates for the 213 lots with building permits and the per-acre rate of $66,518 for the remaining property without a building permit. By contrast, the Fiscal Year 2026-27 estimated maximum Special Taxes at buildout, based on currently estimated home sizes, would be $4,584,492. No assurance can be given that the amounts shown in these tables will conform to those ultimately realized in the event of a foreclosure action following delinquency in the payment of the Facilities Special Taxes.
-40-
Table 2 Fiscal Year 2026-27 Maximum Facilities Special Tax Revenues and Value-to-Lien Ratios Development Status and Ownership (1) Expected Residential Units Estimated Taxable Acreage (2) Appraised Value(3) FY 2026-27 Maximum Facilities Special Tax Revenues (4)
Projected FY 2026-27 Facilities Special Tax Levy (5)
Percent of Projected FY 2026-27 Facilities Special Tax Levy Allocated Bond Debt(6)* Value-to-Lien Ratio* Developed Property (6) Individual Homeowners 94 N/A $64,145,000 $441,737 $441,737 16.4% $8,244,564 7.78 Lennar Homes 52 N/A 21,400,000 249,891 249,891 9.3 4,663,954 4.59 Tri Pointe 33 N/A 10,620,000 161,098 161,098 6.0 3,006,718 3.53 Century Communities 34 N/A 9,430,490 151,200 151,200 5.6 2,821,987 3.34 Subtotal Developed Property 213 N/A $105,595,490 $1,003,926 $1,003,926 37.3% $18,737,223 5.64 Final Map Property Century Communities 27 2.11 $3,879,510 $140,684 $125,461 4.7% $2,341,606 1.66 K. Hovnanian 67 7.47 13,400,000 496,639 442,901 16.4 8,266,289 1.62 KB 85 7.59 15,130,000 504,801 450,180 16.7 8,402,141 1.80 Master Developer (7) 115 11.33 14,622,917 753,568 672,031 24.9 12,542,741 1.17 Subtotal Final Map Property 294 28.50 $47,032,427 $1,895,691 $1,690,574 62.7% $31,552,777 1.49 Undeveloped Property Master Developer 425 70.87 $51,177,083 $4,714,101 $0 0.0% $0 N/A Total 932 99.37 $203,805,000 $7,613,718 $2,694,500 100.0% $50,290,000 4.05 * Preliminary; subject to change. (1) Ownership information and development status based on the Appraisal as of June 1, 2026. All of the K. Hovnanian lots are currently held by the K. Hovnanian Land Bank. (2) Reflects acreage per Solano County Assessor's records for Final Map Property. Acreage for Undeveloped Property is based on estimated taxable acreage for each neighborhood per CBG, the Master Developer's engineer. (3) Appraised values were allocated to the individual parcels based on the expected development and lot status for each parcel, as reflected in the Appraisal. The allocated appraised values may not be indicative of the actual market values of the communities or the individual lots. (4) Based on the current status of development and estimated taxable acreage in Improvement Area No. 1. At buildout the maximum Facilities Special Tax revenues are expected to generate $4,584,492 in Fiscal Year 2026-27 dollars. (5) Based on development status based on the Appraisal as of the June 1, 2026, date of value. The projected Fiscal Year 2026-27 Facilities Special Tax levy is subject to change if additional building permits are issued or final maps are recorded before June 30, 2026. (6) Allocated based on the fiscal year 2026-27 projected Facilities Special Tax levy. Does not include overlapping debt from general obligation bonds and tax increment bonds. (7) Includes Neighborhoods N and M, for which the final subdivision map was recorded on June 18, 2026, after the June 1, 2026, date of value of the Appraisal. Source: Goodwin Consulting Group, Inc.; the Appraiser.
-41-
The table below shows the approximate value-to-debt ratios for the property in Improvement Area No. 1 allocated by value-to-lien categories, based on the appraised values set forth in the Appraisal, the outstanding principal amount of the 2024 Bonds, and the principal amount of the 2026 Bonds. Table 3 Appraised Values and Value-to-Debt Ratios Allocated by Value-to-Debt Category Value-to-Lien Category Expected Residential Units Appraised Value FY 2026-27 Maximum Facilities Special Tax Revenues (1)
Projected FY 2026-27 Facilities Special Tax Levy (2)
Percent of Projected FY 2026-27 Projected Special Tax Levy Allocated Bond Debt(3)* Average Value-to-Lien* Greater than 4:1 130 $85,506,534 $611,623 $611,623 22.7% $11,415,299 7.49 3:1 to 4:1 21 6,509,816 99,207 99,207 3.7 1,851,595 3.52 2:1 to 3:1 62 13,579,141 293,096 293,096 10.9 5,470,329 2.48 Less than 2:1 294 47,032,427 1,895,691 1,690,574 62.7 31,552,777 1.49 Undeveloped Property(4) 425 51,177,083 4,714,101 0 0.0 0 N/A Totals 932 $203,805,000 $7,613,718 $2,694,500 100.0% $50,290,000 4.05 * Preliminary; subject to change. (1) Based on the current status of development and estimated taxable acreage in Improvement Area No. 1. At buildout, the expected maximum Facilities Special Tax revenues are expected to generate $4,584,492 in Fiscal Year 2026-27 dollars. (2) Based on development status as of the June 1, 2026, date of value of the Appraisal. The projected Fiscal Year 2026-27 Facilities Special Tax levy is subject to change if additional building permits are issued or final maps are recorded before June 30, 2026. (3) Allocated based on the Fiscal Year 2026-27 projected Facilities Special Tax levy. Does not include overlapping debt from general obligation bonds and tax increment bonds. (4) Although the projected Fiscal Year 2026-27 Facilities Special Tax levy does not require revenue from Undeveloped Property, Facilities Special Taxes could, per the Rate and Method, be levied on Undeveloped Property if such revenues were needed to meet the Facilities Special Tax Requirement. Therefore Undeveloped Property is also security for the Bonds and the value is included in the calculation shown above. Source: Goodwin Consulting Group, Inc.; the Appraiser.
-42-
Direct and Overlapping Governmental Obligations Contained within the boundaries of Improvement Area No. 1 are certain overlapping local agencies providing public services. Many of these local agencies have outstanding debt. The direct and overlapping debt affecting Improvement Area No. 1 as of July 1, 2026, is shown in the table below, a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. The Debt Report is included for general information purposes only. Neither the City nor the Underwriter has reviewed the Debt Report for completeness or accuracy and neither makes any representation in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of Improvement Area No. 1 in whole or in part. These long-term obligations are not payable from Facilities Special Taxes derived from Improvement Area No. 1 (except as indicated) nor are they necessarily obligations secured by land within Improvement Area No. 1. The contents of the Debt Report are as follows: (1) the first column indicates the public agencies that have outstanding debt as of the date of the Debt Report and whose territory overlaps Improvement Area No. 1; (2) the second column shows the percentage of the assessed valuation of the overlapping public agency identified in column 1 which is represented by property located within Improvement Area No. 1; and (3) the third column is an apportionment of the dollar amount of each public agency's outstanding debt (which amount is not shown in the table) to property in Improvement Area No. 1, as determined by multiplying the total outstanding debt of each agency by the percentage of the public agency's assessed valuation represented in column 2. Table 4 Direct and Overlapping Governmental Obligations 2025-26 Local Secured Assessed Valuation: $39,814,942 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 7/1/26 Solano Community College District General Obligation Bonds 0.052% $200,676 Travis Unified School District General Obligation Bonds 0.755 158,482 City of Fairfield Zone of Benefit Obligations 0.194 8,487 City of Fairfield Community Facilities District No. 2023-1, IA 1 (1) 100.000 36,500,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $36,867,645 Ratios to Appraised Value: (2) Total Direct and Overlapping Tax and Assessment Debt ............... 18.08% (1) Excludes the 2026 Bonds. (2) The appraised value set forth in the Appraisal is $203,805,000 as of June 1, 2026. Source: California Municipal Statistics, Inc.
-43-
Estimated Tax Burden on Single-Family Homes The following table sets forth the estimated and projected total tax burden based on Merchant Builders’ base home prices for certain representative categories of developed single-family detached units in Improvement Area No. 1. Table 5 Fiscal Year 2025-26 Illustrative Tax Bill (Developed Single-Family Detached Units) Serenity Emerald Swirl Sunflower Assumptions 2,750 SF 2,238 SF 2,591 SF 2,145 SF Estimated Market Value (1) $720,000 $655,000 $720,000 $660,000 Homeowner's Exemption ($7,000) ($7,000) ($7,000) ($7,000) Net Expected Assessed Value $713,000 $648,000 $713,000 $653,000 Ad Valorem Tax Rate (2) Rate Base Property Tax 1.0000000% $7,130 $6,480 $7,130 $6,530 Fairfield City 0.0020000% $14 $13 $14 $13 SCC 2012 GOB Series F 0.0024178% $17 $16 $17 $16 Travis Uni Schl Dist M & O 0.0546763% $390 $354 $390 $357 Solano Community Col M & O 0.0009652% $7 $6 $7 $6 SCC 2012 GOB Series C 0.0023839% $17 $15 $17 $16 SCC GOB 2012 Series A 0.0009861% $7 $6 $7 $6 SCC 2015 GO Refunding Bonds 0.0066264% $47 $43 $47 $43 SCC 2019 GO Refunding Bonds 0.0049989% $36 $32 $36 $33 Solano Community Col Bonds 2021 0.0041774% $30 $27 $30 $27 SCC 2012 GOB Series E 0.0012145% $9 $8 $9 $8 SCC 2012 GOB Series D 0.0007688% $5 $5 $5 $5 SC Water Agency ST Water Proj 0.0200000% $143 $130 $143 $131 Total Ad Valorem Taxes 1.1012153% $7,852 $7,136 $7,852 $7,191 Direct Charges (3) CFD No. 2023-2 TSSP – Services $1,069 $1,069 $1,069 $1,069 F-S SD Drainage Maintenance $20 $20 $20 $20 SF Bay Rest Auth-Measure Aa $12 $12 $12 $12 CFD No. 2023-1 IA 1 - Facilities (4) $4,909 $4,475 $4,656 $4,149 Total Direct Charges $6,010 $5,576 $5,757 $5,250 Total Taxes and Direct Charges $13,862 $12,712 $13,609 $12,441 Percentage of Estimated Base Price 1.93% 1.94% 1.89% 1.89% Merchant Builder’s Base Price(5) $773,547 $686,547 $745,000 $631,323 Percentage of Merchant Builder’s Base Price 1.87% 1.90% 1.86% 1.92% (1) Represents the average home value for the applicable neighborhood included in the Appraisal. (2) Based on the Fiscal Year 2025-26 ad valorem tax rates for the tax rate area within Improvement Area No. 1. Ad valorem tax rates are subject to change in future years. (3) Based on the Fiscal Year 2025-26 charges identified on the County-issued property tax bills. Charges are subject to change in future years. (4) Pursuant to the RMA, the special tax is levied based on residential living square footage; therefore, the average unit size within the applicable neighborhood was used to estimate the maximum special tax for the fiscal year shown above . (5) Represents the average of the Merchant Builder’s base home prices for the applicable neighborhood, as identified in the Appraisal. Source: Solano County Tax Collector’s Office; Goodwin Consulting Group, Inc.; the Appraiser.
-44-
History of Facilities Special Tax Collection and Delinquencies The Facilities Special Tax was first levied in Improvement Area No. 1 in Fiscal Year 2025-26. The table sets forth a summary of Special Tax levy, collections and delinquency for Fiscal Year 2025-26 based on amounts levied and outstanding delinquencies as of June 11, 2026. Table 6 Delinquency History As of June 11, 2026 Fiscal Year
Total Special Tax Levied(1)
Parcels Subject to Special Tax Levied(1) Number of Parcels Delinquent Amount Delinquent(2) Percentage Delinquent 2025-26 $1,933,520 188 31 $150,213 7.8% (1) As reported by Willdan Financial Services. (2) Delinquent amounts do not include penalties, interest, or fees. The District is a participant in the County's Teeter Plan and as such receives from the County 100% of the proceeds of the Special Taxes levied but none of the penalties or interest in the case of delinquencies. Sources: Solano County Tax Collector’s Office; Goodwin Consulting Group, Inc. Potential Consequences of Facilities Special Tax Delinquencies General. Delinquencies in the payment of property taxes (including the Facilities Special Taxes) with respect to property in Improvement Area No. 1 could result in draws on the 2024 Reserve Fund, and perhaps, ultimately, a default in the payment on the 2026 Bonds. See “SECURITY FOR THE BONDS – Covenant to Foreclose – Facilities Special Taxes Are Not Covered By Teeter Plan” and “BOND OWNERS’ RISKS.” Facilities Special Tax Enforcement and Collection Procedures. The City could receive additional funds for the payment of debt service through foreclosure sales of delinquent property, but no assurance can be given as to the amount of foreclosure sale proceeds or when foreclosure sale proceeds would be received. The City has covenanted in the Fiscal Agent Agreement to take certain enforcement actions and commence and pursue foreclosure proceedings against delinquent parcels under the terms and conditions described herein. See “SECURITY FOR THE BONDS — Covenant to Foreclose” and “BOND OWNERS’ RISKS.” Foreclosure actions would include, among other steps, formal City Council action to authorize commencement of foreclosure proceedings, mailing multiple demand letters to the record owners of the delinquent parcels advising them of the consequences of failing to pay the applicable Facilities Special Taxes and contacting secured lenders to obtain payment. If these efforts were unsuccessful, they would be followed (as needed) by the filing of an action to foreclose in superior court against each parcel that remained delinquent. Limitations on Increases in Facilities Special Tax Levy. If owners are delinquent in the payment of Facilities Special Taxes, the City may not increase Facilities Special Tax levies to make up for delinquencies for prior Fiscal Years above the Maximum Facilities Special Tax rates specified for each category of property within Improvement Area No. 1. See “SECURITY FOR THE BONDS – Amended Rate and Method.” In addition, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the
-45-
amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the 2026 Bonds. See “BOND OWNERS’ RISKS.”
-46-
PROPERTY OWNERSHIP AND DEVELOPMENT STATUS The information provided in this section has been included because it may be considered relevant to an informed evaluation and analysis of the 2026 Bonds and Improvement Area No. 1. No assurance can be given, however, that the proposed development of the property within the One Lake Project and Improvement Area No. 1 will occur in a timely manner or in the configuration or to the density described herein, or that the Master Developer, any landbank, any merchant builder, any owners or affiliates thereof, or any other property owner described herein will or will not retain ownership of its respective property within the One Lake Project or Improvement Area No. 1. Neither the 2026 Bonds nor any of the Facilities Special Taxes are personal obligations of any property owner within Improvement Area No. 1. The 2026 Bonds are secured solely by the Facilities Special Taxes levied on property within Improvement Area No. 1 and amounts on deposit in certain of the funds and accounts maintained by the Fiscal Agent under the Fiscal Agent Agreement as described in this Official Statement. Neither the City nor the Underwriter can provide any assurances as to the accuracy of the information in this section. The One Lake Project General. The property in Improvement Area No. 1 is part of the One Lake Project, a 358.5-acre master-planned community known as “One Lake” being developed by the Master Developer, previously defined in the Official Statement as One Lake Holding LLC, a Delaware limited liability company. The One Lake Project comprises the property known as Planning Area 4 and Planning Area 5 of the Specific Plan, previously defined in the Official Statement as the Fairfield Train Station Specific Plan, adopted by the City Council on July 26, 2011, as amended. Although the One Lake Project is divided into two separate planning areas, the combined areas are being developed as one project, and are integrated through a network for roads, bicycle/pedestrian trails, and various private and public recreational spaces. In total, the One Lake Project is planned for 1,927 single-family and multi-family homes, a 190-unit apartment complex, and approximately 20,000 square feet of commercial/retail space. The Master Developer is not a homebuilder and intends to carry out all land development activities through the sale of finished lots to merchant builders. Improvement Area No. 1 comprises all of Planning Area 5, with the exception of Neighborhoods P and Q (which are included within the Future Annexation Area for the District). Planning Areas. The two Planning Areas within the One Lake Project are further described below: Planning Area 4. Development of Planning Area 4 commenced in the summer of 2018 and is now nearing build-out. Planning Area 4 has been developed in four phases; all planned single-family detached and attached lots in the first three phases have been fully developed and sold to merchant builders. The fourth and final phase includes: (a) Neighborhood 8 (56 single-family lots) which has been sold to a merchant builder and (b) Neighborhood 9 which may be developed for up to 200 3-story townhomes on 14.2 acres but is currently being re-mapped for 118 single-family (medium density) lots. As of June 1, 2026, approximately 614 building permits have been issued, and the merchant builders have reported 596 home sale escrow closings. In addition to the aforementioned housing developments, a 5-acre site was sold to an affordable housing developer who constructed a 190-unit apartment complex, which is now fully rented.
-47-
Planning Area 4 is within CFD No. 2019-1, a separate community facilities district previously formed by the City, and not subject to the Facilities Special Tax securing the 2026 Bonds. Planning Area 5. Planning Area 5 consists of the property in Improvement Area No. 1 and property in the Future Annexation Area (comprising Neighborhoods P and Q). Improvement Area No. 1 is planned to include 10 low-density residential neighborhoods (816 units) and 6 medium density residential neighborhoods (116 units) all of which have either final map or tentative map approvals. The Future Annexation Area is planned to include 172 multi-family units in Neighborhoods P and Q. . Amenities. At the core of the One Lake Project, is a 10-acre lake (the “Lake”), surrounded by an 11-acre public park (the “Lake Park”). Along the one-mile pathway that rims the Lake, the park provides a series of unique experiences in a collection of nine distinct park settings. The primary amenity for the homeowners within the One Lake community is the 7,500 square foot clubhouse and pool house, which were recently completed at a combined cost of approximately $7.5 million. This private facility is centrally located within Planning Area 4 and overlooks the Lake Park and the Lake. Along the main entrance to the One Lake Project, on One Lake Drive, is the iconic Glass House, a 3,600 square foot building and covered patio that serves as the visitor center and a coffee shop. The 1.5-acre community garden known as The Grove sits directly across the street from the Glass House. In addition to Lake Park, there is a 2.5-acre park, known as Lake Trail Park, which is fully equipped with recreational equipment, and provides a pathway to the Lake Park. A four-acre sports park and 3,500 square foot “sports complex,” as well as several additional parks, will be constructed in the later development stages of Improvement Area No. 1. Only the property in Improvement Area No. 1 (which excludes Neighborhoods P and Q in the Future Annexation Area) is subject to the Facilities Special Tax that secures payment of the 2026 Bonds. The remainder of the One Lake Project located in Planning Area 4 and Neighborhoods P and Q of Planning Area 5 are not subject to the lien of the Facilities Special Tax securing the 2026 Bonds. One Lake Project Map. The map depicting the One Lake Project follows on the next page.
