Agenda packet — Fontana City Council, July 12, 2022 (part 6 of 6)

Price Point Study
In connection with the formation of the District, the City hired Empire Economics, Inc., Capistrano Beach, California (the “Price Point Consultant”) to prepare a price point study of the prices of the homes planned within the District, dated March 5, 2021 (the “Original Price Point Study”). The Special Tax rates set forth in the Rate and Method were based in part on the prices set forth in the Original Price Point Study. In connection with and in preparation for the issuance of the Bonds, the City hired the Price Point Consultant to conduct an update to the Original Price Point Study within the District, dated May 4, 2022 (the “Updated Price Point Study”). Pursuant to Section C of the Rate and Method, prior to the issuance of Bonds, the City is required to amend the Assigned Facilities Special Tax (as defined in the Rate and Method) to the extent necessary to cause the total effective tax burden for residential property in the District to not exceed 1.95% of the minimum sales prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as Appendix C to this Official Statement. Based on the conclusions of the Updated Price Point Study, the Facilities Special Taxes, Services Special Taxes, and all direct and overlapping property taxes, special assessments and other special taxes, the City does not expect to amend the Assigned Facilities Special Tax because effective tax rates are not projected to exceed 1.95% for any parcel. See “THE COMMUNITY FACILITIES DISTRICT — Direct and Overlapping Debt — Table 3” — Projected Total Effective Tax Rate for Individually Owned Residential Property.” See also “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Rate and Method of Apportionment.”
Professionals Involved in the Offering
U.S. Bank Trust Company, National Association, Los Angeles, California, will act as Trustee under the Indenture and as the initial Dissemination Agent under the District Continuing Disclosure Agreement.

Stifel, Nicolaus & Company, Incorporated is the Underwriter of the Bonds. The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick Herrington & Sutcliffe LLP, Bond Counsel to the District. CSG Advisors Incorporated, San Francisco, California, is acting as Municipal Advisor for the City in connection with the Bonds. Kitty Siino & Associates, Inc., Tustin, California, is acting as the Appraiser to the District. DTA, Inc. is acting as the Special Tax Consultant to the District. Empire Economics, Inc. is acting as the Price Point Consultant to the District. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Riverside, California, in its capacity as City Attorney, and Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California. 1050
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For information concerning respects in which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see “FINANCIAL INTERESTS” herein.

Continuing Disclosure
The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org (“EMMA”) certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). See “CONTINUING DISCLOSURE” herein. See the form of District Continuing Disclosure Agreement attached as Appendix G hereto (the “District Continuing Disclosure Agreement”) for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. See the form of Developer Disclosure Certificate attached as Appendix H hereto (the “Developer Continuing Disclosure Certificate”) for a description of the specific nature of the semi-annual reports to be filed by D.R. Horton and notices of listed events to be provided by D.R. Horton. See “CONTINUING DISCLOSURE.” Bond Owners’ Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds.

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

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

Copies of the Indenture, the District Continuing Disclosure Agreement and other documents and information referred to herein are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 8353 Sierra Avenue, Fontana, California 92335, Attention: Jessica Brown.
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ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the expected sources and uses of Bond proceeds and certain other amounts.

Sources:

Principal Amount of the Bonds
Less Net Original Issue Discount
Less Underwriter’s Discount
Funds on Hand
Total
Uses:

Acquisition Account of the Improvement Fund(1)
Construction Account of the Improvement Fund(2)
Reserve Fund(3)
Costs of Issuance Fund
Administrative Expense Fund
Special Tax Fund
Total
(1) To finance the acquisition of the Acquisition Facilities described under the caption “THE COMMUNITY FACILITIES DISTRICT — The Acquisition Facilities.”
(2) To reimburse Fontana 37 for certain Acquisition Facilities pursuant to the Acquisition Agreement, as described under the caption “THE COMMUNITY FACILITIES DISTRICT — The Acquisition Facilities.” (3) Equal to the initial Reserve Requirement.

THE BONDS
General Provisions
The Bonds will be issued in fully registered form without coupons in denominations of $5,000 and any integral multiple thereof (“Authorized Denominations”). The Bonds will be dated the date of issuance thereof. The Bonds are scheduled to mature on September 1, in the years and in the principal amounts, and will bear interest at the rates per annum, shown on the inside front cover page of this Official Statement.

Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months and will be payable on March 1 and September 1 of each year, commencing March 1, 2023 (each an “Interest Payment Date”). Interest on each Bond will be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) such Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day (the “Record Date”) in which event interest thereon will be payable from such Interest Payment Date, (ii) such Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date or (iii) interest on such Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been previously paid or duly provided for.

The interest on, and principal of and redemption premiums, if any, on the Bonds are payable in lawful money of the United States of America. Interest is payable by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (except that interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date will, if and to the extent that amounts subsequently become available therefor, be payable on a payment date established by the Trustee to the Person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date to be established by the Trustee pursuant to the Indenture). Payment of 1052
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principal of any Bond will be made only upon presentation and surrender thereof at maturity or upon earlier redemption at the Office of the Trustee.

The Bonds will initially be issued in book-entry form, and DTC will act as securities depository. So long as the Bonds are held in book-entry form, principal of, premium, if any, and interest on the Bonds will be paid by the Trustee directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with procedures adopted by DTC. See Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM.”
The Bonds are not general obligations of the District but are special, limited obligations of the District payable solely from Net Special Tax Revenues and the other amounts held under the Indenture in the Special Tax Fund, the Bond Fund and the Reserve Fund. Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State, or any political subdivision thereof, is pledged to the payment of the Bonds. See “SPECIAL RISK FACTORS — Bonds Are Limited Obligations.”
Redemption
Optional Redemption.
*
The Bonds maturing on and after September 1, 20__ shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any date on or after September 1, 20__, from any source of available funds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:

Redemption Dates Redemption Price
September 1, 2029 through August 31, 2030 103%
September 1, 2030 through August 31, 2031 102
September 1, 2031 through August 31, 2032 101
September 1, 2032 and thereafter 100
Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date, from and to the extent of prepaid Special Taxes required to be applied thereto and any related proportional amounts in the Reserve Fund required to be applied thereto pursuant to the Indenture (see “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Reserve Fund”) at the following respective Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed), plus accrued interest thereon to the date of redemption:

Redemption Dates Redemption Price
Any Interest Payment Date through March 1, 2030 103%
September 1, 2030 and March 1, 2031 102
September 1, 2031 and March 1, 2032 101
September 1, 2032 and thereafter 100
See the caption “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments” for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes.

Mandatory Sinking Fund Redemption. The Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__, at a Redemption Price equal to the principal amount of the Bonds maturing September 1, 20__ to be redeemed, * Preliminary, subject to change.
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without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:

Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Bonds maturing on September 1, 20__ so redeemed, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the District.

The Bonds maturing September 1, 20__ shall be subject to mandatory sinking fund redemption, in part, on September 1 in each year, commencing September 1, 20__, at a Redemption Price equal to the principal amount of the Bonds maturing September 1, 20__ to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows:

Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed
If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the optional redemption provisions of the Indenture described above, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Certificate of the District filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of the Bonds maturing on September 1, 20__ 1054
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so optionally redeemed. If some but not all of the Bonds maturing on September 1, 20__ are redeemed pursuant to the mandatory redemption from Special Tax prepayments provisions of the Indenture, the principal amount of the Bonds maturing on September 1, 20__ to be redeemed by mandatory sinking fund redemption as described above on any subsequent September 1 shall be reduced by the aggregate principal amount of the Bonds maturing on September 1, 20__ so redeemed, such reduction to be allocated among redemption dates as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Trustee, notice of which determination shall be given by the Trustee to the District.

Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for redemption (i) with respect to any optional redemption of Bonds, among maturities of the Bonds as directed in a Written Request of the District, and (ii) with respect to any redemption of Bonds from prepayments of Special Taxes, among maturities of all Series of Bonds and any Additional Bonds on a pro rata basis as nearly as practicable. The Trustee shall select for redemption the Bonds and any Additional Bonds of the same Series with the same maturity by lot in any manner in which the Trustee, in its sole discretion, shall deem appropriate. For purposes of such selection, all Bonds shall be deemed to be comprised of separate $5,000 denominations, and such separate denominations shall be treated as separate Bonds that may be separately redeemed.

Notice of Redemption. If the Bonds are held in book-entry form, notice of redemption will be mailed to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry system. Neither the District 1055
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nor the Trustee is responsible for giving notice of redemption to the Beneficial Owners. See Appendix I — “INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY AND ITS BOOK-ENTRY SYSTEM” herein.