-48-
[INSERT SITE PLAN MAP FOR ONE LAKE PROJECT]
-49-
Development Agreement On May 8, 2015, City and Canon Station (as defined under “– Master Developer” below) entered into an Amended and Restated Development Agreement (“Restated Development Agreement”) originally concerning the development of the One Lake Project, and was recorded in the Official Records of the County on June 10, 2015, as Document No. 201500051329. The Restated Development Agreement was subsequently amended by a First Amendment to Development Agreement recorded in the Official Records of the County on February 17, 2016, a Second Amendment to Development Agreement recorded in the Official Records of the County on January 27, 2017, an unrecorded Agreement and Consent to Modification and Correction of Development Agreement dated as of August 21, 2017, a Third Amendment to Development Agreement recorded in the Official Records of the County February 19, 2019, a Fourth Amendment to Development Agreement recorded in the Official Records of the County on June 22, 2021, and a Fifth Amendment to Development Agreement recorded in the Official Records of the County on October 8, 2024 (as so amended, the “Development Agreement”). Under an Assignment and Assumption Agreement recorded in the Official Records of the County on January 24, 2020, Canon Station assigned all of its rights in, to and under the Development Agreement with respect to the One Lake Project to the Master Developer, and as such, the Master Developer is the sole “Developer” under the Development Agreement with respect to the One Lake Project. The Development Agreement governs the entitlement of the One Lake Project as a whole and provides the Master Developer with vested rights to construct a maximum of 3,101 housing units and 65,000 square feet of commercial floor area and library space, subject to certain conditions of development. The Development Agreement has a term of 20 years, commencing on its effective date of October 25, 2011. However, the Master Developer intends to request a five-year extension of the Development Agreement as part of its proposed amendments to the Development Agreement. See “– Potential Development Agreement Revisions” below.
-50-
Conditions of Approval The Development Agreement, the Specific Plan, and the Master Planned Unit Development (the “MPUD”) require various conditions for the development of the One Lake Project. Many of the conditions are linked to the number of building permits or occupancy permits issued by the City in the One Lake Project as a whole, or with respect to Planning Area 5 only. The following table provides the estimated number of permits that have been issued, or may potentially be issued, as of June 1, 2026: Building Permits Occupancy Permits Planning Area 4 (1) Completed Apartment Complex (Received) 190 190 Single-Family Units (Received) 614 599 Single-Family Units (Potential) 9 24 Totals 813 813 Planning Area 5 (2) Single-Family Units (Received) 193 110 Single-Family Units (Potential) 739 822 Totals 932 932 Totals without Neighborhoods 9, P, & Q 1,745 (3) 1,745 (3) (1) Does not include Neighborhood 9, which is planned for 200 multi-family units, but is currently being re-mapped for 118 single-family lots. (2) Does not include Neighborhoods P and Q, which have the potential for an additional 172 multi-family units. (3) If both Neighborhood 9 of Planning Area 4 (at 200 units) and Neighborhoods P and Q (172 units) from Planning Area 5 were included in the potential permit count, the total would be 2,117 . Conditions for Entirety of the One Lake Project. Descriptions of some of the facilities required as conditions of developing the property in Improvement Area No. 1 based upon development in both Planning Area 4 and Planning Area 5 are described below: At the 1,750th Building Permit: • The first phase of the Great Park, a 50-acre public park, must start construction and finish in 36 months, unless a later date is determined by the City. Preliminary conceptual plans are being prepared by the City at the expense of the Master Developer. • All improvements to New Canon Road must be constructed from Vanden Road to North Gate Road. However, see “Potential Development Agreement Revisions” below. • Extension of the full complement of utilities (water, sewer, drainage, natural gas, electrical, and communication) into Planning Area 6 (an industrial project located east of Planning Area 5 that is not part of the One Lake Project); and development of a minimum of 50-acres of industrial land. Refer to the “Potential Development Agreement Revisions” below.
-51-
At the 400th Building Permit: • Construction must begin on Segment 1 of the pedestrian trail going from Peabody Road to Lake Trail to Vanden. Segment 1 is a former railroad line right-of-way (owned by the City) and is not located within Improvement Area No. 1. Because a portion of Segment 1 required environmental cleanup, the Master Developer, acting as agent for the City, completed the Department of Toxic Substance Control (“DTSC”) Remedial Action Plan and grading work of Segment 1. The improvement permits have been issued and the Master Developer plans to commence construction in July 2026. Notwithstanding that the 400th building permit threshold has passed, the City has indicated that it will continue to issue building permits because the City is in the process of providing the documentation needed for the DTSC to issue its final closure determination. Other Conditions: • Segments 2-5 of the pedestrian trail must be started at various times as follows: Segment 2 at the 1,200th building permit; Segment 3 at the 1,250th building permit; Segment 4 at the 1,500th building permit; and Segment 5 at the 1,600th building permit. Segments 6-8 of the pedestrian trail must be started at various times after the 1600th building permit. Please refer to the “Potential Development Agreement Revision” below. Conditions on Planning Area 5 Only. Descriptions of some of the facilities required as conditions of developing the property in Improvement Area No. 1 based upon development in Planning Area 5 only are described below: At the 300th Building Permit in Planning Area 5: • Place Making items for the Linear Park shall commence construction upon the issuance of the 300th building permit and be completed within 18 months. Please refer to the “Potential Development Agreement Revision” below. At Approximately 740th Building Permit in Planning Area 5: • The Master Developer shall design and complete improvements extending Vanden Road from the current terminus to the City limits prior to issuing any building permits in Planning Area 5 beyond 67% buildout of Planning Area 5 (approximately 740 units). However, see “Potential Conditions Revision” below. Other Conditions: • Design and construction of the Zone 2 Pump Station prior to the issuance of the first certificate of occupancy in Planning Area 5. Based on water pressure tests, the City has concluded that the Zone 2 Pump Station isn’t needed at this time. Moreover, the City will fund the construction of the Zone 2 Pump Station, but the Master Developer will fund the design and construct the facility. This will be memorialized in the “Potential Development Agreement Revisions” below.
-52-
Conditions for Specific Neighborhoods in Planning Area 5. Descriptions of some of the facilities required as conditions of developing specific neighborhoods within Planning Area 5 are described in the table below: Neighborhood Condition R Prior to the first certificate of occupancy in Neighborhood R, a berm or berm/wall combination along the Vanden Road frontage must be completed. Improvements have been completed. And By the 404th building permit in Planning Area 5, the Master Developer shall complete construction of the proposed 0.82-acre “Boot Park”. The Boot Park has been designed and is a condition to the development of Neighborhood R, but the City acknowledges that construction of the Boot Park cannot commence until all of the improvements at the intersection of Lake Trail and Vanden Road are completed. Consequently, the Master Developer is requesting an amendment to this condition by the City. Meanwhile, the City is not enforcing this condition until the construction of the Boot Park is practicable and the Lake Trail and Vanden Road improvements are completed. A/B The Master Developer shall complete construction of the proposed Dog Park prior to issuance of the 33rd certificate of occupancy within Neighborhood A/B. Landscape plans have been completed and approved, with improvements to commence in June 2026. E/F Master Developer shall complete construction of the proposed 0.48-acre pocket park prior to the City’s issuance of the 100th building permit for Neighborhoods E/F. I-1 or I-2 Construction of the public portion of the Sports Park and Complex shall commence concurrently with construction of Neighborhood I-1 or Neighborhood I-2 and be completed and operational within 18 months thereafter. The 4.0-acre Sports Park was graded in the Fall of 2025, and improvement plans have been submitted to the City for their review and approval . Potential Development Agreement Revision. The Development Agreement allows the City to assign transportation improvements to the Master Developer in a logical manner, taking into consideration current needs, surrounding development, and other factors. The City and the Master Developer are in the process of amending the Development Agreement and the other conditions of approval to re-prioritize certain public improvements, with an emphasis being placed on re-directing funds to the construction and completion of the Vanden Road improvements. The revised priority, if approved by the City Council, will result in the modification or elimination of certain conditions described above. The Master Developer currently anticipates that the Development Agreement amendment will be submitted to the City Council for consideration in the fall of 2026.
-53-
Public Infrastructure Improvements Required for the One Lake Project For the One Lake Project as a whole, the Master Developer estimates that it will expend approximately $671,340,200 in land, infrastructure, soft costs and financing costs. As of June 1, 2026, the Master Developer and its predecessors have expended approximately $473,823,276 (refer to Table 10). Planning Area 4 was disproportionately burdened with upfront infrastructure costs due to extending city utilities to the One Lake Project site, and the development of the 10-acre Lake and 11-acre Lake Park. Backbone and in-tract infrastructure costs for Planning Area 4 (623 housing units, which excludes the 190 apartments for which the Master Developer did not provide infrastructure improvements) totaled $130,030,244 or $208,716 per lot. The remaining cost to complete this first development phase of One Lake, which is nearly fully developed except for Neighborhood 9, amounts to approximately $750,000, which is directly related to the completion of Lake Trail Road Improvements. As shown in Table 7 below, the total infrastructure cost to deliver 932 finished lots in Planning Area 5 totals approximately $122,062,528, which includes the improvement costs for Neighborhood P and Q that are estimated to total $4,500,000. Therefore, after netting out those improvement costs, the estimated infrastructure cost to produce 932 finished lots in Planning Area 5 is $117,562,528 or approximately $126,140 per lot, much lower in comparison to the Planning Area 4 finished lot cost. The table below shows (i) the infrastructure improvements and fees required for the development of the One Lake Project as a whole (including Improvement Area No. 1) and (ii) separately, the infrastructure improvements and fees required for the development of Planning Area 5 only (including Improvement Area No. 1 and Neighborhoods P and Q, which are located in the Future Annexation Area). All such improvements and fees are payable by the Master Developer. Table 7 Estimated Improvement Costs (Planning Area 5)(1) (As of June 1, 2026) Estimated Costs to be Incurred by Master Developer Total Estimated Costs for One Lake Project
Total Estimated Planning Area 5 Costs Completed Planning Area 5 Costs Percentage Complete of Planning Area 5 Costs Remaining Planning Area 5 Costs Grading $27,202,246 $10,832,448 $7,430,408 69% $3,402,040 Backbone Infrastructure 53,934,338 20,344,289 12,499,063 61% 7,845,226 Community Amenities 18,751,481 9,132,971 -- 0% 9,132,971 Landscape & Parks 20,133,406 8,040,029 -- 0% 8,040,029 Consultants & Fees 41,714,351 12,989,350 9,956,553 77% 3,032,797 Subtotal $161,735,822 $61,339,087 $29,886,024 49% $31,453,063 In-tract Improvements 90,356,950 60,723,441 33,153,877 55% 27,569,564 Total $252,092,772 $122,062,528 $63,039,901 52% $59,022,627 Source: Master Developer. (1) Includes development cost for Neighborhoods P and Q.
-54-
Improvement Area No. 1 Development Status Summary Grading and Infrastructure Status. The first development phase of Improvement Area No. 1, which consists of Neighborhoods R, O, L, K-1, K-2, J, A/B, and C, have been fully developed into 404 finished lots with all in-tract improvements and roadways completed. Also, the backbone improvements connecting Planning Area 4 and Planning Area 5, which includes the roadway bridge that spans over the California Aqueduct; a 30-inch waterline, sewer, storm drain and electrical lines, have been completed along Club Drive. The second development phase of Improvement Area No. 1, which consists of Neighborhoods N, H, and M, includes a 4.0-acre Sports Park, and a 6.5-acre detention basin, which will be located on City owned property. The mass grading for these improvements was split into two phases: the first phase, which was completed in fall of 2025, consisted of the grading of Neighborhood N, the Sports Park, and roughly half of the detention basin; the second mass grading operation, which includes the grading of Neighborhoods H and M and the second phase of the detention basin was started in the first week in April 2026. As of June 1, 2026, approximately $12.5 million of backbone infrastructure and $33.2 million of in-tract improvements have been constructed in Planning Area 5 (see Table 7 above). Subdivision Mapping Status. All of the property in Improvement Area No. 1 is being developed in accordance with a tentative subdivision map entitled “Tentative Map, One Lake – Planning Area 5” dated May 27, 2021. Final subdivision maps have been approved for Neighborhoods R, O, K-1, L, J, K-2, A/B, C and portions of Neighborhood N, as shown in the table below. The final subdivision map for the balance of Neighborhood N was approved by the City Council on May 26, 2026, and is expected to record by June 15, 2026, and the final subdivision map for Neighborhood H is scheduled to be on the July 21, 2026 City Council Agenda for approval. Development Status and Development Plan. The development status, subdivision mapping status and anticipated development plan for the property in Improvement Area No. 1 as of June 1, 2026, is shown on the following table.
-55-
Table 8 Planned Development and Development Status As of June 1, 2026 Neighborhood Gross Acreage Number of Lots Lot Size Development Type Development Status Actual and Projected Final Map Status Phase 1 R 8.63 65 45x70 Single-Family Detached Finished Lots Recorded Dec. 15, 2022 O 9.65 10 50x80 Single-Family Detached Finished Lots Recorded Dec. 15, 2022 56 50x80 Single-Family Detached Finished Lots Recorded Dec. 18, 2023 K-1 2.77 20 58x75 Courtyard Cluster Finished Lots Recorded Dec. 15, 2022 K-2 2.30 12 58x75 Courtyard Cluster Finished Lots Recorded March 5, 2025 L 2.78 20 58x75 Courtyard Cluster Finished Lots Recorded Dec. 15, 2022 J 7.69 62 46x65 Single-Family Detached Finished Lots Recorded March 5, 2025 7 46x65 Single-Family Detached Finished Lots Recorded Dec. 15, 2022 A/B 12.12 67 50x80 Single-Family Detached Finished Lots Recorded April 30, 2025 C 11.7 85 46x75 Single-Family Detached Finished Lots Recorded July 8, 2025 Phase 2 N 12.27 72 7 46x75 46x75 Single-Family Detached Single-Family Detached Blue Topped Blue Topped Recorded June [_], 2026 Recorded Dec. 18, 2023 (1) M 3.24 24 58x75 Courtyard Cluster Rough Graded Expected Nov. 2026 H 14.79 93 50x80 Single-Family Detached Rough Graded Expected July 2026 Phase 3 I-1 3.88 28 58x75 Courtyard Cluster Rough Graded Expected Sept. 2026 I-2 2.30 12 58x75 Courtyard Cluster Rough Graded Expected Sept. 2026 G 16.20 70 50x90 Single-Family Detached Rough Graded Expected May 2027 Phase 4 D 16.96 122 46x75 Single-Family Detached Rough Graded Expected Feb. 2027 E/F 16.74 100 55x80 Single-Family Detached Rough Graded Expected June 2027 Totals 127.80 932 (1) While these lots received a final map in 2023, they are treated as rough-graded, undeveloped lots for other purposes of this Official Statement. (2) Table 8 excludes Neighborhoods P and Q, zoned for up to 172 townhomes, which are future annexation parcels. Source: Master Developer
-56-
Existing and Planned Sales to Merchant Builders The Master Developer is not a homebuilder and is developing the property through the sale of finished lots to merchant builders. As of June 1, 2026, approximately 392 finished lots have been completed and sold to merchant builders. The Master Developer will continue to market the other neighborhoods to merchant builders to be identified in the future. The current status of lot sales to merchant builders is described below. Table 9 Actual and Projected Lot Sales to Merchant Builders As of June 1, 2026 Neighborhood Number of Lots Property Owner Merchant Builder Purchase Agreement Status Development Status Actual or Projected Closing Date Phase 1 R 65 Lennar Homes Lennar Homes Signed Finished Lots Closed O 66 Lennar Homes Lennar Homes Signed Finished Lots Closed L 20 Tri Pointe Tri Pointe Signed Finished Lots Closed J 69 Century Comm. Century Comm. Signed Finished Lots Closed K-1 20 Tri Pointe Tri Pointe Signed Finished Lots Closed K-2 12 Master Developer Tri Pointe Signed Finished Lots July 9, 2026 A/B 67 K. Hovnanian Land Bank K. Hovnanian Signed Finished Lots Closed C 85 KB KB Signed Finished Lots Closed Phase 2 N 79 Master Developer TBD TBD Rough Graded Oct. 2026 M 24 Master Developer TBD TBD Rough Graded June 2027 H 93 Master Developer TBD TBD Rough Graded Dec. 2026 Phase 3 I-1 28 Master Developer TBD TBD Rough Graded June 2027 I-2 12 Master Developer TBD TBD Rough Graded June 2027 G 70 Master Developer TBD TBD Rough Graded Nov. 2027 Phase 4 D 122 Master Developer TBD TBD Rough Graded Nov. 2027 E/F 100 Master Developer TBD TBD Rough Graded Oct. 2028 Totals 932 Source: Master Developer. No assurance can be given that the Master Developer will close on the projected lot sales shown in the table above on the time frames shown above, or as to the timing of any future lot sales.