The Indenture provides that the Trustee on behalf and at the expense of the District will give notice of any redemption by first class mail to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books at least 30 but not more than 60 days prior to the date fixed for redemption. Such notice of redemption will state the date of the notice, the redemption date, the redemption place and the Redemption Price and shall designate the CUSIP numbers, if any, the Bond numbers and the maturity or maturities of the Bonds to be redeemed (except in the event of redemption of all of the Bonds of such maturity or maturities in whole). The notice of redemption will require that the Bonds to be redeemed be surrendered at the Office of the Trustee for redemption at the Redemption Price, and give notice that further interest on such Bonds will not accrue from and after the date fixed for redemption. Neither the failure to receive any notice so mailed, nor any defect in such notice, will affect the validity of the proceedings for the redemption of the Bonds or the cessation of accrual of interest thereon from and after the date fixed for redemption.

If, on said date fixed for redemption, moneys for the Redemption Price of all the Bonds to be redeemed, together with interest to said date, is held by the Trustee so as to be available therefor on such date, and, if notice of redemption thereof will have been mailed as aforesaid and not canceled, then, from and after said date, interest on said Bonds will cease to accrue and become payable. All moneys held by or on behalf of the Trustee for the redemption of Bonds will be held in trust for the account of the Owners of the Bonds so to be redeemed without liability to such Owners for interest thereon. With respect to any notice of any optional redemption of Bonds, unless at the time such notice is given the Bonds to be redeemed shall be deemed to have been paid within the meaning of the Indenture, such notice will state that such redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys that, together with other available amounts held by the Trustee, are sufficient to pay the Redemption Price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District will not be required to redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not so received, the redemption of Bonds as described in the conditional notice of redemption will not be made and the Trustee will, within a reasonable time after the date on which such redemption was to occur, give notice to the Persons and in the manner in which the notice of redemption was given, that such moneys were not so received and that there shall be no redemption of Bonds pursuant to such notice of redemption. 1056
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Debt Service Schedule
Year Ending
September 1 Principal(1) Interest Total
(1) Includes mandatory sinking fund redemption.

Source: The Underwriter.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS
General
The Bonds are special, limited obligations of the District, and, except as otherwise provided in the Indenture, they are payable solely from Net Special Tax Revenues. The Indenture defines “Net Special Tax Revenues” to mean Special Tax Revenues less amounts required to pay Administrative Expenses. The term “Special Tax Revenues” is defined in the Indenture to mean the proceeds of the Special Taxes received by or on behalf of the District, including any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes (which shall be limited to the amount of said lien and interest and penalties thereon). The Indenture defines the term “Special Taxes” as the special taxes described and defined in the Rate and Method as the “Facilities Special Tax” approved by the qualified electors of the District. “Administrative Expenses” is defined in the Indenture to 1057
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mean costs directly related to the administration of the District, including, but not limited to: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules and the costs of collecting the Special Taxes, the costs of remitting the Special Taxes to the Trustee, the fees and costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture, the costs incurred by the District in complying with the disclosure provisions of any continuing disclosure undertaking and the Indenture, including those related to public inquiries regarding the Special Taxes and disclosures to Owners, the costs of the District related to an appeal of the Special Taxes, any amounts required to be rebated to the federal government in order for the District to comply with the tax covenants in the Indenture, an allocable share of the salaries of the City staff providing services on behalf of the District directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto, and the costs of foreclosure of delinquent Special Taxes.

Under the Rate and Method, parcels of Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. For the Fiscal Year 2022-23 Special Tax levy, based on the development status within the District as of May 1, 2022, 150 parcels of Taxable Property will be classified as Developed Property for the Fiscal Year 2022-23 Special Tax levy.

See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Under no circumstances may the amount of Special Taxes levied by the District in any year exceed the maximum rates approved by the qualified electors within the District, as set forth in the Rate and Method. A copy of the Rate and Method is attached to this Official Statement as Appendix A.

In addition to the Net Special Tax Revenues, any other amounts held by the Trustee in the Special Tax Fund, the Bond Fund and the Reserve Fund are pledged pursuant to the Indenture to secure the payment of the principal of, premium, if any, and interest on the Bonds and any Additional Bonds in accordance with their respective terms, the Indenture and the Act. However, those amounts are pledged subject to the provisions of the Indenture permitting the application thereof for the purposes set forth in the Indenture. Amounts on deposit in the Improvement Fund, the Costs of Issuance Fund, the Redemption Fund, the Administrative Expense Fund and the Rebate Fund are not pledged to the payment of any of the Bonds or any Additional Bonds.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE INDENTURE), THE CITY OR THE

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

SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL, LIMITED OBLIGATIONS OF THE

DISTRICT PAYABLE SOLELY FROM NET SPECIAL TAX REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.