-57-
Entitlements Specific Plan. The Specific Plan, known as the Fairfield Train Station Specific Plan, was originally adopted by the City Council on July 26, 2011, and has been subsequently amended. The Specific Plan guides the development for the last growth area within the City, and encompasses approximately 2,972 acres with (i) approximately 60% representing open space and habitat conservation open space, (ii) approximately 17% for residential use, (iii) approximately 10% representing industrial use, and (iv) the balance of approximately 13% representing retail/commercial and parks. The land subject to the Specific Plan is anticipated to ultimately be developed with a diverse mix of housing, shopping, employment and recreational opportunities within walking distance of each other. Zoning. Improvement Area No. 1 is zoned TS-PD (Train Station Specific Plan) by the City, which allows for residential low, medium & high density development. Utilities. Utility services to the property within Improvement Area No. 1 will be supplied by the following: • Water: City of Fairfield • Sewer: City of Fairfield and the Fairfield-Suisun Sewer District • Storm drain: City of Fairfield • Electricity and gas: Pacific Gas & Electric • Telephone: AT&T • Cable TV: Comcast • Refuse collection: Republic Services Environmental Matters Environmental Impact Report. The City certified the final Environmental Impact Report for the Specific Plan (the “EIR”) under the California Environmental Quality Act on July 26, 2011. Hazardous Substances. The former railroad right-of-way, along the southern and western property boundaries of Improvement Area No. 1 has been impacted with elevated concentrations of arsenic and lead. The former railroad right-of-way, which is owned by the City and not a part of the One Lake Project, will be improved with a Linear Park Trail. Remedial work was necessary to remove these areas of the impacts, in-order to allow for the proposed trail redevelopment. The Master Developer, through the completion of a Phase II Environmental Site Assessment, conducted field reconnaissance and soil sampling to delineate the extent of the arsenic soil impact. The scope of the Phase II Assessment includes an arsenic background soil analysis, additional step-out and vertical soil sampling, groundwater sampling, and groundwater leachability analysis. Based on the work completed, the extent of anthropogenic impact to the rail spur soils was limited to a 50-foot wide corridor along the centerline of the former rail spur alignment. Acting as agent for the City, the Master Developer prepared all the necessary documentation and testing analysis to meet compliance with DTSC requirements for the former railroad right-of-way, approximately 5.1 acres in size. With oversight from DTSC, the Master Developer has completed all the remediation work and is awaiting the closure letter from DTSC. All such remediation necessary for the development of Improvement Area No. 1 as described in this Official Statement, including for merchant builders to obtain building permits within Improvement Area No. 1, has been completed. Flood Hazard Map Information. The District is located in an area of minimal flooding according to the Federal Emergency Management Association (“FEMA”). In particular, Improvement Area No. 1 is located in an area designated by FEMA as being within Zone X, with
-58-
a 0.02% chance of flooding in any given year. See “BOND OWNERS’ RISKS – Property Values – Natural Disasters.” Seismic Conditions. Like other areas of Northern California, property in the District is subject to the risk of major earthquake damage. The City is located along the eastern edge of the seismically active Coast Ranges of California. Active faults near the City include the Green Valley and Cordelia faults. Most large earthquakes in the Bay Area have occurred along the major faults including the San Andreas, Hayward, and Calaveras faults, which are located 20 to 45 miles west and south of the City. A significant earthquake along these or other faults is possible during the period the 2026 Bonds will be outstanding. See “BOND OWNERS’ RISKS – Property Values – Natural Disasters.” Environmental Permits and Requirements. In connection with the development of the One Lake Project, the Master Developer has obtained permits from Army Corps of Engineers, US Fish and Wildlife Service, California Department of Fish and Wildlife, and California State Water Resources Control Board (collectively, the “Environmental Permits”). Such permits establish requirements to avoid, minimize, and mitigate impacts to wetlands, streams, and threatened and endangered species. Compliance with these permits fall into three, interrelated primary categories: (i) avoidance and minimization of impacts during project construction; (ii) wetland mitigation; and (iii) habitat conservation for endangered species. The following summarizes compliance and ongoing activities related to these permits for Improvement Area No. 1, and the One Lake Project as a whole. Avoidance and Minimization of Impacts During Project Construction. The Environmental Permits contain multiple requirements for compliance with multiple construction period conditions. These conditions include requirements for ongoing compliance such as monitoring by approved biologists and other technical disciplines, environmental training for construction crews, work restrictions during wet weather, and capture and relocation of threatened and endangered species, most notably the threatened California tiger salamander. The One Lake Project is in good standing with all agencies with respect to the Environmental Permits and has demonstrated ongoing compliance with all required permit conditions to each relevant agency and is up to date on all reporting requirements. The California Department of Fish and Wildlife has also agreed that all construction related conditions (limiting construction periods and timing) are no longer required within Improvement Area No. 1. Additionally, from November 2018 through March 2020, the Master Developer relocated approximately 6,780 California tiger salamanders from the One Lake Project to designated habitat mitigation lands (owned by the Master Developer) in compliance with permit requirements. Wetland Mitigation. Under the Environmental Permits issued by the US Army Corps of Engineers and State Water Resources Control Board, the Master Developer is required to provide compensatory mitigation for the authorized impacts to wetlands by establishing (constructing) 20.12 acres of vernal pool habitat, rehabilitating 21.00 acres of existing vernal pool, and enhancing functions on an additional 45.03 acres of existing wetlands. Construction activities for implementation of the wetland mitigation requirements was initiated in the summer of 2018 and completed in the late summer 2019. An as-built compliance report and ongoing monitoring, including hydrological monitoring of constructed and rehabilitated wetlands from 2020 to 2024, document compliance with the required mitigation. The as-built compliance report was submitted to the agencies in March 2020. Habitat Conservation for Endangered Species. The Master Developer is required to secure Habitat Mitigation Lands under conservation easements in a phased approach concurrent with construction. The Master Developer owns approximately 590 acres of “onsite” lands which
-59-
are dedicated to the mitigation requirement and has purchased the rights to place a conservation easement on an additional approximately 1,273 acres of offsite land The conservation easement for the 1,273-acre offsite lands was recorded in July 2022. The 1,863 acres of the conservation lands satisfies the habitat mitigation land requirements for the California Department of Fish and Wildlife for permitted activities in all of Improvement Area No. 1 as well as development in Planning Area 4 and permitted road construction in Planning Area 6 (an industrial project located east of Planning Area 5 that is not part of the One Lake Project). The conservation easements for the onsite lands are currently in the final stages of review and final approval with the California Department of Fish and Wildlife and U.S. Fish and Wildlife Service. The Master Developer’s consultants have been working diligently with California Department Fish and Wildlife for the past 36 months on finalizing all the documents and the wording of the Conservation Easement Agreement. The Master Developer expects to be in the position to record the onsite Conservation Easement on the mitigation property by December 2026. Costs for the conservation easements and required funding for management of these lands are secured by existing financial assurances (mostly surety bonds and letters of credit) provided as part of the permit with the California Department of Fish and Wildlife. Master Developer Financing Plan for Improvement Area No. 1 The Master Developer is using the proceeds of a borrowing secured by the One Lake Property (discussed below), proceeds of lot sales, and equity to finance the planned development for Improvement Area No. 1. First Trust Deed. On November 17, 2023, the Master Developer closed on a $69,600,000 loan facility from Encore Capital (the “Encore Loan”). The Encore Loan provided funds to fully repay the prior outstanding loan of $30.2 million from Trez Capital and certain former Canon Station managing owners in the amount of $8.3 million. The Encore Loan is a 3-year revolving facility that will allow a continued recycling of loan funds as long as the outstanding loan funds do not exceed a 70% loan-to-value ratio until the loan is paid down by $20,000,000, at which time the maximum loan-to-value ratio will be reduced to 60% for the remaining term of the loan. The Encore Loan facility, coupled with lot sales revenues, and Bond proceeds are anticipated to provide sufficient funds to complete the balance of the infrastructure improvements for the One Lake Project. Encore Capital, located in Corte Madera, California, is a non-traditional lender, and their loan financing costs are higher in comparison to conventional banking sources; however, providing that the 60% loan-to-value ratio threshold is not exceeded, their accelerated repayment requirement provides additional loan borrowings until the Encore Loan is fully repaid. The Encore Loan is secured with a first deed of trust on all of the property owned by the Master Developer in Improvement Area No. 1 including: (i) all of the unsold developed (Neighborhood K-2) or undeveloped property in Planning Area 5, (ii) Neighborhoods P and Q and (iii) Neighborhood 9 of Planning Area 4. Neighborhoods R, O, L, K-1, J, A/B, and C have closed escrow and are no longer security for the Encore Loan. Recourse guaranties and completion guaranties were provided by Daniel Aguilar and Steve Riter. As of June 1 2026, a total of $114,712,223 of the Encore Loan has been drawn and, excluding loan paydowns and interest reserves, the current outstanding balance is approximately $61,435,432. The Encore Loan is a revolving facility, whereby it provides the re-borrowing or recycling of loan funds as the Encore Loan is paid down. As of June 1, 2026, the Master Developer is able to draw up to approximately $8.1 million under the Encore Loan. Upon execution of the Encore Loan modification discussed below, the Master Developer will be able to
-60-
make additional borrowings that do not exceed $17 million (so long as the maximum loan-to-value does not exceed 60%). As of June 1, 2026, no default has occurred or is continuing with respect to the Encore Loan or the Deed of Trust that secures the Encore Loan. Interest on the outstanding balance of the Encore Loan is payable monthly, with the outstanding principal due at maturity. The Encore Loan matures on November 17, 2026, but the Master Developer and Encore Capital are in the process of negotiating a loan modification that would extend the maturity of the Encore Loan by two years to November 17, 2028, with a one-year extension option, and provide enhanced loan terms such as an interest rate reduction and reduced reserve requirements.
-61-
Cash Flow Summary. A summary of the expected cash flow for the Master Developer and the development of the One Lake Project, including Improvement Area No. 1, is set forth below: Table 10 Master Developer Sources and Uses One Lake Project (As of June 1, 2026) Actual Projected Projected Projected Through Through 12/31/2026 Through 12/31/2027 Through 12/31/2028 Totals 3/15/2026 (1) Thereafter Sources Land Sales-Single Family (2) $168,745,810 $30,837,017 $105,191,924 $27,934,383 $1,474,250 $334,183,384 Land Sales-Townhomes -- 7,247,924 -- -- 22,917,076 30,165,000 Land Sales-Apartments 5,700,000 -- -- -- -- 5,700,000 Land Sales-Commercial -- -- 2,667,778 -- 2,500,000 5,167,778 Mitigation Credit Sales (net) 7,704,055 (531,058) (752,137) 421,836 12,526,616 19,369,312 CFD Net Bond Proceeds (3) 45,432,986 10,942,500 -- 20,737,500 16,095,228 93,208,214 Urbanite Loan 32,000,000 -- -- -- -- 32,000,000 Seller Note 10,020,787 -- -- -- -- 10,020,787 Trez Capital Loan 40,000,000 -- -- -- -- 40,000,000 Encore Loan (4) 116,974,704 19,879,930 21,153,679 -- -- 158,008,313 Equity 55,068,795 -- 764,813 -- -- 55,833,608 TOTAL SOURCES $481,647,137 $68,376,313 $129,026,057 $49,093,719 $55,513,170 $783,656,396 Uses Land 35,111,167 -- 1,250,113 1,620,043 -- 37,981,323 Northeast Transportation Improvements (5) 13,948,929 3,253,044 2,237,268 17,422,294 6,629,740 43,491,275 Loan Paydown Urbanite 32,000,000 -- -- -- -- 32,000,000 Loan Paydown Seller Note 10,020,787 -- -- -- -- 10,020,787 Loan Paydown Trez Capital 40,000,000 -- -- -- -- 40,000,000 Loan Paydown Encore 71,144,074 40,468,685 46,395,554 -- -- 158,008,313 Distributions 12,500,000 -- -- -- -- 12,500,000 Carrying Costs 9,864,036 545,146 217,383 191,501 -- 10,818,066 Backbone Infrastructure 129,309,798 7,743,185 15,672,349 5,149,990 3,860,500 161,735,822 In-tract Improvements 62,787,386 10,600,334 13,783,161 3,186,069 -- 90,356,950 Overhead and administration 9,179,289 421,565 283,890 64,265 -- 9,949,009 Loan Interest and Fees 47,957,810 4,849,806 2,830,332 -- -- 55,637,948 Contingency -- -- -- -- 8,840,707 8,840,707 TOTAL USES $473,823,276 $67,881,765 $82,670,050 $27,634,162 $19,330,947 $671,340,200 NET CASH FLOW
-62-
Beginning Balance -- 7,823,861 8,318,409 54,674,416 76,133,973 112,316,196 Net Cash Flows 7,823,861 494,548 46,356,007 21,459,557 36,182,223 -- Ending Balance (6) $7,823,861 $8,318,409 $54,674,416 $76,133,973 $112,316,196 $112,316,196 (1) Includes all revenues and costs associated with every source or cost incurred by the Master Developer in the development of the One Lake Project (i.e., Planning Areas 4 and 5), through June 1, 2026. (2) Estimates are based on actual and projected sales as follows: (i) the closing of Neighborhood J, A/B, and C. Thereafter, land sales assume sales of Phase 2 (N and H) in 2026, Phase 2 and 3 (M, I-1, I-2, G) in 2027, and Phase 4 (D, E/F) in 2027-28. (3) The CFD Net Bond Proceeds includes net bond proceeds from prior CFD No. 2019-1 bond sales in 2019 and 2021, and the 2024 Bonds for Improvement Area No. 1 and future Parity Bonds. Any future Parity Bonds may only be issued subject to the conditions set forth in the Fiscal Agent Agreement. See “THE 2026 BONDS – Issuance of Future Parity Bonds.” (4) The Encore Loan is a revolving loan facility, which allows the Master Developer to borrow additional loan funds, provided that the loan-to-value ratio does not exceed 60%. Under Uses of Funds above, since the Encore Loan closed in November 2023, approximately $13 million in loan paydowns have been made, allowing additional loan borrowing. The numbers in Table 10 assume the extension of the Encore Loan. (5) Represents costs for offsite public improvements, such as roadway, traffic signals, landscaping, etc., that are located within the Specific Plan. (6) A portion of the ending balance is held in escrow to be used for backbone infrastructure improvements. Source: Master Developer.
-63-
The Master Developer General. The Master Developer is One Lake Holding LLC, a Delaware limited liability company, is 100% owned by Canon Station, LLC, a California corporation (“Canon Station”). The controlling interest in Canon Station is held by McKinley Partners Fairfield LP, a Delaware limited partnership (“McKinley Fairfield”), and the minority interest is held by the original landowners (referred to as Minority Members). McKinley Realty Partners (“McKinley”), is the manager of both Canon Station and the Master Developer. Principals. McKinley’s principals are Daniel Aguilar, Steve Riter, and Jeff Shaffer. Mr. Aguilar and Mr. Riter are the original officers of the Master Developer, and within the past 12 months Mr. Shaffer and Anthony Russo, an investor partner, were added as officers of the One Lake management team. Brief biographies of Mr. Aguilar, Mr. Riter, Mr. Shaffer and Mr. Russo follow. Daniel Aguilar, Founding Principal. • Over 43 years of residential development experience. • Co-founded McKinley Partners in 2006, along with Steve Riter, and raised a $25 million land fund to acquire seven distressed residential development projects in northern and southern California. This included the co-management of two master-planned communities that have been fully developed or nearing completion. Most of those assets were sold once they were repositioned or re-entitled after the Great Recession. • Prior to McKinley Partners, Aguilar was a partner at Mission Valley Properties from 1990 to 2006, where he successfully optioned and procured entitlements for six residential developments in the northern part of the San Francisco Bay Area. • From 1996 to 1998, Mr. Aguilar worked as a consultant procuring entitlements (development approvals) on several projects within the greater San Francisco Bay Area. • From 1988 to 1995, Mr. Aguilar worked for Southwest Diversified/Coscan, now Brookfield Homes, VP of finance and land acquisition. • His first job after receiving his MBA from UCLA was for Citicorp Real Estate Group, as a VP of construction lending from 1980 to 1988. Steve Riter, Founding Principal. • Over 41 years of residential development experience. • Mr. Riter co-founded McKinley Partners in 2006, directing all investment strategies of the Company and acting as primary manager of many acquisitions and land development efforts of McKinley investment portfolio projects. • Mr. Riter was also a partner in Mission Valley Properties where he acquired, entitled, and developed residential projects throughout Northern California. • Prior to joining Mission Valley Properties, he was VP of Land Acquisition and Development at Catellus Residential Group and was responsible for acquiring and entitling residential properties and building a regional California homebuilder presence. • From 1990 – 1996, Mr. Riter’s professional experience included residential land acquisition and development experience with SummerHill Homes, a subsidiary of Marcus & Millichap Inc. and Southwest Diversified/Coscan (now known as Brookfield Homes). • From 1984 to 1990 he was Project Controller for the Vintage Club, with Vintage Properties a $1.1 billion mixed-use residential and commercial development company, where he later transitioned to Manager of Land Acquisition.
-64-
• Mr. Riter was a member of the Board of Directors of Seneca Center, a $75 million non-profit serving children and families in the San Francisco Bay Area. • He received a Bachelor of Science in Business from Brigham Young University in 1981 and conducted Master of Business Administration studies at John F. Kennedy University. Jeff Shaffer, Principal. • Over 31 years of residential development experience. • Joined McKinley Partners in 2007 to head up Southern California acquisitions and investments. After the initial land fund acquisitions, he ran the foreclosed home acquisitions and portfolios in Southern California and San Antonio. In 2015, he become the principal manager of the $30 million Development Capital Fund, and in 2018 raised and manages the $100 million Opportunity Fund X (OFX). • As part of the OFX, Mr. Shaffer is on the six-person Executive Committee overseeing the development in the 1800-unit Carroll Canyon master planned development in San Diego, in a joint venture with California West Communities, Lennar Homes, and Shea Homes. The OFX is also invested in real estate developments in the San Francisco Bay Area, Sacramento, and Salt Lake City. • Prior to McKinley, Mr. Shaffer joined a regional homebuilder, SeaCountry Homes, as their VP of Operations managing the entitlement, development, and operations in San Diego, Riverside, and San Bernardino counties, where he brought to market over 600 lots and homes in 3 years. • In 1999, he then joined Pacific Ridge as the development manager for a 90,000 sq. ft. themed retail center in Sedona, Arizona, and several other projects totaling over 130,000 sq. ft. of retail. • In 1996, he partnered to form a land development and homebuilding venture (Granite Homes), purchasing RTC and bank-owned assets out of the early 1990s real estate downturn. That company rapidly expanded from an initial 21-lot holding to ultimately controlling approximately 1,435 lots in Sacramento and San Diego, California, San Antonio, Texas, and Phoenix, Arizona. • Prior to his involvement in real estate, Mr. Shaffer worked on national security and military strategy issues for the Center for Strategic and International Studies in Washington, D.C. • He earned a BA in International Relations from UCLA and a Master's degree in National Security Studies from Georgetown University. Anthony Russo, Partner. • 18 years’ experience in the real estate lending industry for a major California lender. • 10-years’ experience in the construction/construction materials industry in Solano County. • 7-years’ experience in mergers and acquisitions for a major construction company. • 15-years’ experience in the real estate development/construction and property management field for a local family office. Development Experience. Prior projects for which McKinley managed or co-managed include: • Jordan Ranch – 890 residential units, Dublin, California. Developed lots sold to Brookfield, Tri Pointe, Toll Bros., and Landsea; completed and sold out. • Alamo Creek – 141 residential units, Vacaville, California. Approved lots sold to Tri Pointe and 141 single family units completed and sold out; the 10-acre balance of the site was sold to an apartment developer in 2022.
-65-
• The Vineyard - 351 residential units, Ontario, California. Developed lots sold 229 lots to DR Horton and 122 lots to Woodside Homes; all 351 residential units completed and sold out. • Arroyo Crossing – 155 residential units, Livermore, California. Approved lots sold to Obrien Group; completed and sold out. • Carroll Canyon (master planned community) – 1,800 residential units, San Diego. The development partners of Carroll Canyon, include Shea Homes, Lennar Homes, and California West Homes. Roughly 95% of the residential lots have been fully developed and improved with single-family and townhomes. The balance of the Carroll Canyon project should be fully developed and the homes sold and closed within the first quarter of 2027. As of June 1, 2026, the Master Developer believes that the One Lake Project is adequately capitalized and that there will not be a need for any additional equity investment. If necessary, the Master Developer has the ability to borrow additional funds secured by the One Lake Project. Further information regarding the Master Developer is available from the McKinley website at www.mckinleycp.com. This internet address is included for reference only, and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. Lennar Homes General. Lennar Homes of California, LLC, a California limited liability company (“Lennar Homes”), 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 Homes 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, 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. This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site.