Special Taxes
Pursuant to the Act, the City Council adopted a resolution on June 8, 2021 stating its intention to establish the District and to levy a special tax within the District. In accordance with the provisions of the Act, the City Council established the District on July 13, 2021 for the purpose of, among other things, financing certain public infrastructure improvements necessary for the proposed development within the District. At a special election held on July 13, 2021, the then sole landowner of the property within the District, Fontana 37, authorized the District to incur indebtedness in an amount not to exceed $8,500,000 and approved the Rate and Method. The Rate and Method is set forth in Appendix A hereto.

Pursuant to Section C of the Rate and Method, prior to the issuance of the Bonds, if necessary, the City is required to amend the Assigned Facilities Special Tax (as defined in the Rate and Method) to the extent necessary to cause the Total Tax Burden (as defined in the Rate and Method) for one or more land use classes 1058
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of residential property in the District to not exceed 1.95% of the Minimum Sales Prices (as defined in the Rate and Method) set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as Appendix C to this Official Statement. Based on the conclusions of the Updated Price Point Study, the Facilities Special Taxes, Services Special Taxes, and all direct and overlapping property taxes, special assessments and other special taxes, the City does not expect to amend the Assigned Facilities Special Tax.

See “— Rate and Method of Apportionment” below. See also “THE COMMUNITY FACILITIES DISTRICT — Direct and Overlapping Debt — Table 3 — Projected Total Effective Tax Rate for Individually Owned Residential Property.”
Pursuant to the Indenture, the District has covenanted that it will fix and levy the amount of Special Taxes in each Fiscal Year in accordance with the Rate and Method in an amount sufficient (subject to the limitations contained in the Rate and Method as to the maximum Special Taxes that may be levied) to yield Special Tax Revenues in the amount required for (i) the payment of principal of and interest on any Outstanding Bonds and any Additional Bonds becoming due and payable during the corresponding Bond Year, (ii) any necessary replenishment of the Reserve Fund, and (iii) the payment of Administrative Expenses estimated to be paid from such Special Tax Revenues, taking into account the balances in the funds and accounts established under the Indenture. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Certain Covenants Under the Indenture.” Notwithstanding this covenant, the amount of Special Taxes actually collected each year may be less than the amount described for a variety of different reasons. See “SPECIAL RISK FACTORS — Levy of the Special Tax.” The Bonds have been structured so that, beginning in Fiscal Year 2022-23, the Assigned Facilities Special Tax rates set forth in the Rate and Method that may be levied within the District, based on the expected buildout of the District, are at least 110% of debt service on the Bonds in each Bond Year net of estimated Administrative Expenses of $40,000 escalating 2% each fiscal year beginning July 1, 2023. The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A ⎯ “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. Pursuant to the Act, the Special Taxes levied in any Fiscal Year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District 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. See “SPECIAL RISK FACTORS ⎯ Levy of the Special Tax” and “ ⎯ Exempt Properties.” Rate and Method of Apportionment
General. The Rate and Method is to be applied by the District each year for the purpose of determining the amount of the Special Tax to be levied against each Assessor’s Parcel of Taxable Property within the District. For purposes of the discussion of the Rate and Method only, terms with initial capital letters that are not otherwise defined in this Official Statement shall have the respective meanings assigned to them in the Rate and Method, a copy of which appears in Appendix A.

Under the terms of the Indenture, prior to August 1 of each year, the District will ascertain from the County of San Bernardino Assessor the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District will levy the Special Taxes by August 10 of each Fiscal Year that the Bonds are Outstanding, or otherwise such that the computation of the levy is complete before the final date on which the auditor (the “Auditor”) of the County of San Bernardino (the “County”) will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the District will prepare, or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll. 1059
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The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” hereto. Although the Bonds have been structured so that, beginning in Fiscal Year 2022-23, the Assigned Facilities Special Tax rates set forth in the Rate and Method that may be levied based on expected build out of the District are at least 110% of debt service on the Bonds net of estimated Administrative Expenses of $40,000 escalating 2% each fiscal year beginning July 1, 2023, there is no assurance that the proceeds of the Special Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See “SPECIAL RISK FACTORS — Levy of the Special Tax” herein.

Rate and Method of Apportionment of Special Tax. The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to a methodology, i.e., the Rate and Method, which the City Council and the qualified elector within the District have approved. The Rate and Method apportions the total amount of the Facilities Special Tax and Services Special Tax to be collected among the Taxable Property in the District as more particularly described below. The Facilities Special Tax is referred to herein as the “Special Taxes.” The Services Special Tax is not pledged to the repayment of the Bonds and is not available to pay debt service on the Bonds.

The following is a synopsis of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method which is attached as Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The meaning of the defined terms used in this section are as set forth in Appendix A. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the Rate and Method attached as Appendix A. As used in the Rate and Method, “Bonds” means the Bonds and any Additional Bonds. “CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, providing for the levy and collection of the Special Taxes, and performing other duties as set forth in the Rate and Method of Apportionment of Special Tax.
“Developed Property” means, for each Fiscal Year, (i) with respect to the Facilities Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which a building permit for new construction, other than the construction of a garage, parking lot, or parking structure, was issued after January 1, 2021 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Facilities Special Taxes are being levied, and (ii) with respect to the Services Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, (a) for which the Final Residential Subdivision was recorded prior to the Fiscal Year for which the Services Special Taxes are being levied, or (b) for which a building permit has been issued with respect to NonResidential Property on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Services Special Taxes are being levied.
“Facilities Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Taxable Property within the District to fund the Special Tax Requirement for Facilities as set forth in the Rate and Method of Apportionment of Special Tax.
“Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of the District that is entitled to a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code (or any successor statute), as indicated in the County’s assessment roll finalized as of the last preceding January 1. “Residential Floor Area” means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor’s Parcel shall be as set forth in the building permit(s) issued for such Assessor’s Parcel and/or as set forth in the appropriate records kept by the Building 1060
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and Safety Department of the City, or other applicable City department, as determined by the CFD Administrator.
“Services Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Developed Property within the District to fund the Special Tax Requirement for Services as set forth in the Rate and Method of Apportionment of Special Tax. The Services Special Tax is not pledged to the repayment of the Bonds and is not available to pay debt service on the Bonds. “Special Tax Requirement for Facilities” means, for any Fiscal Year, that amount required, after taking into account available amounts held in the funds and accounts under the Indenture, for the following items: (i) debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) periodic costs with respect to the Bonds, including but not limited to, costs of credit enhancement and federal rebate payments due in the calendar year commencing in such Fiscal Year; (iii) pay all or a portion of Administrative Expenses; (iv) any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) without duplicating any amounts described in clause (iv) above, reasonably anticipated Facilities Special Tax delinquencies based on the delinquency rate for the Facilities Special Tax in the previous Fiscal Year, as said levy for delinquencies shall be limited by the Act; and (vi) pay directly for the acquisition or construction of Authorized Facilities, provided that the inclusion of such amount does not cause an increase in the Facilities Special Tax levy on Undeveloped Property. “Taxable Property” means all of the Assessor’s Parcels within the boundaries of the District which are not exempt from the Special Tax pursuant to law or described below under the subheading “— Exempt Property.” Each Fiscal Year, all Taxable Property within the District will be classified as Developed Property, Undeveloped Property, Taxable Property Owner Association Property, or Taxable Public Property, and will be subject to Special Taxes in accordance with the Rate and Method described below under the subheading “Maximum Special Tax, Assigned Special Tax and Backup Special Tax.” “Taxable Property Owner Association Property” means all Assessor’s Parcels of Property Owner Association Property that are not exempt from the Special Tax described below under the subheading “— Exempt Property,” and further described in Section E of the Rate and Method attached hereto as Appendix A.
“Taxable Public Property” means all Assessor’s Parcels of Public Property that are not exempt from the Special Tax described below under the subheading “— Exempt Property,” and further described in Section E of the Rate and Method attached hereto as Appendix A. “Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Public Property or Taxable Property Owner Association Property.

Exempt Property. No Facilities Special Tax will be levied on up to 15.5 Acres of Public Property and/or Property Owner Association Property in the District. Tax-exempt status will be assigned by the CFD Administrator in chronological order in which property in the District becomes Public Property or Property Owner Association Property. However, should an Assessor’s Parcel no longer be classified as Public Property or Property Owner Association Property, it will, from that point forward, be subject to the Facilities Special Tax.