-66-
Copies of Lennar Corporation’s annual report and related financial statements are available from Lennar Corporation’s website at www.Lennar.com. This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. Lennar Homes Development Plan and Development Status. Lennar Homes’ development plan is to construct single-family detached homes on the lots it owns in Neighborhood O and Neighborhood R, as shown in the tables below as of June 1, 2026. Base sale prices are subject to change, and exclude any lot premiums, buyer selected options and upgrades, and any incentives, selling concessions or price reductions which may be offered. Development Plans Neighborhoods O and R (as of June 1, 2026) Floor Plan Square Footage Planned Units Base Sales Prices (1) Neighborhood O Plan 1 2,589 22 $745,880 Plan 2 2,756 21 775,880 Plan 3 2,905 22 798,880 Subtotal 65 Neighborhood R Plan 1 2,111 21 $673,880 Plan 2 2,257 22 685,880 Plan 3 2,347 22 699,880 NB R Model 2,257 1 798,880 Subtotal 66 (1) Base sales prices represent the estimated prices used by Lennar Homes when underwriting the project and are subject to change when Lennar Homes begins its sales process. Source: Lennar Homes
-67-
Set forth below is the status of home construction and sales within Neighborhood O and Neighborhood R as of June 1, 2026. Status of Development, Home Construction and Sales Neighborhoods O and R (as of June 1, 2026) Neighborhood Planned Units Building Permits Issued Homes Under Construction(2) Completed Homes Owned by Lennar Homes
Homes Under Contract for Sale(3) Home Closings O 65 54 11 8 2 32 R 66(1) 66 14 5 0 47 Totals 131 120 25 13 2 79 (1) Lennar Homes has built two model homes physically located in Neighborhood O that will serve as models for both Neighborhood O and Neighborhood R. The model home is accounted for in the corresponding Neighborhood (2) Under construction means that a building permit has been issued and vertical home construction is in process. (3) Represents homes under contract with individual homebuyers that have not closed escrow. Source: Lennar Homes. Lennar Homes anticipates buildout and final home sales in Neighborhood O by June 2027, and in Neighborhood R by November 2026. Although the information in this Official Statement reflects the current development expectations of Lennar Homes, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans and at the prices described 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. Lennar Homes 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. Lennar Homes Financing Plan. Lennar Homes intends to finance the development of the property in Neighborhood O and Neighborhood R using internal sources (equity and home sales proceeds). A summary of the costs incurred and anticipated to be incurred for the full buildout of the 65 lots within Neighborhood O is set forth in the following table: Lennar Homes Financing Plan Neighborhood O (as of June 1, 2026) Total Budget Costs Incurred Through June 1, 2026 June 2, 2026, through Buildout Land $13,817,607 $13,817,607 $0 Site Construction (1) 369,322 119,482 249,840 Direct Construction 17,595,431 13,873,218 3,722,213 Sales and Marketing 2,287,805 826,283 1,461,522 Total Projected Costs $34,070,165 $28,636,590 $5,433,575 (1) These costs are primarily landscaping in the parkway strips as development of the homes adjacent to such parkway strips is completed. Source: Lennar Homes.
-68-
A summary of the costs incurred and anticipated to be incurred for the full buildout of the 66 lots within Neighborhood R is set forth in the following table: Lennar Homes Financing Plan Neighborhood R (as of June 1, 2026) Total Budget Costs Incurred Through June 1, 2026 June 2, 2026, through Buildout Land $12,117,719 $12,117,719 $0 Site Construction (1) 375,004 121,320 253,684 Direct Construction 16,135,504 14,627,110 1,508,394 Sales and Marketing 2,041,931 838,995 1,202,936 Total Projected Costs $30,670,158 $27,705,144 $2,965,014 (1) These costs are primarily landscaping in the parkway strips as development of the homes adjacent to such parkway strips is completed. Source: Lennar Homes. Although Lennar Homes expects to have sufficient funds available to complete its development in Improvement Area No. 1 in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining planned development by Lennar Homes in Improvement Area No. 1 will be available from Lennar Homes or any other source when needed. Neither Lennar Homes, nor any of its related entities, are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 1 and there is no direct recourse against Lennar Homes or any of its related entities for nonpayment of ad valorem property taxes or the Facilities Special Taxes. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary. If and to the extent that the aforementioned sources are inadequate to pay the costs to complete the planned development by Lennar Homes within Improvement Area No. 1 and other financing by Lennar Homes is not put into place, there could be a shortfall in the funds required to complete the planned development by Lennar Homes in Improvement Area No. 1 or to pay ad valorem property taxes or Facilities Special Taxes related to Lennar Homes’ property in Improvement Area No. 1, and the remaining portions of such development may not be completed. Many factors beyond Lennar Homes’ control, or a decision by Lennar Homes to alter its current plans, may cause the actual sources and uses to differ from the projections. Land Bank Arrangement. Lennar Homes and TPG AG EHC III (LEN) CA 1, L.P., a Delaware limited partnership (the “Lennar Land Bank”) previously entered into that certain Option Agreement, dated July 16, 2024, as amended by that First Amendment to Option Agreement dated August 26, 2024 (as amended, the “Lennar Option Agreement”) whereby Lennar Homes had the option, but not the obligation, to purchase the 131 lots in Neighborhoods R and O Lots from the Lennar Land Bank pursuant to a takedown schedule agreed upon between Lennar Homes and the Lennar Land Bank. As of June 1, 2026 Lennar Homes had taken down all 131 Lots from the Lennar Land Bank pursuant to the Lennar Option Agreement.
-69-
Tri Pointe General. As previously defined in this Official Statement the “Tri Pointe” is Tri Pointe Homes Holdings, Inc., a Delaware corporation. Tri Pointe is an indirect, wholly-owned subsidiary of Tri Pointe Homes, Inc., a Delaware corporation (“Tri Pointe Parent Corporation”) . Tri Pointe Parent Corporation is engaged in the design, construction and sale of innovative single-family attached and detached homes across twelve states, including Arizona, California, Colorado, Florida, Maryland, Nevada, North Carolina, South Carolina, Texas, Utah, Virginia and Washington, and the District of Columbia. In April 2024, Tri Pointe Parent Corporation announced its expansion into the Orlando and Coastal Carolinas regions, which includes parts of Georgia and South Carolina. While the company has an established presence in South Carolina, the company had not yet commenced operations in Georgia as of March 31, 2026. In May 2026, Tri Pointe Parent Corporation was acquired by Sumitomo Forestry Co., Ltd., a publicly traded Japanese joint stock company (TSE:1911) (“Sumitomo”), as described below. As a result, Tri Pointe is also an indirect, wholly-owned subsidiary of Sumitomo. Tri Pointe Parent Corporation continues to file certain reports with the SEC, which set forth, among other things, certain data relative to the consolidated results of operations and financial position of Tri Pointe Parent Corporation and its consolidated subsidiaries, including Tri Pointe, as of such dates (e.g., see Tri Pointe Parent Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed with the SEC on February 26, 2026 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, as filed with the SEC on April 29, 2026). The SEC maintains an Internet website that contains reports and other information regarding registrants that file electronically with the SEC, including Tri Pointe Parent Corporation. The address of such website is www.sec.gov. All documents filed by Tri Pointe Parent Corporation pursuant to the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Tri Pointe Parent Corporation’s most recent Annual Report on Form 10-K and each of its other quarterly reports are available in the “investors” portion of its website at www.tripointehomes.com. The foregoing websites are included for reference only and the information on these websites is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. Neither Tri Pointe nor any other entity or person is 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 2026 Bonds. Merger. On May 14, 2026, pursuant to an Agreement and Plan of Merger, dated as of February 13, 2026 (the “Merger Agreement”), Sumitomo acquired 100% of Tri Pointe Parent Corporation’s shares of outstanding common stock for $47.00 per share, for an aggregate consideration of approximately $4.5 billion in cash, in connection with which Tri Pointe Parent Corporation became a wholly-owned indirect subsidiary of Sumitomo (the “Transaction”). As a result of the Transaction, Tri Pointe Parent Corporation’s common stock is no longer publicly traded (and has been delisted from the New York Stock Exchange), and Tri Pointe Parent Corporation’s common stock has been deregistered under the Securities Exchange Act of 1934, as amended. Sumitomo is a leading Japanese comprehensive housing and wood products company whose common stock is currently traded on the Tokyo Stock Exchange under the ticker symbol “1911”. Founded in 1691, Sumitomo is engaged in a broad range of global businesses centered on wood, including forestry management, the manufacture and distribution of wood building
-70-
materials, the contracting of single-family homes and medium- to large-scale wooden buildings, real estate development, and wood biomass power generation. As a result of the Transaction, Tri Pointe Parent Corporation became part of Sumitomo’s family of U.S. homebuilders and operates as a distinct brand led by the Tri Pointe Parent Corporation management team, supported by Sumitomo’s scale and investment. Tri Pointe Parent Corporation does not expect that the Transaction will interfere with the completion of its planned development within Improvement Area No. 1. Tri Pointe Homes Development Plan and Development Status. Tri Pointe’s development plan is to construct single-family detached homes on the 40 lots it acquired in Neighborhood L and Neighborhood K-1 in a neighborhood being marketed as “Swirl at One Lake”. The anticipated product mix for the project in Neighborhood L and Neighborhood K-1 is reflected in the table below, as of June 1, 2026. Development Plan Neighborhoods L and K-1 – Swirl at One Lake (as of June 1, 2026) Floor Plan Approx. Square Footage Planned Units Estimated Base Sales Prices (1) Plan 1 2,401 10 $714,000 Plan 2 2,510 10 737,000 Plan 3 2,668 10 757,000 Plan 4 2,783 10 772,000 Total: 40 (1) Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. Source: Tri Pointe The status of home construction and sales for the project is reflected in the table below, as of June 1, 2026. Between June 2, 2026 and ___________, 2026, Tri Pointe has been issued ____ additional building permits and has ____ additional building permits pending, which the City has indicated it will issue. Status of Home Construction and Sales Neighborhoods L and K-1 – Swirl at One Lake (as of June 1, 2026) Neighborhood Planned Units Building Permits(1) Homes Under Construction(2) Completed Homes Owned by Tri Pointe(3) Homes Under Contract for Sale(4) Home Closings L 20 20 8 5 5 7 K-1 20 8 8 0 0 0 Totals 40 28 16 5 5 7 (1) The final 12 building permits are pending, which the City has indicated it will issue after June 1, 2026. (2) Under construction means that a building permit has been issued and vertical home construction is in process. Includes 16 production homes. (3) Includes four model homes and one production hone. (4) Represents homes under contract with individual homebuyers that have not closed escrow. Source: Tri Pointe.
-71-
Tri Pointe anticipates buildout and final home closings in Neighborhood L and in Neighborhood K-1 by November 2027. Although the information in this Official Statement reflects the current development expectations of Tri Pointe, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans and at the prices described 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. Tri Pointe 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 “BOND OWNERS’ RISKS – Concentration of Ownership.” Tri Pointe Financing Plan. To date, Tri Pointe has financed its land acquisition and various site development and home construction costs related to its property in Neighborhood L and Neighborhood K-1 in Improvement Area No. 1 through internally generated funds (which may include home sales revenue and funding from its parent company). Tri Pointe expects to use internally generated funds to complete development of its property in Improvement Area No. 1. However, home sales revenues from Tri Pointe’s property in Improvement Area No. 1 are not segregated and set aside for completing its development in Improvement Area No. 1. Home sales revenues are swept daily from the divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other needs at the discretion of management. As of June 1, 2026, Tri Pointe estimates that it has spent approximately $15.5 million on land acquisition costs, site improvement costs, direct and indirect home construction costs, permit and impact fees, and sales and marketing costs (exclusive of interest, internal financing repayment, and corporate overhead) related to its development of Neighborhood L and Neighborhood K-1 in Improvement Area No. 1. As of June 1, 2026, Tri Pointe expects to spend approximately $18.0 million in additional site improvement costs, direct and indirect home construction costs, permit and impact fees, and sales and marketing costs (exclusive of internal financing repayment, corporate overhead, and other carrying costs) to complete its development in Improvement Area No. 1. Tri Pointe believes that it will have sufficient funds available to complete its planned development in Improvement Area No. 1 in accordance with the development schedule described in this Official Statement. Although Tri Pointe expects to have sufficient funds available to complete its proposed development in Improvement Area No. 1 commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to fund the remaining planned development by Tri Pointe within Improvement Area No. 1 will be available to Tri Pointe when needed. While Tri Pointe has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Tri Pointe nor any other entity or person is under any legal obligation of any kind to expend funds for the development of Tri Pointe’s property in Improvement Area No. 1, or the payment of ad valorem property taxes or the Special Taxes within Improvement Area No. 1. Any contributions by Tri Pointe or any other entity or person to fund the costs of such development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by Tri Pointe in Improvement Area No. 1, and other financing by Tri Pointe is not put into place, there could be a shortfall in the funds required to complete the planned development by Tri Pointe or to pay ad valorem property taxes or Special Taxes related to Tri Pointe’s property in Improvement Area No. 1, and the remaining portions of such development may not be completed. Many factors beyond Tri Pointe’s control, or a decision by Tri Pointe to alter its current plans, may cause the actual sources and uses to differ from the projections. See “BOND OWNERS’ RISKS” herein for a discussion of risk factors.
-72-
Century Communities General. The term "Century Communities" is Century Communities of California, LLC, a Delaware limited liability company. Century Communities is a subsidiary of Century Communities, Inc., a Delaware corporation ("Century Parent"). The Century Parent, and its subsidiaries including Century Communities, is engaged in the design, construction, and sale of master planned communities throughout the United States. Founded in 2002, the Century Parent is a Colorado based corporation and is a top-10 national home builder. Offering new homes under the Century Communities and Century Complete brands, the Century Parent is engaged in all aspects of homebuilding — including the acquisition, entitlement, and development of land, along with the construction, innovative marketing and sale of quality homes designed to appeal to a wide range of homebuyers. The Century Parent operates in 17 states across the U.S. and offers title, insurance, and lending services in select markets through its Parkway Title, IHL Home Insurance Agency, and Inspire Home Loan subsidiaries. The Century Parent is a publicly traded company listed on the New York Stock Exchange under the ticker symbol "CCS." The Century Parent is subject to the informational requirements of the Securities Exchange Act of 1934, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the "SEC"). Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of the Century Parent and its subsidiaries (including Century Communities). The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including the Century Parent. The address of such internet web site is www.sec.gov. All documents subsequently filed by the Century Parent pursuant to the requirements of the Securities Exchange Act of 1934 after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of the Century Parent's annual report, quarterly reports and current reports, including any amendments, are available from the Century Parent's website at www.investors.centurycommunities.com. The foregoing website addresses and references to filings with the SEC are included for reference only, and the information on such websites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. Neither Century Communities nor the Century Parent is 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 2026 Bonds. Century Communities Development Plan and Development Status. Century Communities' development plan is to construct single-family detached homes on the lots it owns in Neighborhood J, as shown the tables below as of June 1, 2026. Base sale prices are subject to change, and exclude any lot premiums, buyer selected options and upgrades, and any incentives, selling concessions or price reductions which may be offered.
-73-
Development Plans Neighborhood J (as of June 1, 2026) Floor Plan Square Footage Planned Units Base Sales Prices (1) Plan 1 2,009 22 $612,990 Plan 2 2,148 23 632,990 Plan 3 2,277 24 647,990 Total 69 (1) Base sales prices represent the estimated prices used by Century Communities when underwriting the project and are subject to change when Century Communities begins its sales process. Source: Century Communities Set forth below is the status of home construction and sales within Neighborhood J as of June 1, 2026. Status of Development, Home Construction and Sales Neighborhood J (as of June 1, 2026) Neighborhood Planned Units Building Permits Homes Under Construction (1) Completed Homes Owned Century Communities
Homes Under Contract for Sale (2) Home Closings Plan 1 22 15 9 0 0 2 Plan 2 23 14 8 1 1 3 Plan 3 24 14 7 1 1 3 Totals 69 43 24 2 2 8 (1) Under construction means that a building permit has been issued and vertical home construction is in process. (2) Represents homes under contract with individual homebuyers that have not closed escrow. Source: Century Communities. Century Communities anticipates buildout and final home sales in Neighborhood J by October 31, 2027. Although the information in this Official Statement reflects the current development expectations of Century Communities, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans and at the prices described 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. Century Communities 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 “BOND OWNERS’ RISKS – Concentration of Ownership.” Century Communities Financing Plan. Century Communities intends to finance the development of the property in Neighborhood J using internal sources (equity and home sales proceeds). A summary of the costs incurred and anticipated to be incurred for the full buildout of the 69 lots within Neighborhood J is set forth in the following table:
-74-
Century Communities Financing Plan Neighborhood J (as of June 1, 2026) Total Budget Costs Incurred Through June 1, 2026 June 2, 2026, through Buildout Land $10,580,589 $10,580,589 $0 Site Construction 1,520,451 498,440 1,022,011 Direct Construction 11,525,440 6,013,273 5,512,167 Sales and Marketing 482,992 75,605 407,387 Total Projected Costs $24,109,472 $17,167,907 $6,941,565 Source: Century Communities. Although Century Communities expects to have sufficient funds available to complete its development in Improvement Area No. 1 in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining planned development by Century Communities in Improvement Area No. 1 will be available from Century Communities or any other source when needed. Neither Century Communities, nor any of its related entities, are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 1 and there is no direct recourse against Century Communities or any of its related entities for nonpayment of ad valorem property taxes or the Facilities Special Taxes. Any contributions by Century Communities to fund the costs of such development are entirely voluntary. If and to the extent that the aforementioned sources are inadequate to pay the costs to complete the planned development by Century Communities within Improvement Area No. 1 and other financing by Century Communities is not put into place, there could be a shortfall in the funds required to complete the planned development by Century Communities in Improvement Area No. 1 or to pay ad valorem property taxes or Facilities Special Taxes related to Century Communities’ property in Improvement Area No. 1, and the remaining portions of such development may not be completed. Many factors beyond Century Communities’ control, or a decision by Century Communities to alter its current plans, may cause the actual sources and uses to differ from the projections. See “BOND OWNERS’ RISKS” herein for a discussion of risk factors. KB General. KB HOME North Bay LLC, a Delaware limited liability company (“KB”) is a wholly-owned subsidiary of KB Home, a Delaware corporation (“Parent KB Entity”), whose principal executive offices are located in Los Angeles, California. Parent KB Entity is a publicly traded company listed on the New York Stock Exchange, under the ticker symbol “KBH.” Founded in 1957, Parent KB Entity constructs and sells homes through its operating divisions under the name KB Home. Parent KB Entity’s ongoing principal operations are in nine states, including California, Arizona, Nevada, Colorado, Texas, Florida, North Carolina, Idaho and Washington within 49 major markets. Parent KB Entity first developed homes in California in 1963. Parent KB Entity’s homebuilding operations offer a variety of homes designed primarily for first-time, move-up and active adult homebuyers, including attached and detached single-family homes, townhomes and condominiums. In 2025, Parent KB Entity announced the reentry into the Atlanta, Georgia market. However, as of November 25, 2025, the company had not acquired land or commenced selling homes in that market.