Notwithstanding the above, an Assessor’s Parcel in the District that is transferred to a public agency or property owner’s association prior to the issuance of the first series of bonds that causes the Acreage of Public Property and Property Owner Association Property to exceed the 15.5 Acreage limit that can be designated by the CFD Administrator under the Rate and Method will also be exempted from the Special Tax.

Public Property or Property Owner Association Property that is not exempt from the Facilities Special Tax as described above will be subject to the levy of the Facilities Special Tax and will be taxed 1061
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Proportionately as part of the fourth step described under the heading “Method of Apportionment of Special Tax” below. The District will not levy a Services Special Tax on Undeveloped Property, Taxable Public Property, Taxable Property Owner Association Property or Public Property and Property Owner Association Property described below under the subheading “— Exempt Property,” and further described in Section E of the Rate and Method attached hereto as Appendix A.

Under the Rate and Method, no Special Tax shall be levied on Lower Income Household Welfare Exemption Property; provided that if, in any Fiscal Year, applicable law does not require that an Assessor’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Facilities Special Tax, then the Facilities Special Tax shall be levied on such Assessor’s Parcel in accordance with the Rate and Method as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property. Senate Bill 1473, the “Local Government Omnibus Act of 2020,” amended Government Code Section 53340(c) to provide that in a community facilities district in which the levy of a special tax is authorized by an ordinance adopted on or after January 1, 2020, a property receiving a welfare exemption under subdivision (g) of Section 214 of the California 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. Therefore, pursuant to the Rate and Method and California law, and given that no property is subject to the welfare exemption as of the date hereof, the Special Tax will be applicable to Lower Income Household Welfare Exemption Property so long as the Bonds are outstanding.

Maximum Special Tax, Assigned Special Tax and Backup Special Tax. The Maximum Special Tax, Assigned Special Tax and Backup Special Tax for the Facilities Special Tax provided for in the Rate and Method are as follows:

Facilities Special Tax.

Developed Property. The Maximum Facilities Special Tax for each Assessor’s Parcel classified as Developed Property will be the greater of (i) the amount derived by application of the Assigned Facilities Special Tax or (ii) the amount derived by application of the Backup Facilities Special Tax.

Assigned Facilities Special Tax. Residential Property will be assigned to Land Use Classes 1 through 10 as listed in Table 1 in Section C of the Rate and Method. Non-Residential Property will be assigned to Land Use Class 11. The Assigned Facilities Special Tax applicable to an Assessor’s Parcel classified as Residential Property within the District upon adoption of the Rate and Method ranged from $2,984 per unit for units with a Residential Floor Area less than 1,500 square feet, to $3,618 per unit for units with a Residential Floor Area greater than or equal to 2,700 square feet. The Assigned Facilities Special Tax applicable to an Assessor’s Parcel classified as Non-Residential Property is $25,180 per acre. Based on the Updated Price Point Study provided by the Price Point Consultant, the City does not expect the Assigned Facilities Special Tax rates set forth in Section C of the Rate and Method to be reduced, as the total effective tax burden applicable to each land use class of residential property to be constructed within the District will not exceed

1.95% of the minimum sale prices set forth in the Updated Price Point Study. A copy of the Updated Price Point Study is included as Appendix C to this Official Statement.

Backup Facilities Special Tax. The Backup Facilities Special Tax for an Assessor’s Parcel of Developed Property upon adoption of the Rate and Method equaled the lesser of (a) $27,980 per Acre, or (b) in connection with any reduction in the Assigned Facilities Special Tax as set forth in Section C.1 of the Rate and Method, the reduced amount per Acre calculated pursuant to Section C.1.a.(3) of the Rate and Method.

Pursuant to the Updated Price Point Study provided by the Price Point Consultant, no reduction of the Assigned Facilities Special Tax will be required under the Rate and Method; accordingly, no reduction of the Backup Facilities Special Tax will be required.

The Assigned Facilities Special Tax and Backup Facilities Special Tax are not subject to escalation. 1062
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Multiple Land Use Classes. In some instances an Assessor’s Parcel of Developed Property may contain both Developed and Undeveloped Property. In such cases, the Acreage of the Assessor’s Parcel will be allocated between Developed Property and Undeveloped Property based on the portion of the Assessor’s Parcel for which building permits had been issued prior to May 1 of the prior Fiscal Year and the portion of the Assessor’s Parcel for which building permits had not been issued prior to May 1 of the prior Fiscal Year.