-75-
Parent KB Entity is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information, including financial statements, with the SEC. Such filings, particularly, Parent KB Entity’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025, as filed with the SEC on January 23, 2026, and Parent KB Entity’s Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2026, as filed with the SEC on April 9, 2026, set forth certain data relative to the consolidated results of operations and financial position of Parent KB Entity and its subsidiaries, including KB, as of such dates. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including parent KB Entity. The address of such Internet website is www.sec.gov. All documents subsequently filed by parent KB Entity pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Parent KB Entity’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from Parent KB Entity’s website at www.kbhome.com. The foregoing website addresses and references to filings with the SEC are included for reference only, and the information on such website addresses and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such sites. Neither KB nor any other entity or person is 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 internet sites in evaluating whether to buy, hold or sell the 2026 Bonds. KB Development Plan and Development Status. KB’s development plan is to construct single-family detached homes on the 85 lots it owns in Neighborhood C in a neighborhood being marketed as “Aurora at One Lake.” The anticipated product mix for the project in Neighborhood C is reflected in the table below, as of June 1, 2026. Development Plan Neighborhood C – Aurora at One Lake (as of June 1, 2026) Floor Plan Square Footage Planned Units Base Sales Prices (1) Plan 1 2,135 23 $615,990 Plan 2 2,386 24 645,990 Plan 3 2,501 21 657,990 Plan 4 2,566 17 674,990 Total: 85 (1) Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions that may be offered. Actual base sales prices may be lower than estimated. Source: KB As of June 1, 2026, no building permits had been issued and no homes were under construction by KB and no sales had yet occurred in Neighborhood C, as reflected in the table below.
-76-
Status of Development, Home Construction and Sales Neighborhood C – Aurora at One Lake (as of June 1, 2026) Neighborhood Planned Units Building Permits Homes Under Construction(1) Completed Homes Owned KB Homes Under Contract for Sale(2) Home Closings C 85 0 0 0 0 0 Totals 85 0 0 0 0 0 (1) Under construction means that a building permit has been issued and vertical home construction is in process. (2) Represents homes under contract with individual homebuyers that have not closed escrow . Source: KB. KB anticipates its first home closings in Neighborhood C by March 2027 and buildout and final home closings in Neighborhood C by March 2029. Although the information in this Official Statement reflects the current development expectations of KB, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans and at the prices described 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. KB 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 “BOND OWNERS’ RISKS – Concentration of Ownership.” KB Financing Plan. To date, KB has financed its land acquisition and various site development and home construction costs related to its property in Neighborhood C in Improvement Area No. 1 through internally generated funds (which may include home sales revenue and funding from its parent company). KB expects to use internally generated funds to complete development of its property in Improvement Area No. 1. However, home sales revenues from KB’s property in Improvement Area No. 1 are not segregated and set aside for completing its development in Improvement Area No. 1. Home sales revenues are swept daily from the divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other needs at the discretion of management. As of June 1, 2026, KB estimates that it has spent approximately $14.80 million on land acquisition costs, site improvement costs, direct and indirect home construction costs, permit and impact fees, and sales and marketing costs (exclusive of interest, internal financing repayment, and corporate overhead) related to its development of Neighborhood C in Improvement Area No. 1. As of June 1, 2026, KB expects to spend approximately $31.52 million in additional site improvement costs, direct and indirect home construction costs, permit and impact fees, and sales and marketing costs (exclusive of internal financing repayment, corporate overhead, and other carrying costs) to complete its development in Improvement Area No. 1. KB believes that it will have sufficient funds available to complete its planned development in Improvement Area No. 1 in accordance with the development schedule described in this Official Statement.
-77-
Although KB expects to have sufficient funds available to complete its proposed development in Improvement Area No. 1 commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to fund the remaining planned development by KB within Improvement Area No. 1 will be available to KB when needed. While KB has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither KB nor any other entity or person is under any legal obligation of any kind to expend funds for the development of KB’s property in Improvement Area No. 1, or the payment of ad valorem property taxes or the Special Taxes within Improvement Area No. 1. Any contributions by KB or any other entity or person to fund the costs of such development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by KB in Improvement Area No. 1, and other financing by KB is not put into place, there could be a shortfall in the funds required to complete the planned development by KB or to pay ad valorem property taxes or Special Taxes related to KB’s property in Improvement Area No. 1, and the remaining portions of such development may not be completed. Many factors beyond KB’s control, or a decision by KB to alter its current plans, may cause the actual sources and uses to differ from the projections. See “BOND OWNERS’ RISKS” herein for a discussion of risk factors. K. Hovnanian General. The term "K. Hovnanian" is K. Hovnanian Homes Northern California, Inc., a California corporation. K. Hovnanian is an indirect, wholly-owned subsidiary of Hovnanian Enterprises, Inc., a Delaware corporation (“Hovnanian”), which is based in Matawan, New Jersey, and has been in the business of developing residential real estate communities in California since 1994. Hovnanian is subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and in accordance therewith files reports, proxy statements, and other information, including financial statements, with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Hovnanian. The address of such website is www.sec.gov. All documents subsequently filed by Hovnanian pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Hovnanian’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from Hovnanian’s website at www.khov.com. The foregoing website addresses and references to filings with the SEC are included for reference only, and the information on such websites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. Neither K. Hovnanian nor Hovnanian is 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 2026 Bonds. K. Hovnanian’s Development Plan and Development Status. K. Hovnanian’s development plan is to construct single-family detached homes on the lots it owns in Neighborhood A/B, as shown the tables below as of June 1, 2026. Base sale prices are subject to change, and exclude any lot premiums, buyer selected options and upgrades, and any incentives, selling concessions or price reductions that may be offered.
-78-
Development Plans Neighborhood A/B (as of June 1, 2026) Floor Plan Square Footage Planned Units Base Sale Price(1) Fayetteville II (8714) 2,521 23 $853,990 Seine ESP (8648) 2,530 20 868,990 Water Lily II (8591) 2,588 24 875,990 Total 67 (1) Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions or price reductions that may be offered. Actual base sales prices may be lower than estimated. Set forth below is the status of home construction and sales within Neighborhood A/B as of June 1, 2026. Status of Development, Home Construction and Sales Neighborhood A/B (as of June 1, 2026) Floor Plan Planned Units Building Permits Issued Homes Under Construction (1) Completed Homes Owned by K. Hovnanian Land Bank or K. Hovnanian Homes Under Contract for Sale (2) Home Closings Fayetteville II (8714) 23 0 0 0 0 0 Seine ESP (8648) 20 0 0 0 0 0 Water Lilly II (8591) 24 0 0 0 0 0 Totals 67 0 0 0 0 0 (1) Under construction means that a building permit has been issued and vertical home construction is in process. K. Hovnanian intends to build three (3) model homes in Neighborhood A/B. (2) Represents homes under contract with individual homebuyers that have not closed escrow. There can be no guarantee that homes in escrow will actually close escrow. K. Hovnanian anticipates buildout and final home sales in Neighborhood A/B by July 2029. Although the information in this Official Statement reflects the current development expectations of K. Hovnanian, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans and at the prices described 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. K. Hovnanian 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. K. Hovnanian’s Land Bank Agreement. In connection with the acquisition of lots within Improvement Area No. 1, K. Hovnanian entered into a landbank option arrangement (the “Option Agreement”) with DRP CA 4, LLC, a Delaware limited liability company (previously defined as the “K. Hovnanian Land Bank”). As of June 1, 2026, K. Hovnanian had acquired 0 lots within the District from the K. Hovnanian Land Bank. Under the Option Agreement, K. Hovnanian has the option – but not the obligation - to acquire additional lots within the District so long as a minimum cumulative number of lots are acquired on a periodic basis until a final takedown of lots currently anticipated to occur in or before July 2029. Under the Option Agreement, K. Hovnanian
-79-
is responsible for the payment of property and special taxes for the lots owned by the K. Hovnanian Land Bank within the District that accrue during the term of the Option Agreement. Under the Option Agreement, K. Hovnanian has the option to acquire such lots from the K. Hovnanian Land Bank pursuant to a takedown schedule. Neither K. Hovnanian nor the K. Hovnanian Land Bank is under any obligation to develop the property in the District. The failure to timely acquire lots by K. Hovnanian could result in the termination of the Option Agreement by the K. Hovnanian Land Bank. In the event that K. Hovnanian does not exercise its option to acquire lots under the Option Agreement, the K. Hovnanian Land Bank, being an investor only and not a homebuilder, would likely attempt to sell such lots to another merchant builder. The take-down schedule is as follows. As of June 1, 2026, K. Hovnanian had acquired a total of 0 lots under the Option Agreement. As of the date of this Official Statement, K. Hovnanian was in good standing under the Option Agreement and anticipates taking down lots from the K. Hovnanian Land Bank in accordance with the terms and conditions of the Option Agreement. Date Minimum No. of Lots Cumulative Lots Date Minimum No. of Lots Cumulative Lots 10/7/2026 2 2 3/7/2028 2 36 11/7/2026 2 4 4/7/2028 2 38 12/7/2026 2 6 5/7/2028 2 40 1/7/2027 2 8 6/7/2028 2 42 2/7/2027 2 10 7/7/2028 2 44 3/7/2027 2 12 8/7/2028 2 46 4/7/2027 2 14 9/7/2028 2 48 5/7/2027 2 16 10/7/2028 2 50 6/7/2027 2 18 11/7/2028 2 52 7/7/2027 2 20 12/7/2028 2 54 8/7/2027 2 22 1/7/2029 2 56 9/7/2027 2 24 2/7/2029 2 58 10/7/2027 2 26 3/7/2029 2 60 11/7/2027 2 28 4/7/2029 2 62 12/7/2027 2 30 5/7/2029 2 64 1/7/2028 2 32 6/7/2029 2 66 2/7/2028 2 34 7/7/2029 1 67
-80-
K. Hovnanian’s Financing Plan. K. Hovnanian intends to finance the development of the property in Neighborhood A/B using internal sources (equity and home sales proceeds). A summary of the costs incurred and anticipated to be incurred for the full buildout of the 67 lots within Neighborhood A/B is set forth in the following table: K. Hovnanian’s Financing Plan Neighborhood A/B (as of June 1, 2026) Total Budget Costs Incurred Through June 1, 2026 June 2, 2026, through Buildout Land $15,413,656 $2,714,150 $12,699,506 Site Construction/Fees 5,822,260 103,899 5,718,361 Direct Construction 15,707,710 0 15,707,710 Sales and Marketing 1,330,673 44,150 1,286,523 Total Projected Costs $38,274,299 $2,862,199 $35,412,100 Although K. Hovnanian expects to have sufficient funds available to complete its development in Improvement Area No. 1 in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining planned development by K. Hovnanian in Improvement Area No. 1 will be available from K. Hovnanian or any other source when needed. Neither K. Hovnanian, nor any of its related entities, are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 1 and there is no direct recourse against K. Hovnanian or any of its related entities for nonpayment of ad valorem property taxes or the Facilities Special Taxes. Any contributions by K. Hovnanian to fund the costs of such development are entirely voluntary. If and to the extent that the aforementioned sources are inadequate to pay the costs to complete the planned development by K. Hovnanian within Improvement Area No. 1 and other financing by K. Hovnanian is not put into place, there could be a shortfall in the funds required to complete the planned development by K. Hovnanian in Improvement Area No. 1 or to pay ad valorem property taxes or Facilities Special Taxes related to K. Hovnanian's property in Improvement Area No. 1, and the remaining portions of such development may not be completed. Many factors beyond K. Hovnanian's control, or a decision by K. Hovnanian to alter its current plans, may cause the actual sources and uses to differ from the projection.
-81-
BOND OWNERS’ RISKS The purchase of the 2026 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. 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 2026 Bonds. Risks of Real Estate Secured Investments Generally The Bondowners 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 Improvement Area No. 1, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure, (ii) changes in real estate tax rates and other operating expenses, government rules (including, without limitation, zoning laws and restrictions relating to threatened and endangered species), (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses, or natural disasters elsewhere in the country or other parts of the world affecting supply of building materials that may cause delays in construction, and (iv) the impacts of a public health emergency on construction and sales activity, the national and regional economy and financial circumstances of property owners in Improvement Area No. 1. 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 Facilities Special Taxes when due, and could induce or exacerbate the risks described herein. See “– Value to Lien Ratios,” “– Levy and Collection of the Facilities Special Tax,” “– Property Tax Delinquencies,” and “– Bankruptcy Delays” below. Limited Obligation of the City to Pay Debt Service The City has no obligation to pay principal of and interest on the 2026 Bonds if Facilities Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the 2024 Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Facilities Special Tax delinquencies. The City is not obligated to advance funds to pay Debt Service on the 2026 Bonds. See “SECURITY FOR THE BONDS – Limited Obligation.” If Special Tax Revenues are insufficient to pay debt service on the 2026 Bonds, the District’s ability to increase Facilities Special Tax rates is limited as described under “SECURITY FOR THE BONDS – Facilities Special Taxes” and the Fiscal Agent may be compelled to draw upon moneys in the 2024 Reserve Fund, resulting in a rapid depletion of such fund. See “SECURITY FOR THE BONDS – 2024 Reserve Fund.” Potential Early Redemption of Bonds from Facilities Special Tax Prepayments The property owner of any parcel of taxable property within Improvement Area No. 1 is permitted to prepay up to 75% of the Facilities Special Tax obligation applicable to that parcel at any time. Any such payments will result in a mandatory redemption of Bonds from Facilities Special Tax prepayments on the next Interest Payment Date for which timely notice may be given under the Fiscal Agent Agreement following the receipt of any such Facilities Special Tax prepayment. Any resulting redemption of 2026 Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such 2026 Bonds. See “THE 2026 BONDS – Redemption.”
-82-
Concentration of Property Ownership Failure of any significant owner of taxable property within Improvement Area No. 1, such as the Master Developer, the Merchant Builders and any future merchant builder, to pay the annual Facilities Special Taxes when due could result in the rapid, total depletion of the 2024 Reserve Fund prior to replenishment from the resale of the property upon a foreclosure or otherwise or prior to delinquency redemption after a foreclosure sale, if any. In that event, there could be a default in payments of the principal of and interest on the 2026 Bonds. Further development of property in Improvement Area No. 1 may not occur as currently proposed or at all. See “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS” herein for information regarding property ownership and the status of development in Improvement Area No. 1. See also “– Depletion of 2024 Reserve Fund” below. Levy and Collection of the Facilities Special Tax General. The principal source of payment of principal of and interest on the 2026 Bonds is the proceeds of the annual levy and collection of the Facilities Special Tax against property within Improvement Area No. 1. Limitation on Maximum Facilities Special Tax Rate. The annual levy of the Facilities Special Tax is subject to the maximum annual Facilities Special Tax rate authorized in the Amended Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Facilities Special Tax, together with other available funds, will not be sufficient to pay Debt Service on the 2026 Bonds. No Relationship Between Property Value and Facilities Special Tax Levy. Because the Facilities Special Tax formula set forth in the Amended Rate and Method is not based on property value, the levy of the Facilities Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Facilities Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of Debt Service on the 2026 Bonds, and certainly not a direct relationship. Factors that Could Lead to Facilities Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Facilities Special Tax on any particular parcel of Taxable Property to vary from the Facilities Special Tax that might otherwise be expected: Transfers to Governmental Entities. The number of parcels of Taxable Property could be reduced through the acquisition of Taxable Property by a governmental entity and failure of the government to pay the Facilities Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. See “– Exempt Properties” below. Property Tax Delinquencies. Failure of the owners of Taxable Property to pay property taxes (and, consequently, the Facilities Special Tax), or delays in the collection of or inability to collect the Facilities Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Facilities Special Taxes. See “– Property Tax Delinquencies” below. Delays Following Facilities Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent Agreement generally provides that the Facilities Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the
-83-
special covenant for foreclosure described in “SECURITY FOR THE BONDS – Covenant to Foreclose” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County. If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2026 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the 2024 Reserve Fund is depleted. See “SECURITY FOR THE BONDS – Covenant to Foreclose.” The ability of the City to collect interest and penalties specified by State law and to foreclose against properties having delinquent Facilities Special Tax installments may be limited in certain respects with regard to properties in which a federal governmental agency has or obtains an interest. See “– FDIC/Federal Government Interests in Properties” below. Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Facilities Special Taxes or the timing of enforcement of Facilities Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment, and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service. Property Tax Delinquencies General. Delinquencies in the payment of property taxes and, consequently, the Facilities Special Taxes, can occur because the owners of delinquent parcels may not have received property tax bills from the County in a timely manner, including situations in which the County initially sent property tax bills to the property developer or merchant builder at a time when the parcels in question had already been sold to individual homeowners. Delinquencies can also reflect economic difficulties and duress by the property owner. Numerous future delinquencies by the owners of Taxable Property in Improvement Area No. 1 in the payment of property taxes (and, consequently, the Facilities Special Taxes, which are collected on the ordinary property tax bills) when due could result in a deficiency in Facilities Special Tax revenues necessary to pay Debt Service on the 2026 Bonds, which could in turn result in the depletion of the 2024 Reserve Fund, prior to reimbursement from the resale of foreclosed property or payment of the delinquent Facilities Special Tax. See “SECURITY FOR THE BONDS – 2024 Reserve Fund,” and “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Potential Consequences of Facilities Special Tax Delinquencies.” Measures to Mitigate Consequences of Continuing Delinquencies. The City intends to take certain actions designed to mitigate the impact of future delinquencies, including: enforcing the lien of the Facilities Special Taxes through collection procedures that will include foreclosure actions under certain circumstances (see “SECURITY FOR THE BONDS – Covenant to Foreclose”); and increasing the levy of Facilities Special Taxes against non-delinquent property owners in Improvement Area No. 1, to the extent permitted under the Amended Rate and Method and the Act and to the extent the Facilities Special Taxes are not already being levied at the maximum Facilities Special Tax rate. See “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Potential Consequences of Facilities Special Tax Delinquencies.”