Furthermore, Developed Property may contain more than one Land Use Class. In such cases, the Acreage that is considered Developed Property will be allocated between Residential Property and Non-Residential Property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor's Parcel. The Maximum Facilities Special Tax that can be levied on such Assessor’s Parcel will be the sum of the Maximum Facilities Special Tax that can be levied on each type of property located on that Assessor’s Parcel. The CFD Administrator’s allocation to each type of property will be final.

Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property.

The Maximum Facilities Special Tax for each Assessor’s Parcel of Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property is $27,980 per Acre. The Maximum Facilities Special Tax rates for Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property are not subject to escalation.

Method of Apportionment of Special Tax. Commencing with Fiscal Year 2021-22, and for each following Fiscal Year, the CFD Administrator will determine the Special Tax Requirement for Facilities and, subject to the Maximum Facilities Special Tax rates described above, will provide for the levy the Facilities Special Tax as follows:

First: The Facilities Special Tax shall be levied on each Assessor’s Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Facilities Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Facilities Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property at up to 100% of the Maximum Facilities Special Tax for Undeveloped Property;
Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Facilities Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Facilities Special Tax is determined through the application of the Backup Facilities Special Tax shall be increased in equal percentages from the Assigned Facilities Special Tax up to the Maximum Facilities Special Tax for each such Assessor’s Parcel;
Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Facilities Special Tax shall be levied Proportionately on each Assessor’s Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% of the Maximum Facilities Special Tax for Taxable Public Property and Taxable Property Owner Association Property, as needed to satisfy the Special Tax Requirement for Facilities.

Notwithstanding the above, the CFD Administrator will, in any Fiscal Year, calculate a levy Proportionately less than 100% of the Assigned Facilities Special Tax in step one above, when (i) the CFD Administrator is no longer required to provide for the levy of the Facilities Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; and (ii) all authorized Bonds for the District have already been issued or the City Council has covenanted that it will not issue any additional District bonds (except refunding bonds) to be supported by the Facilities Special Tax. The District has 1063
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covenanted in the Indenture not to issue any Additional Bonds except to refund the Bonds or outstanding Additional Bonds. See “— No Additional Bonds Except For Refunding Bonds” below.

Further, notwithstanding the above, under no circumstances shall the Facilities Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property for which an occupancy permit for private residential use has been issued (in accordance with Section 53321(d)(3) of the California Government Code), be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within the District 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. To the extent that the levy of the Facilities Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Facilities Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Facilities Special Tax.

Prepayment of Special Taxes. The Facilities Special Tax obligation for an Assessor’s Parcel of Developed Property or Undeveloped Property for which a building permit has been issued, may be prepaid in full, or in part, and only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment, provided that the terms set forth under Section H of the Rate and Method are satisfied.

The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Premium plus the Future Facilities Amount plus the Defeasance Amount plus the Administrative Fees and Expenses, less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any) and less an allocable share of capitalized interest (if any), all as specified in Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX — Section H.”
Mandatory redemption of Bonds from Special Tax prepayments may result in the reduction in the otherwise expected yield on such Bonds if the Bonds were purchased at a price greater than par. See “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Special Tax Prepayments.” Term of Special Taxes. Pursuant to the Rate and Method, the Facilities Special Tax levy is authorized to be levied for a period not to exceed fifty years commencing with Fiscal Year 2021-22.

Estimated Debt Service Coverage. Based on the expected buildout of the District, Assigned Special Tax rates set forth in the Rate and Method are at least 110% of debt service on the Bonds in each Bond Year plus estimated Administrative Expenses. The District may levy up to the Maximum Facilities Special Tax rates on Taxable Property within the District. See “— Rate and Method of Apportionment — Maximum Special Tax, Assigned Special Tax and Backup Special Tax” and “— Rate and Method of Apportionment — Exempt Property.”
Pursuant to the Rate and Method, the status of Developed Property is based on building permits issued as of May 1 of the Fiscal Year preceding the Fiscal Year for which the Facilities Special Tax is levied. As of May 1, 2022, building permits had been issued for 150 anticipated residential parcels within the District; accordingly, 150 taxable parcels within the District will be classified as Developed Property for the Fiscal Year 2022-23 Special Tax levy. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Collection and Application of Special Taxes
The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes; provided, however, that the District may directly bill the Special Taxes, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act.