-84-
Limitations on Increases in Facilities Special Tax Levy. If property owners are delinquent in the payment of the Facilities Special Tax, the City may not increase Facilities Special Tax levies to make up for delinquencies for prior fiscal years above the maximum annual Facilities Special Tax rates specified in the Amended Rate and Method. In addition, the City’s ability to increase Facilities Special Tax levies on residential property to make up for delinquencies for prior Fiscal Years is limited by Section 53321(d) of the Act, which provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the 2026 Bonds. Future Property Development Continuing development of the parcels in Improvement Area No. 1 may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of the developer, water or electricity shortages, discovery on the undeveloped property of any plants or animals in their habitat that have been listed as endangered species, changes in laws, and other factors outside the control of the owners of land in Improvement Area No. 1. The timing of development in Improvement Area No. 1 may also be affected by the conditions of approval for development. Development in Improvement Area No. 1 may also be affected by development in surrounding areas, which may compete with the property in Improvement Area No. 1. Value to Lien Ratios Appraised value-to-lien ratios have traditionally been used in land-secured bond issues as a measure of the “collateral” supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value-to-lien ratio is mathematically a fraction, the numerator of which is the value of the property as measured by assessed values or appraised values (in this case, the appraised value of taxable property within Improvement Area No. 1 as of the June 1, 2026, date of value of the Appraisal) and the denominator of which is the “lien” of the allocable share of assessment or special tax bonds. A value to lien ratio should not, however, be viewed as a guarantee for credit-worthiness. Land values are sensitive to economic cycles. A downturn of the economy or other market factors may depress land values and lower the value-to-lien ratios. Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years to complete, and the bankruptcy courts may impede the foreclosure action. No assurance can be given that, should a parcel with delinquent Facilities Special Taxes be foreclosed upon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Facilities Special Taxes. Finally, local agencies may form overlapping community facilities districts or assessment districts. Local agencies typically do not coordinate their bond issuances. Debt issuance by another entity could dilute value to lien ratios.
-85-
Risks Related to Homeowners with High Loan to Value Ratios Any future decline in home values in Improvement Area No. 1 could result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Facilities Special Taxes, when due. Under such circumstances, bankruptcies are likely to increase. Bankruptcy by homeowners with delinquent Facilities Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Facilities Special Taxes. It is possible that laws could be enacted in the future to assist homeowners in default in the payment of mortgages and property taxes. It is further possible that federal laws could be enacted that would adversely impact the ability of the City to foreclose on parcels with delinquent Facilities Special Taxes. No assurance can be given that any such laws will be enacted, or if enacted will be effective in assisting affected homeowners. Payment of Facilities Special Tax is not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Facilities Special Taxes. Rather, the Facilities Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Facilities Special Tax and a foreclosure sale by the City, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the City has no recourse against the owner. Appraised Values The Appraisal set forth in APPENDIX I estimates the market value of the Taxable Property within Improvement Area No. 1. This market value is merely the opinion of the Appraiser as of the date of value set forth in the Appraisal, and is subject to the assumptions and limiting conditions stated in the Appraisal. The City has not sought an updated opinion of value by the Appraiser subsequent to the date of value of the Appraisal, or an opinion of the value of the Taxable Property by any other appraiser. A different opinion of value might be rendered by a different appraiser. The opinion of value assumes a sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information. In addition, the opinion of value is made as of the date of value set forth in the Appraisal, based upon facts and circumstances existing as of the date of value. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from the facts and circumstances at the time the Appraisal was prepared. No assurance can be given that any of the Taxable Property in Improvement Area No. 1 could be sold for the estimated market value contained in the Appraisal if that property should become delinquent in the payment of Facilities Special Taxes and be foreclosed upon. Property Values The value of Taxable Property within Improvement Area No. 1 is a critical factor in determining the investment quality of the 2026 Bonds. If a property owner defaults in the payment
-86-
of the Facilities Special Tax, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Facilities Special Tax. Land values could be adversely affected by economic and other factors beyond the City’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, landslides, wildfires, or other natural disasters, environmental pollution or contamination, public health emergencies, such as the COVID-19 pandemic, or unfavorable economic conditions. The following is a discussion of specific risk factors that could affect the value of property in Improvement Area No. 1. Prolonged Economic Downturn. Land values are affected by economic conditions and to the extent that an economic downturn is prolonged, property values could decline or remain flat for an indefinite period. Declines in home values in Improvement Area No. 1 could also result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies are likely to increase. Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings. Natural Disasters. The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The City, like all northern California communities, is likely to be subject to unpredictable seismic activity, fires, floods or other natural disasters. If there were a severe seismic, flood or fire event or other natural disaster in the City, there could be substantial damage to and interference with the City. Seismic Activity. The City is located along the eastern edge of the seismically active Coast Ranges of California. Active faults near the City include the Green Valley and Cordelia faults. Most large earthquakes in the Bay Area have occurred along the major faults including the San Andreas, Hayward, and Calaveras faults, which are located 20 to 45 miles west and south of the City. The closest mapped fault to Improvement Area No. 1 is the Vaca fault zone (not considered active), located within approximately 500 feet of the northwest corner of the project site. The closest active fault displaying surface expression is the Green Valley fault, located approximately 8 miles west of Improvement Area No. 1. The maximum magnitude earthquake (the “Mmax”) assumed for the Green Valley fault in this region is 6.8. The Mmax is the maximum earthquake believed possible for the fault. Flooding Hazards. The District is located in an area of minimal flooding according to FEMA. In particular, Improvement Area No. 1 is located in an area designated by FEMA as being within Zone X, with a 0.02% chance of flooding in any given year. Wildfire Hazards. Significant portions of the foothill watershed areas surrounding the City are threatened with wildfire risk, and these areas present a dangerous combination of factors. “Fire Hazard Severity Zones” are those lands where severe burning conditions prevail (chaparral and heavy woodland, steep slopes, poor access, winds). In the City, this includes the hilly areas to the west and northwest, the Cement Hill
-87-
area, the hills above Green Valley and the hills above Interstate 80 and 680 just south of Cordelia. Improvement Area No. 1 is not within a Fire Hazard Severity Zone. Drought. With respect to droughts specifically, California has a history of suffering periodic drought conditions. Most recently, on May 10, 2021, the governor proclaimed a State of Emergency for 41 of the State’s 58 counties (including Solano County), citing above-average temperatures and dry conditions. In April 2022, the governor extended the State of Emergency to all counties in the State and asked all Californians to voluntarily reduce water usage by 15%. While some drought-related water restrictions were eased in May 2023, no assurance can be given that drought conditions will not continue in future years or, subside only to return in the future, potentially impacting the development of property in Improvement Area No. 1, the value of Taxable Property within Improvement Area No. 1, or economic activity within Improvement Area No. 1. Legal Requirements. Other events that may affect the value of Taxable Property include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Hazardous Substances. One of the most serious risks in terms of the potential reduction in the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The property values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the City is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the City is not aware of them. Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but that may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of Taxable Property that is realizable upon a delinquency.
-88-
There can be no assurance that the discovery, release or classification of additional hazardous substances will not affect the value of Taxable Property in Improvement Area No. 1. Mortgage Interest Rates. Future increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the 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 or the ability to achieve the sales prices of the planned for-sale homes within Improvement Area No. 1 as described herein. Other Factors. Other factors that could adversely affect property values in Improvement Area No. 1 include, among others, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, and destruction of property caused by man-made disasters. Other Possible Claims Upon the Value of Taxable Property While the Facilities Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims. The tables in the sections entitled “THE DISTRICT AND IMPROVEMENT AREA NO. 1 – Direct and Overlapping Governmental Obligations” and “– Estimated Tax Burden on Single-Family Homes” show the presently outstanding amount of governmental obligations, the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. The tables do not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Facilities Special Tax securing the 2026 Bonds. In general, as long as the Facilities Special Tax is collected on the County tax roll, the Facilities Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Facilities Special Taxes securing the 2026 Bonds, the Facilities Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Facilities Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata basis. Although the Facilities Special Taxes will generally have priority over non-governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental
-89-
liens were in existence at the time of the levy of the Facilities Special Tax or not, this result may not apply in the case of bankruptcy. See “– Bankruptcy Delays” below. Exempt Properties Certain properties are exempt from the Facilities Special Tax in accordance with the Amended Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Facilities Special Tax; provided, however, that property within Improvement Area No. 1 acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Facilities Special Tax, will continue to be subject to the Facilities Special Tax. See “SECURITY FOR THE BONDS – Amended Rate and Method.” In addition, although the Act provides that if property subject to the Facilities Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Facilities Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Facilities Special Tax. For ordinances levying special taxes that are adopted after January 1, 2020, Section 53340(c) of the Act also provides that: “a property receiving a welfare exemption under subdivision (g) of Section 214 of the Revenue and Taxation Code shall be exempt from the special tax unless debt is outstanding and the property was subject to the special tax prior to receiving the exemption, in which case the property shall remain subject to the special tax and the special tax shall be enforceable against the property. However, whether or not the resolution of formation that authorized creation of the district specified conditions under which the obligation to pay a special tax may be prepaid and permanently satisfied, the legislative body of the local agency that created the district may, by resolution, specify additional or different conditions under which the property receiving the welfare exemption may prepay and satisfy the obligation to pay the special tax. The conditions may be specified only if the legislative body of the local agency that created the district finds and determines that the prepayment arrangement will not, in and of itself, adversely affect the ability of the district to make scheduled payments on debt as such payments become due.” Because the Ordinance levying the Facilities Special Taxes within Improvement Area No. 1 was adopted after January 1, 2020, the foregoing is applicable to Improvement Area No. 1. See “SECURITY FOR THE BONDS – Amended Rate and Method" and APPENDIX B for a discussion of the treatment of welfare exemption property. The Act further provides that no other properties or entities are exempt from the Facilities Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. FDIC/Federal Government Interests in Properties General. The ability of the City to foreclose the lien of delinquent unpaid Facilities Special Tax installments may be limited with regard to properties in which the FDIC, the Federal National Mortgage Association, the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.
-90-
Federal courts have held that, based on the supremacy clause of the United States Constitution, 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. The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Facilities Special Taxes but does not pay taxes and assessments levied on the parcel (including Facilities 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 City wishes to foreclose on the parcel as a result of delinquent Facilities 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 Facilities Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The City has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Facilities Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the 2026 Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within Improvement Area No. 1 is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the City to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Facilities Special Taxes may be limited. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit
-91-
a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Facilities Special Taxes on a parcel within Improvement Area No. 1 in which the FDIC has or obtains an interest, although prohibiting the lien of the Facilities Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the 2024 Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2026 Bonds. Depletion of 2024 Reserve Fund The 2024 Reserve Fund is to be maintained at an amount equal to the 2024 Reserve Requirement for the 2026 Bonds, the 2024 Bonds and any additional 2024-Related Parity Bonds issued in the future. See “SECURITY FOR THE BONDS – 2024 Reserve Fund.” The 2024 Reserve Fund will be used to pay principal of and interest on the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds issued in the future if insufficient funds are available from the proceeds of the levy and collection of the Facilities Special Tax against property within Improvement Area No. 1 of the District. If the 2024 Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Facilities Special Taxes that exceed the amounts to be paid to the owners of the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds issued in the future under the Fiscal Agent Agreement. However, because the Facilities Special Tax levy is limited to the maximum annual Facilities Special Tax rates, it is possible that no replenishment would be possible if the Facilities Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the 2024 Reserve Fund will be depleted and not be replenished by the levy and collection of the Facilities Special Taxes. Bankruptcy Delays The payment of the Facilities Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Facilities Special Tax, as discussed in “SECURITY FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the 2026 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Facilities Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the
-92-
property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Facilities Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2026 Bonds. In addition, the amount of any lien on property securing the payment of delinquent Facilities Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Facilities Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Facilities Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2026 Bonds and the possibility of delinquent Facilities Special Taxes not being paid in full. The chances are increased that the 2024 Reserve Fund could be fully depleted during any such delay in obtaining payment of delinquent Facilities Special Taxes. As a result, sufficient moneys would not be available in the 2024 Reserve Fund to make up shortfalls resulting from delinquent payments of the Facilities Special Tax and thereby to pay principal of and interest on the 2026 Bonds, the 2024 Bonds and any other 2024-Related Parity Bonds issued in the future on a timely basis. Cyber Security The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the City’s efforts 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 District, or the administration of the 2026 Bonds. The City is also reliant on other entities and service providers in connection with the administration of the 2026 Bonds, including without limitation the County tax collector for the levy and collection of Facilities Special Taxes, the Fiscal Agent, and the Dissemination Agent. No assurance can be given that the City, the District and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners. Disclosure to Future Purchasers The City has recorded a notice of the Facilities Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in Improvement Area No. 1 or the lending of money secured by property in Improvement Area No. 1. The Act and the Goals and Policies of the City require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Facilities Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Facilities Special Tax when due.
-93-
Public Health Emergencies In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. Pandemic diseases arising in the future could have significant adverse health and financial impacts throughout the world, leading to loss of jobs and personal financial hardships, and/or actions by federal, State and local governmental authorities to contain or mitigate the effects of an outbreak. Taxpayer assistance measures may include deferral of due dates of property taxes, which was an assistance program during the COVID-19 pandemic, and with or without a deferral some taxpayers affected by a public health emergency may be unable to make their property and Facilities Special Tax payments. No assurance can be given that the property tax payment dates will not be deferred in the future, which may cause a delay in the receipt of Facilities Special Taxes. In addition, home values may be affected by a reduction in demand stemming from personal finances, or general widespread economic circumstances resulting from pandemic diseases. No Acceleration Provisions The 2026 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2026 Bonds or the Fiscal Agent Agreement. Under the Fiscal Agent Agreement, a Bondholder is given the right for the equal benefit and protection of all Bond owners similarly situated to pursue certain remedies. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.” So long as the 2026 Bonds are in book-entry form, DTC will be the sole Bondholder and will be entitled to exercise all rights and remedies of Bond holders. Loss of Tax Exemption As discussed under the caption “LEGAL MATTERS – Tax Exemption,” interest on the 2026 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the 2026 Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the 2026 Bonds were to become includable in gross income for purposes of federal income taxation, the 2026 Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Facilities Special Taxes. See “THE 2026 BONDS – Redemption.” IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service (the “IRS”) has a program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2026 Bonds will be selected for audit by the IRS. It is also possible that the market value of such 2026 Bonds might be affected as a result of such an audit of such 2026 Bonds (or by an audit of similar bonds or securities). Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption Future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2026 Bonds to be subject, directly or indirectly, to federal
-94-
income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bondowners from realizing the full current benefit of the tax status of such interest. Voter Initiatives Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the 2026 Bonds. Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees, Assessments, and Charges—Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act”. Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote. The Facilities Special Taxes and the 2026 Bonds were each authorized by not less than a two-thirds vote of the landowners within Improvement Area No. 1 of the District who constituted the qualified electors at the time of such voted authorization. The City believes, therefore, that issuance of the 2026 Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26. Like their antecedents, Proposition 218 and Proposition 26 are likely to undergo both judicial and legislative scrutiny before the impact on the City and its obligations can be determined. Certain provisions of Proposition 218 and Proposition 26 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot be predicted. For example, in August 2014, the California Court of Appeal, Fourth Appellate District, Division One (the “Court”), issued its opinion in City of San Diego v. Melvin Shapiro, et al. (“Shapiro”) invalidating an election held by the City of San Diego to authorize the levying of special taxes on hotels city-wide pursuant to a city charter ordinance creating a convention center facilities district which specifically defined the electorate to consist solely of (1) the owners of real property in the city on which a hotel is located, and (2) the lessees of real property owned by a governmental entity on which a hotel is located. The court held that such landowners and lessees are neither “qualified electors” of the city for purposes of Articles XIII A, Section 4 of the California
-95-
Constitution, nor a proper “electorate” under Article XIIIC, Section 2(d) of the California Constitution. The court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) of the Act (which was the nature of the voter approval through which the District and Improvement Area No. 1 were formed) violates the California Constitution in districts that lack sufficient registered voters to conduct an election among registered voters. Accordingly, Shapiro should have no effect on the levy of the Facilities Special Taxes by the City because the District had no registered voters at the time of its formation. The City cannot predict the ultimate outcome or effect of any such judicial scrutiny, legislative actions, or future initiatives. These initiatives, and any future initiatives, may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the 2026 Bonds. No Ratings – Limited Secondary Market for Bonds The City has not applied to have the 2026 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 2026 Bonds or, if a secondary market exists, that any 2026 Bonds can be sold for any particular price. Although the City has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bondowners 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 2026 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. No assurance can be given that the market price for the 2026 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Tax Code), or changes in interpretation of the Tax Code, or any action of the IRS, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2026 Bonds for audit examination, or the course or result of any IRS audit or examination of the 2026 Bonds or obligations that present similar tax issues as the 2026 Bonds.
-96-
LEGAL MATTERS Legal Opinions The legal opinion of Jones Hall LLP, San Mateo, California, Bond Counsel, approving the validity of the 2026 Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX H. Jones Hall LLP, San Mateo, California, has also served as Disclosure Counsel to the City. Richards, Watson and Gershon, San Francisco, California, will pass upon certain legal matters for the City. Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, is serving as counsel to the Underwriter. Cox, Castle Nicholson, San Francisco, California, is serving as counsel to One Lake Holding LLC, the Master Developer. Tax Exemption Federal Tax Status. In the opinion of Jones Hall LLP, San Mateo, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2026 Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals; however, such interest on the 2026 Bonds may be taken into account for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the 2026 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2026 Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2026 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2026 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "bond premium" for purposes of federal income taxes and State of California personal income taxes. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2026 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2026 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2026 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2026 Bonds who purchase the 2026 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2026 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2026 Bonds with original issue
-97-
discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2026 Bonds is sold to the public. Under the Tax Code, bond premium is amortized on an annual basis over the term of the 2026 Bond (said term being the shorter of the 2026 Bond's maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2026 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2026 Bond is amortized each year over the term to maturity of the 2026 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2026 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2026 Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the 2026 Bonds is exempt from California personal income taxes. Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2026 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2026 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2026 Bonds, or as to the consequences of owning or receiving interest on the 2026 Bonds, as of any future date. Prospective purchasers of the 2026 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Owners of the 2026 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2026 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2026 Bonds, the ownership, sale or disposition of the 2026 Bonds, or the amount, accrual or receipt of interest on the 2026 Bonds. No Litigation At the time of delivery of the 2026 Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the City has been served with process or threatened, which: • in any way questions the powers of the City Council or the City or the District, or • in any way questions the validity of any proceeding taken by the City Council in connection with the issuance of the 2026 Bonds, or
-98-
• wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the purchase contract with respect to the 2026 Bonds, or • which, in any way, could adversely affect the validity or enforceability of the resolutions of the City Council adopted in connection with the formation of the District and Improvement Area No. 1 or the issuance of the 2026 Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate or the purchase contract with respect to the 2026 Bonds, or • to the knowledge of the City, in any way questions the exclusion from gross income of the recipients thereof of the interest on the 2026 Bonds for federal income tax purposes, or • in any other way questions the status of the 2026 Bonds under State tax laws or regulations. CONTINUING DISCLOSURE The City. The City will covenant for the benefit of owners of the 2026 Bonds to provide certain financial information and operating data relating to Improvement Area No. 1 and the 2026 Bonds by not later than nine months after the end of the City's fiscal year (currently March 31 based on the City’s fiscal year end of June 30) (the “Annual Report”), commencing March 31, 2027, and to provide notices of the occurrence of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in “APPENDIX E – FORM OF CITY CONTINUING DISCLOSURE CERTIFICATE.” The City previously entered into numerous disclosure undertakings under the Rule in connection with the issuance of long-term obligations. The City has not failed to comply in all material aspects with any previous undertakings with regard to the Rule in the past five years. Any failure by the City to comply with the provisions of its undertaking will not constitute a default under the Fiscal Agent Agreement (although owners of the 2026 Bonds will have any remedy available at law or in equity as provided in the undertaking). Nevertheless, a failure to comply must be reported in accordance with the Rule. Such a failure may adversely affect the transferability and liquidity of the 2026 Bonds. To ensure compliance with its continuing disclosure undertakings under the Rule in the future, the City has appointed the City’s Finance Director to coordinate the preparation and filing of annual disclosure reports in accordance with the City’s disclosure undertakings and has adopted policies and procedures related thereto. The City has also engaged Willdan Financial Services to serve as its dissemination agent and assist the City in complying with its continuing disclosure undertakings. Master Developer. The Master Developer will covenant in a continuing disclosure certificate, the form of which is set forth in APPENDIX F to this Official Statement (the “Master Developer Continuing Disclosure Certificate”), for the benefit of holders and beneficial owners of the 2026 Bonds, to provide certain information relating to itself and the status of its property within Improvement Area No. 1 on a semi-annual basis, beginning on October 31, 2026, and to provide notices of the occurrence of certain enumerated events. See APPENDIX F.
-99-
The Master Developer is not an obligated person as defined under the Rule. The obligations of the Master Developer under the Master Developer Continuing Disclosure Certificate will terminate when the property owned by the Master Developer is no longer responsible for payment of 15% or more of the Facilities Special Taxes or Master Developer owns ____ or fewer existing or planned single-family lots within Improvement Area No. 1. The Master Developer is in compliance with its prior continuing disclosure undertakings. [PLEASE CONFIRM] Lennar Homes. Lennar Homes will covenant in a continuing disclosure certificate, the form of which is set forth in APPENDIX G to this Official Statement (the “Merchant Builder Continuing Disclosure Certificate”), for the benefit of holders and beneficial owners of the 2026 Bonds, to provide certain information relating to itself and the status of the property it owns within Improvement Area No. 1 on a semi-annual basis, beginning on October 31, 2026, and to provide notices of the occurrence of certain enumerated events. See APPENDIX G. Lennar Homes is not an obligated person as defined under the Rule. The obligations of Lennar Homes under its Merchant Builder Continuing Disclosure Certificate will terminate when Lennar Homes owns or has an option to purchase 50 or fewer existing or planned single-family lots within Improvement Area No. 1. [PLEASE UPDATE] Other than as disclosed in this Official Statement, in the last five years, Lennar Homes has not failed to comply in any material respects with its previous continuing disclosure undertakings, specifically regarding its requirement to provide developer periodic reports or to provide notice of occurrence of enumerated events. However, (i) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, Lennar Homes 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 Homes inadvertently failed to file the initial annual report by the due date of April 1, 2022, but filed a curative report on September 21, 2022. [ADDITIONAL MERCHANT BUILDING CONTINUING DISCLOSURE REQUIREMENTS TO BE DISCUSSED] NO RATING The City has not obtained a credit rating on the 2026 Bonds. Nothing should be assumed from any credit rating that the City may obtain for other purposes. Prospective purchasers of the 2026 Bonds are required to make independent determinations as to the credit quality of the 2026 Bonds and their appropriateness as an investment. UNDERWRITING The 2026 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), at a purchase price of $________ (which represents the aggregate principal amount of the 2026 Bonds ($________), plus original issue premium of $________, less an Underwriter's discount of $________).
-100-
The purchase agreement relating to the 2026 Bonds provides that the Underwriter will purchase all of the 2026 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell the 2026 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter. PROFESSIONAL FEES In connection with the issuance of the 2026 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2026 Bonds. Those professionals include the Underwriter, Stradling Yocca Carlson & Rauth LLP, as Underwriter’s Counsel, PFM Financial Advisors LLC, as municipal advisor, Goodwin Consulting Group, Inc., as special tax consultant, and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent.
-101-
EXECUTION The execution and delivery of the Official Statement by the City have been duly authorized by the City Council, acting as the legislative body of the District. CITY OF FAIRFIELD By: John Furtado, Director of Finance
A-1
APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF FAIRFIELD AND SOLANO COUNTY The following information concerning the City of Fairfield (the "City") and Solano County (the “County”) are included only for the purpose of supplying general information regarding the community. The 2026 Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor. General The City, which comprises approximately 37 square miles, is located in the County approximately 44 miles northeast of San Francisco and 42 miles west of Sacramento. The City is served by Interstate 80, the major freeway link between San Francisco and Sacramento, as well as Highway 12, a connecting freeway from Interstate 80 to Napa Valley. Historically, the City's economy has been based upon agriculture and related industries; the City has served as a commerce center for agriculture in its region for over 100 years. In recent years, the City has transformed its economic base as a result of significant residential, industrial and commercial building activity occurring over the past several years. The City has been proactive in providing commercial/industrial development opportunities, and has formed several assessment districts to finance public improvements required by new projects. This rapid expansion in manufacturing, logistics, warehousing and distribution has led to substantial growth in population and employment. Another major contributor to the City’s economy is Travis Air Force Base, the largest employer of both the City and the County. As of September 30, 2024 (the date of Travis Air Force Base’s latest economic impact report), the partnership between Travis Air Force Base and the County generated 13,336 indirect jobs, totaling an estimated annual dollar value of $1,487,354,041. Travis Air Force Base also awarded more than $211 million worth of contracts to local businesses for work on construction, operations and maintenance of base infrastructure projects. Municipal Government The City was incorporated in 1892 and operates under a council/manager form of government. All municipal departments operate under the supervision of the City Manager. The City Council consists of a Mayor elected at large for a four-year term and four other Council members elected at large for overlapping four-year terms.
A-2
Population The Fairfield area experienced significant growth over the 1980's. The population of the City was 58,099 as of the 1980 census. By January 1, 1990 the population of the City was estimated to be 77,211, a percentage increase of approximately 33% over this ten-year period. Further growth occurred during the 1990's, when the population grew another 25% over this ten-year period. From 2000 to 2010, the population continued to expand, increasing by approximately 9.5% over that period. Population estimates for calendar years 1980, 1990, 2000, 2010, and the past five years in the City, the County, and the State are shown in the following table. CITY OF FAIRFIELD, COUNTY OF SOLANO AND STATE OF CALIFORNIA Population Estimates Calendar Years 1980, 1990, 2000, 2010, and 2020 through 2025 Year City of Fairfield Solano County State of California 1980 58,099 235,203 23,668,562 1990 77,211 339,471 29,758,213 2000 96,178 394,930 33,873,086 2010 105,321 413,344 37,253,956 2020 120,447 453,491 39,538,223 2021 120,114 450,518 39,369,530 2022 119,254 447,671 39,179,680 2023 119,854 447,411 39,228,444 2024 120,609 449,966 39,420,663 2025 120,720 449,839 39,529,101 Source: State Department of Finance estimates.
A-3
Employment and Industry The unemployment rate in the Solano County was 5.5 percent in January 2026, up from a revised 5.2 percent in December 2025, and above the year-ago estimate of 5.4 percent. This compares with an unadjusted unemployment rate of 5.5 percent for California and 4.7 percent for the nation during the same period. The table below shows the Vallejo-Fairfield Metropolitan Statistical Area’s labor patterns during 2020 through 2024. VALLEJO-FAIRFIELD METROPOLITAN STATISTICAL AREA (SOLANO COUNTY) Civilian Labor Force, Employment and Unemployment (Annual Averages) (March 2024 Benchmark) 2020 2021 2022 2023 2024 Civilian Labor Force (1) 209,900 208,200 209,700 214,000 216,300 Employment 190,200 193,200 201,000 204,600 205,600 Unemployment 19,700 15,000 8,700 9,400 10,800 Unemployment Rate 9.4% 7.2% 4.1% 4.4% 5.0% Wage and Salary Employment: (2) Agriculture 1,500 1,600 1,600 1,500 1,400 Mining and Logging 400 300 300 300 200 Construction 11,100 11,600 12,100 11,800 11,100 Manufacturing 10,900 10,900 11,200 11,200 11,400 Wholesale Trade 4,100 4,000 4,100 4,200 4,100 Retail Trade 16,700 17,500 17,600 17,500 17,300 Trans., Warehousing, Utilities 4,900 5,300 6,000 6,400 7,100 Information 800 800 900 900 900 Finance and Insurance 3,400 3,200 3,000 2,800 2,900 Professional and Business Services 9,700 10,400 10,900 11,100 11,100 Educational and Health Services 27,900 27,600 28,500 29,900 31,200 Leisure and Hospitality 12,300 13,600 15,500 16,000 15,600 Other Services 4,000 4,200 4,700 4,900 4,900 Federal Government 3,600 3,600 3,400 3,300 3,400 State Government 5,400 5,200 5,200 5,000 4,900 Local Government 14,400 14,100 14,800 15,500 16,200 Total all Industries (3) 132,800 135,500 141,500 144,100 145,700 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department.
A-4
Largest Employers Employment in the City area traditionally is centered around food processing, financial and service employees and the public sector. The following table lists some of the largest employers located within the City. CITY OF FAIRFIELD Largest Employers June 30, 2025 Employer Name Type Jobs Travis Air Force Base Military Base 13,414 County of Solano Government 2,633 Fairfield-Suisun Unified School District Education 2,213 Northbay Medical Center Hospital 1,969 Solano Community College Education 750 Partnership Health Plan Healthcare Group 561 City of Fairfield Government 553 Jelly Belly Candy Co. Candy & Confections 489 Sutter Regional Medical Foundation Insurance 475 Westamerica Bancorporation Banking 418 Source: City of Fairfield Annual Comprehensive Financial Report for fiscal year ended June 30, 2025.
A-5
Major Employers The table below lists the major employers in the County as of April 2026, listed alphabetically. Solano County Major Employers (Listed Alphabetically) April 2026 Employer Name Location Industry Aerospace Medical Travis AFB Medical Centers California Medical Facility Vacaville Hospitals Collins Aerospace Fairfield Aircraft Components-Manufacturers Duravent Inc Vacaville Ventilating Equipment (whls) Flatiron Construction Corp Benicia General Contractors Guittard Chocolate Co Fairfield Chocolate & Cocoa-Manufacturers Jelly Belly Candy Co Fairfield Candy & Confectionery-Manufacturers Meyer Corp US Vallejo Exporters (whls) Northbay Healthcare Green Vly Fairfield Health Services Northbay Medical Ctr Fairfield Hospitals Northbay Vacavalley Hospital Vacaville Hospitals Primal Pet Foods Inc Fairfield Pet Shops Quick Lane Fairfield Tire-Dealers-Retail Six Flags Discovery Kingdom Vallejo Amusement & Theme Parks Solano County Fairfield General Government Support Solano County Sheriff Fairfield Civil Enforcement Solano County Special Edu Fairfield Schools Sutter Solano Medical Ctr Vallejo Hospitals Touro University California Vallejo University-College Dept/Facility/Office Travis Air Force Base Travis AFB Military Bases USDA Forest Svc Vallejo Federal Government-Land/Mineral/Wildlife/Fore Valero Benicia Refinery Benicia Crude Oil-Petroleum Refineries Vallejo City Manager's Office Vallejo City Government-Executive Offices Walmart Neighborhood Market Vacaville Grocers-Retail Walmart Supercenter Dixon Department Stores Source: State of California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database, 2026 1st Edition.
A-6
Effective Buying Income "Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as "disposable personal income." The following table summarizes the total effective buying income for the City, the County, the State and the United States for the calendar years 2022 through 2026. EFFECTIVE BUYING INCOME For Calendar Years 2022 Through 2026 Year and Area Total Effective Buying Income (000s omitted) Median Household Effective Buying Income 2022 City of Fairfield $4,177,793 $83,809 County of Solano 16,095,586 81,515 California 1,452,426,153 77,058 United States 11,208,582,541 64,448 2023 City of Fairfield $4,041,044 $81,551 County of Solano 16,044,120 81,403 California 1,461,799,662 77,175 United States 11,454,846,397 65,326 2024 City of Fairfield $4,182,467 $85,615 County of Solano 16,238,988 83,539 California 1,510,708,521 80,973 United States 11,987,185,826 67,876 2025 City of Fairfield $4,245,900 $84,469 County of Solano 16,525,335 83,205 California 1,557,429,767 82,725 United States 12,525,577,707 69,687 2026 City of Fairfield $4,830,845 $93,715 County of Solano 18,935,275 92,659 California 1,730,654,738 90,403 United States 13,932,177,817 75,433 _______________________ Source: Claritas, LLC.
A-7
Commercial Activity A summary of historic taxable sales within the City and the County during the past five years in which data is available is shown in the following table. Total taxable transactions in the City during the first three quarters of calendar year 2025 were reported to be $1,941,594,331, a 3.63% increase over the total taxable transactions of $1,873,636,114 reported during the comparable quarters of calendar year 2024. CITY OF FAIRFIELD Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions ($000s) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions 2020 1,786 $1,263,571 2,876 $1,909,404 2021 1,680 1,569,006 2,711 2,320,891 2022 1,724 1,666,031 2,792 2,584,908 2023 1,626 1,654,581 2,662 2,527,456 2024 1,601 1,639,755 2,639 2,541,792 Source: State Department of Tax and Fee Administration. Total taxable sales during the first three quarters of calendar year 2025 in the County were reported to be $7,578,324,176, a 1.00% increase over the total taxable sales of $7,503,138,398 reported during the comparable quarters of calendar year 2024. SOLANO COUNTY Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions ($000s) Retail Stores Total All Outlets Number of Permits Taxable Transactions Number of Permits Taxable Transactions 2020 6,996 $5,511,263 11,553 $8,259,715 2021 6,598 6,414,957 11,000 9,733,516 2022 6,709 6,680,984 11,253 10,432,958 2023 6,430 6,602,488 10,898 10,393,076 2024 6,265 6,551,365 10,744 10,546,879 Source: State Department of Tax and Fee Administration.
B-1
APPENDIX B AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX FOR IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5)
C-1
APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT
D-1
APPENDIX D DTC AND THE BOOK-ENTRY ONLY SYSTEM The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the 2026 Bonds, payment of principal, interest and other payments on the 2026 Bonds (herein, the “Securities”) to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Securities and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the Securities (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Securities (the “Agent”) takes any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Securities, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Securities, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Securities, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
D-2
subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as
D-3
possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
E-1
APPENDIX E FORM OF CITY CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE $________________ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the City of Fairfield (the “City”) in connection with the issuance of the bonds captioned above (the “2026 Bonds”). The 2026 Bonds are being issued pursuant to a Fiscal Agent Agreement dated as of December 1, 2024 (the “Master Fiscal Agent Agreement”), as supplemented by a First Supplement to Fiscal Agent Agreement dated August 1, 2026 (as supplemented the “Fiscal Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”). The City hereby covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2026 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means the date that is nine months after the end of the City 's fiscal year (currently March 31 based on the City’s fiscal year end of June 30). “Dissemination Agent” means Willdan Financial Services, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. “District” means the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5). “Improvement Area No. 1” means Improvement Area No. 1 of the District. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
E-2
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule. “Official Statement” means the final Official Statement dated ___________, 2026, executed by the City in connection with the issuance of the 2026 Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the 2026 Bonds required to comply with the Rule in connection with offering of the 2026 Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2027, with the report for the 2025-26 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). (b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide a notice to the MSRB, in a timely manner, in an electronic format as prescribed by the MSRB. (c) With respect to each Annual Report, the Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following documents and information: (a) The City's audited financial statements for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply
E-3
to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement: THE CITY'S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY OR THE DISTRICT, OTHER THAN SPECIAL TAX REVENUES FROM IMPROVEMENT AREA NO. 1 OF THE DISTRICT, ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE 2026 BONDS, AND NEITHER THE CITY NOR THE DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY OR THE DISTRICT IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE 2026 BONDS. (b) To the extent not included in the audited financial statements, the following information: (i) The principal amount of the 2026 Bonds outstanding, the balance in the 2024 Reserve Fund (along with a statement of the 2024 Reserve Requirement) as of the September 30 next preceding the Annual Report Date, and the issuance date and principal amount of any additional bonds or obligations issued under the Fiscal Agent Agreement on a parity with the 2026 Bonds. (ii) The total dollar amount of delinquencies, if any, in Improvement Area No. 1 as of August 1 of the prior calendar year and, if the total delinquencies within Improvement Area No. 1 as of August 1 in the prior calendar year exceed 5% of the Facilities Special Tax for the previous fiscal year, delinquency information for each parcel with a Facilities Special Tax delinquency, including the amounts of delinquencies, number of unpaid installments of Facilities Special Taxes, length of delinquency and status of any foreclosure of each such parcel. (iii) The amount of prepayments of the Special Tax for the prior Fiscal Year. (iv) Total assessed value (per the Solano County Assessor’s records) of all parcels currently subject to the Special Tax within Improvement Area No. 1. (v) An updated table in substantially the form of the table in the Official Statement entitled “Table 2 Fiscal Year 2026-27 Maximum Facilities Special Tax Revenues and Value-to-Lien Ratios,” showing the Facilities Special Tax levy for the then-current Fiscal Year, and substituting assessed values shown on the Solano County Assessor's last equalized tax roll prior to the September next preceding the Annual Report Date for appraised values. (vi) Any changes to the Amended Rate and Method of Apportionment of Special Tax for Improvement Area No. 1 set forth in Appendix B to the Official Statement. (vii) A description of the number of building permits issued with respect to Improvement Area No. 1 as of the previous June 30. (viii) A copy of the most recent annual information required to be filed by the City with the California Debt and Investment Advisory Commission pursuant to the Act and
E-4
relating generally to outstanding Community Facilities District bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information. (c) In addition to any of the information expressly required to be provided under paragraph (b) above, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Listed Events. (a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2026 Bonds, or other material events affecting the tax status of the 2026 Bonds. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the obligated person. (13) The consummation of a merger, consolidation, or acquisition involving the obligated person, or the sale of all or substantially all of the assets of the
E-5
obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional Fiscal Agent or the change of name of the Fiscal Agent, if material. (15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material. (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person any of which reflect financial difficulties. (b) Upon the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Fiscal Agent Agreement. (c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the 2026 Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (16), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The
E-6
term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2026 Bonds. If such termination occurs prior to the final maturity of the 2026 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent will be Willdan Financial Services. Any Dissemination Agent may resign by providing 30 days’ prior written notice to the City. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2026 Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the 2026 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the 2026 Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the 2026 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles
E-7
on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(b). Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the 2026 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Fiscal Agent, the Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2026 Bonds. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the 2026 Bonds, and shall create no rights in any other person or entity.
E-8
Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Dated: _______________, 2026 CITY OF FAIRFIELD By: John Furtado, Director of Finance AGREED AND ACCEPTED: WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Name: Title:
F-1
APPENDIX F FORM OF MASTER DEVELOPER DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE (Master Developer) $___________________ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A This Continuing Disclosure Certificate (Master Developer) (this “Disclosure Certificate”) is executed and delivered by One Lake Holding LLC, a Delaware limited liability company (the “Property Owner”), in connection with the issuance by the City of Fairfield (the “City”) of the bonds captioned above (the “Bonds”) for and on behalf of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “District”) with respect to its Improvement Area No. 1. The Bonds are being issued under a Fiscal Agent Agreement dated as of December 1, 2024 (the “Master Fiscal Agent Agreement”), as supplemented by a First Supplement to Fiscal Agent Agreement dated August 1, 2026 (as supplemented the “Fiscal Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) under managerial control of the Property Owner or a Major Owner, as applicable, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or to the ability of the Property Owner or a Major Owner, as applicable, to pay the Special Taxes levied on the Property prior to delinquency). “Assumption Agreement” means an undertaking of a Major Owner, for the benefit of the holders and beneficial owners of the Bonds, whereby such Major Owner agrees to provide semi-annual reports and notices of significant events with respect to the portion of the property in Improvement Area No. 1 owned by such Major Owner and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 12 hereof. If such Major Owner is a Master Developer, the Assumption Agreement shall require such Major Owner to enter into a disclosure certificate containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the property in Improvement Area No. 1 acquired by the Major Owner). If such Major Owner is a Merchant Builder, the Assumption Agreement shall require such Major Owner to enter into a disclosure certificate containing terms
F-2
substantially similar to the continuing disclosure certificate attached as Appendix G to the Official Statement (as modified for such Major Owner’s development and financing plans with respect to the property in Improvement Area No. 1 acquired by the Major Owner). “Dissemination Agent” means the Property Owner or an entity experienced in providing dissemination agent services such as those required under this Disclosure Certificate designated by the Property Owner to serve as the Dissemination Agent hereunder and who has accepted such obligation in writing, and for which the Property Owner has filed with the City and the Participating Underwriter notice of such designation and acceptance. “Improvement Area No. 1” means Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5). “Official Statement” means the final Official Statement dated ___________, 2026, executed by the City in connection with the issuance of the Bonds. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any date of calculation, an owner of land in Improvement Area No. 1 who is, along with one or more Affiliates, responsible in the aggregate for 15% or more of the Special Taxes actually levied or to be levied at any time during the then-current or next fiscal year. If property is sold to a Merchant Builder that enters into a land bank arrangement, and the land bank would constitute a Major Owner, the Assumption Agreement may be entered into with the Merchant Builder so long as the Merchant Builder reports on the land owned by the land bank during the term of the Merchant Builder’s option agreement with the land bank. [change to lot count?] “Master Developer” means an owner of land, or an entity under option with a land bank, in Improvement Area No. 1 intending to pursue entitlements and land development activities but not develop its property as residences for sale to individual homeowners. “Merchant Builder” means an owner of land in Improvement Area No. 1 intending to develop its property as residences for sale to individual homeowners. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds. “Property” means (i) the property owned by the Property Owner in Improvement Area No. 1, and (ii) the property in Improvement Area No. 1 that the Property Owner sold to a Major Owner who has not assumed the undertakings of this Disclosure Certificate under Section 7(b) with respect to such property. “Report Date” means (a) October 31 of each year, and (b) April 30 of each year. “Semi-Annual Report” means any Semi-Annual Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Special Taxes” means the Facilities Special Taxes levied by the City on the Property.
F-3
Section 3. Provision of Semi-Annual Reports. (a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owner shall, or upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing April 30, 2027, provide to the MSRB, in an electronic format as prescribed by the MSRB, a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent (if different from the Property Owner), the Participating Underwriter and the City to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent is not the Property Owner and it does not receive a Semi-Annual Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 7 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall, in a timely manner, provide a notice to the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the City and the Participating Underwriter. (c) The Dissemination Agent shall: (i) determine prior to each Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and (ii) to the extent the Semi-Annual Report has been furnished to it, file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Semi-Annual Reports. Each Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit A, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit A, each Semi-Annual Report shall include such further information, if any, as may be necessary to make
F-4
the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner; (ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property prior to the delinquency date, to the extent such failure is not promptly cured upon discovery thereof; (iii) filing of a lawsuit against the Property Owner or, if known, an Affiliate of the Property Owner, seeking damages which, if successful, could have a material and adverse impact on the Property Owner’s ability to pay Special Taxes prior to delinquency or to sell or develop the Property; (iv) material damage to or destruction of any of the infrastructure improvements on the Property not yet accepted by the City; and (v) any payment default or other material default by the Property Owner or any Affiliate that continues to exist beyond any applicable notice and cure periods on any loan with respect to the development of infrastructure improvements required for the development of the One Lake Project. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, within 10 business days file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the City and the Participating Underwriter. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
F-5
Section 7. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as the Property is no longer responsible for payment of 15% or more of the Special Taxes, or (iii) at such time as the Property consists of 150 or fewer existing or planned single-family lots, or (iv) the date on which all of the Special Taxes attributable to the Property are paid in full. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property is conveyed to a person or entity that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property conveyed to such Major Owner may be assumed by such Major Owner and the Property Owner’s obligations hereunder with respect to the property conveyed will be terminated. In order to effect such assumption, such Major Owner shall enter into an Assumption Agreement. However, a Major Owner shall not be required to enter into an Assumption Agreement if such Major Owner is already a party to a continuing disclosure certificate in form and substance similar to this Disclosure Certificate or the continuing disclosure certificate attached as Appendix G to the Official Statement, and under which the property conveyed to such Major Owner will become subject to future semi-annual reports. Section 8. Dissemination Agent. The Property Owner may, from time to time, with the written consent of the City, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with the written consent of the City, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be The Property Owner. The Dissemination Agent may resign by providing 30 days’ written notice to the City, the Property Owner, and the Participating Underwriter. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, or change in law;
F-6
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Participating Underwriter, the City, and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to the Dissemination Agent’s negligence or willful misconduct or failure to perform its duties hereunder. If the Dissemination Agent is not the Property Owner, the Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Participating Underwriter, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
F-7
Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given by regular, overnight, or electronic mail as follows: To the issuer: City of Fairfield 1000 Webster Street Fairfield, CA 94533 Fax: (707) 728-7621 [email protected] To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, Suite 3700 San Francisco, CA 94104 [email protected] To the Property Owner: One Lake Holding LLC 2121 N. California Blvd., Suite 1010 Walnut Creek, CA 94596 Attention: Dan Aguilar [email protected] [email protected] Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: ______________________ ONE LAKE HOLDING LLC, a Delaware limited liability company By: Name: _____________________________ Title: Co-President
F-8
F-9
EXHIBIT A SEMI-ANNUAL REPORT [APRIL 30, ____ / OCTOBER 31, _____] $_______ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A This Semi-Annual Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (Master Developer) (the “Disclosure Certificate”) dated as of _________, 2026, executed by the undersigned (the “Property Owner”) in connection with the issuance by the City of Fairfield (the “City”) of the bonds captioned above (the “Bonds”) for Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “District”). Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the Report Date of this Semi-Annual Report). The information provided in this section shall cover the Property and all property owned by an Affiliate and by a Major Owner that has not entered into a continuing disclosure undertaking. A. Description of the Property in substance and form similar to such information in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ B. Updated information regarding land development and infrastructure construction activities with respect to the Property described in the Official Statement or the Semi-Annual Report last filed in accordance with the Disclosure Certificate: ________________________________________________________________________ ________________________________________________________________________ C. A summary of any material changes to the description of land use or development entitlements for the Property described in the Official Statement or the Semi-Annual Report last filed in accordance with the Disclosure Certificate: ________________________________________________________________________ ________________________________________________________________________
F-10
D. Status of any land purchase contracts with regard to all or any portion of the Property, whether acquisition of land in Improvement Area No. 1 by the Property Owner or sales of land to Merchant Builders or other property owners (other than individual homeowners). ________________________________________________________________________ ________________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any material change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. To the extent that the ownership of the Property Owner has changed, describe all material terms of the new ownership structure. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Change in Relationship with Merchant Builders To the extent a relationship (including a contractual relationship) exists between the Property Owner and a Merchant Builder, describe any material change in such relationship. To the extent that a new Merchant Builder has been engaged to carry out home construction, marketing and sales activity in Improvement Area No. 1, fully describe all material terms of the relationship between the Property Owner and any such new Merchant Builder. ________________________________________________________________________ ________________________________________________________________________ V. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any other material changes in the information relating to the Property Owner or the Property contained in the Official Statement under the caption “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS” (other than under the subcaptions “– Lennar Homes,” “– Lennar Homes Land Bank Arrangement” and “– Other Merchant Builders”). ________________________________________________________________________ ________________________________________________________________________
F-11
VI. Status of Tax Payments Describe status of payment of taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property owned by the Property Owner and its Affiliates. ________________________________________________________________________ ________________________________________________________________________ VII. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification On behalf of the Property Owner, the undersigned officer or representative, based on actual knowledge after reasonable inquiry of employees of Property Owner and its affiliates, hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: ONE LAKE HOLDING LLC, a Delaware limited liability company By: Name: _____________________________ Title: Co-President
G-1
APPENDIX G FORM OF MERCHANT BUILDER DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE (Merchant Builder) $___________________ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A This Continuing Disclosure Certificate (Merchant Builder) (this “Disclosure Certificate”) is executed and delivered by _________ (the “Property Owner”), in connection with the issuance by the City of Fairfield (the “City”) of the bonds captioned above (the “Bonds”) for and on behalf of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “District”) with respect to its Improvement Area No. 1. The Bonds are being issued under a Fiscal Agent Agreement dated as of December 1, 2024 (the “Master Fiscal Agent Agreement”), as supplemented by a First Supplement to Fiscal Agent Agreement dated August 1, 2026 (as supplemented the “Fiscal Agent Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as fiscal agent (the “Fiscal Agent”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) under managerial control of the Property Owner or a Major Owner, as applicable, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or to the ability of the Property Owner or a Major Owner, as applicable, to pay the Special Taxes levied on the Property prior to delinquency). [The Land Bank is not an Affiliate of the Property Owner.] “Assumption Agreement” means an undertaking of a Major Owner, for the benefit of the holders and beneficial owners of the Bonds, containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the property in Improvement Area No. 1 acquired by the Major Owner), whereby such Major Owner agrees to provide semi-annual reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area No. 1 owned by such Major Owner and, at the option of the
G-2
Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 12 hereof. “Dissemination Agent” means the Property Owner or an entity experienced in providing dissemination agent services such as those required under this Disclosure Certificate designated by the Property Owner to serve as the Dissemination Agent hereunder and who has accepted such obligation in writing, and for which the Property Owner has filed with the City and the Participating Underwriter notice of such designation and acceptance. “Improvement Area No. 1” means Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5). [“Land Bank” means __________, a ______, together with its successors and assigns.] “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any date of calculation, an owner of land in Improvement Area No. 1 who, along with one or more Affiliates, responsible in the aggregate for 15% or more of the Special Taxes actually levied or to be levied at any time during the then-current or next fiscal year. [change to lot count?] “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information. “Official Statement” means the final Official Statement dated ___________, 2026, executed by the City in connection with the issuance of the Bonds. [“Option Agreement” means that certain Option and Development Agreement dated _________, 20__, between the Land Bank, and the Property Owner, as amended from time to time.] “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the Bonds. “Property” means (i) the property owned by the Property Owner in Improvement Area No. 1, [(ii) the property owned by the Land Bank within the boundaries of Improvement Area No. 1 and under option to be purchased by the Property Owner or any Affiliate thereof pursuant to the Option Agreement, and (iii) the property in Improvement Area No. 1 that was formerly owned by the Property Owner or the Land Bank but with respect to which the Property Owner’s obligations under this Disclosure Certificate have not been assumed the undertakings of this Disclosure Certificate under Section 7(b) with respect to such property. “Report Date” means (a) October 31 of each year, and (b) April 30 of each year. “Semi-Annual Report” means any Semi-Annual Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Special Taxes” means the Facilities Special Taxes levied by the City on the Property.
G-3
Section 3. Provision of Semi-Annual Reports. (a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owner shall, or upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing April 30, 2027, provide to the MSRB, in an electronic format as prescribed by the MSRB, a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent (if different from the Property Owner), the Participating Underwriter and the City to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent is not the Property Owner and it does not receive a Semi-Annual Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 7 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall, in a timely manner, provide a notice to the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the City and the Participating Underwriter. (c) The Dissemination Agent shall: (i) determine prior to each Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and (ii) to the extent the Semi-Annual Report has been furnished to it, file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Semi-Annual Reports. Each Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit A, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit A, each Semi-Annual Report shall include such further information, if any, as may be necessary to make
G-4
the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner; (ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property prior to the delinquency date, to the extent such failure is not promptly cured upon discovery thereof; (iii) filing of a lawsuit against the Property Owner or, if known, an Affiliate of the Property Owner, seeking damages which, if successful, could have a material and adverse impact on the Property Owner’s ability to pay Special Taxes prior to delinquency or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owner or any Affiliates that continues to exist beyond any applicable notice and cure periods on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, within 10 business days file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the City and the Participating Underwriter. Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or
G-5
(ii) at such time as the Property consists of 50 or fewer existing or planned single-family lots, or (iii) the date on which all of the Special Taxes attributable to the Property have been paid in full. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property is conveyed to a person or entity that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property conveyed to such Major Owner may be assumed by such Major Owner and the Property Owner’s obligations hereunder with respect to the property conveyed will be terminated. In order to effect such assumption, such Major Owner shall enter into an Assumption Agreement in form and substance substantially similar to this Disclosure Certificate. However, a Major Owner shall not be required to enter into an Assumption Agreement if such Major Owner is already a party to a continuing disclosure certificate in form and substance similar to this Disclosure Certificate with respect to the Bonds, and under which the property conveyed to such Major Owner will become subject to future semi-annual reports. If the Property Owner terminates the Option Agreement, and the portion of the Property owned by the Land Bank would cause the Land Bank to be a Major Owner, the Property Owner’s obligations under this Disclosure Certificate with respect to such Property shall terminate only upon the execution of an Assumption Agreement by the Land Bank. The conveyance of any portion of the Property from the Land Bank to the Property shall not require an assumption of obligations under this Section 7(b). Section 8. Dissemination Agent. The Property Owner may, from time to time, with the written consent of the City, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with the written consent of the City, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Property Owner. The Dissemination Agent may resign by providing 30 days’ written notice to the City, the Property Owner, and the Participating Underwriter. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, or change in law; (b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
G-6
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Participating Underwriter, the City, and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to the Dissemination Agent’s negligence or willful misconduct or failure to perform its duties hereunder. If the Dissemination Agent is not the Property Owner, the Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Participating Underwriter, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
G-7
Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given by regular, overnight, or electronic mail as follows: To the issuer: City of Fairfield 1000 Webster Street Fairfield, CA 94533 Fax: (707) 728-7621 [email protected] To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, Suite 3700 San Francisco, CA 94104 [email protected] To the Property Owner: Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: [PROPERTY OWNER], a ____________ By: Title:
G-8
EXHIBIT A SEMI-ANNUAL REPORT [APRIL 30, ____ / OCTOBER 31, _____] $_______ IMPROVEMENT AREA NO. 1 OF THE CITY OF FAIRFIELD COMMUNITY FACILITIES DISTRICT NO. 2023-1 (ONE LAKE PLANNING AREA 5) SPECIAL TAX BONDS, SERIES 2026A This Semi-Annual Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (Merchant Builder) (the “Disclosure Certificate”) dated as of _________, 2026, executed by the undersigned (the “Property Owner”) in connection with the issuance by the City of Fairfield (the “City”) of the bonds captioned above (the “Bonds”) for Improvement Area No. 1 of the City of Fairfield Community Facilities District No. 2023-1 (One Lake Planning Area 5) (the “District”). Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the Report Date of this Semi-Annual Report). The information provided in this section shall cover the Property and all property owned by an Affiliate and by a Major Owner that has not entered into a continuing disclosure undertaking. A. Description of the Property in substance and form similar to such information in the Official Statement for the Bonds. ________________________________________________________________________ ________________________________________________________________________ B. Updated information regarding land development and home construction and sales activities with respect to the Property described in the Official Statement for the Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate in the following forms of tables included in the Official Statement:
G-9
Development Plans Neighborhood ___ Floor Plan Square Footage Planned Units Base Sales Prices Neighborhood __ Subtotal Neighborhood __ Subtotal Total Status of Development, Home Construction and Sales Neighborhood __ Neighborhood Planned Units Finished Lots Building Permits Homes Under Construction Completed Homes Owned by Land Bank or Merchant Builder
Homes Under Contract for Sale Home Closings Totals C. Status of building permits and any material changes to the description of land use or development entitlements for the Property described in the Official Statement for the Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate: ________________________________________________________________________ ________________________________________________________________________ D. Status of any land purchase contracts with regard to any property in Improvement Area No. 1 all or any portion of the Property, whether acquisition of land in Improvement Area No. 1 by the Property Owner or an Affiliate or sales of land to other property owners (other than individual homeowners). ________________________________________________________________________ ________________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any material change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. To the extent that the ownership of the Property Owner has changed, describe all material terms of the new ownership structure.
G-10
________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the captions “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS.” ________________________________________________________________________ ________________________________________________________________________ V. Status of Tax Payments Describe status of payment of taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property owned by, or under option to, the Property Owner and its Affiliates. ________________________________________________________________________ ________________________________________________________________________ VI. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification On behalf of the Property Owner, the undersigned officer or representative, based on actual knowledge after reasonable inquiry of employees of Property Owner and its affiliates, hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER
G-11
IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: ______________ a ______________ Name: Title:
G-1
APPENDIX H FORM OF OPINION OF BOND COUNSEL
H-1
APPENDIX I APPRAISAL REPORT
I-1
APPENDIX J COMMUNITY FACILITIES DISTRICT BOUNDARY MAP