The District has made certain covenants in the Indenture for the purpose of ensuring that the current maximum rates and method of collection of the Special Taxes are not altered in a manner that would impair the 1064
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District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that, to the extent it is legally permitted to do so, it will not initiate proceedings under the Act to modify the Rate and Method if such modification would adversely affect the security for the Bonds and any Additional Bonds and if an initiative is adopted that purports to modify the Rate and Method in a manner that would adversely affect the security for the Bonds and any Additional Bonds, the District shall, to the extent permitted by law, commence and pursue reasonable legal actions to prevent the modification of the Rate and Method in a manner that would adversely affect the security for the Bonds and any Additional Bonds. Second, the District has covenanted not to authorize owners of taxable parcels within the District to satisfy Special Tax obligations by the tender of Bonds and any Additional Bonds unless the District shall have first obtained a report of an Independent Consultant certifying that doing so would not result in the District having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds and any Additional Bonds when due.

Although the Special Taxes constitute liens on Taxable Property within the District, they do not constitute a personal indebtedness of the owners of such property within the District. Moreover, other overlapping general obligation debt already exists on the property located within the District and other future special tax and assessment liens and overlapping general obligation debt could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. See “SPECIAL RISK FACTORS — Parity Taxes and Special Assessments” herein. There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described in the section of this Official Statement entitled “SPECIAL RISK FACTORS.”
Under the terms of the Indenture, the Trustee shall establish and maintain a separate fund designated the “Special Tax Fund.” As soon as practicable after the receipt by the District of any Special Tax Revenues, but in any event no later than the date ten Business Days prior to the Interest Payment Date after such receipt, the District shall transfer such Special Tax Revenues to the Trustee for deposit in the Special Tax Fund; provided, however, that any portion of any such Special Tax Revenues that represents prepaid Special Taxes that are to be applied to the payment of the redemption price of Bonds and any Additional Bonds in accordance with the provisions of the Indenture shall be identified to the Trustee as such by the District and shall be deposited in the Redemption Fund. See “— Special Tax Fund” below, “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments” and Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.”
Covenant for Superior Court Foreclosure
Pursuant to Section 53356.1 of the Act, the District has covenanted in the Indenture that it will determine or cause to be determined, no later than September 15 of each year, whether or not any owners of property within the District are delinquent in the payment of Special Taxes and that, if such delinquencies exist, the District will order and cause to be commenced no later than November 1, and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due. Notwithstanding the foregoing, the District is not required under the Indenture to order the commencement of foreclosure proceedings if (a) the total Special Tax delinquency in the District for such Fiscal Year is less than 5% of the total Special Taxes levied in such Fiscal Year, and (b) the amount then on deposit in the Reserve Fund is equal to the Reserve Requirement. Notwithstanding the foregoing, if the District determines that any single property owner is delinquent in excess of $5,000 in the payment of the Special Taxes, then the District will diligently institute, prosecute and pursue foreclosure proceedings against such property owner.

The mere commencement of foreclosure proceedings will not assure a prompt and favorable resolution of Special Tax delinquencies. The ability of the District to foreclose the lien of delinquent unpaid Special Taxes may be limited. See “SPECIAL RISK FACTORS — Bankruptcy and Legal Delays” and “— FDIC/Federal Government Interests in Properties.” Moreover, even if a judgment of foreclosure and 1065
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order of sale is obtained, the District must cause a notice of levy to be issued. Under current law, the property owner has 120 days from the date of service of the notice of levy in which to redeem the subject property. If the property owner fails to redeem the property and it is sold, the property owner’s only remedy is an action to set aside the sale, which action must be brought within 90 days of the date of sale. If such an action results in the setting aside of the foreclosure sale, the judgment is revived, and the District would be entitled to receive interest on the revived judgment as if the sale had not been made. Under former law a property owner had a period of one year within which to redeem property to be sold, and the constitutionality of the legislation that eliminated the one year redemption period has not been tested.

There can be no assurance that, even if the subject property is sold, the proceeds from such sale will be sufficient to pay the delinquent installments of the Special Tax. The Act does not require the District or any other governmental agency to purchase or otherwise acquire any Assessor’s Parcel being sold if there is no other purchaser at such sale. The Act does require that property being sold pursuant to foreclosure under the Act must be sold for not less than the judgment amount (which must include reasonable attorneys’ fees, together with interest, penalties, and other authorized charges and costs) plus post judgment interest and authorized costs, unless a lower bid price is authorized by the Owners of not less than 75% by value of the Bonds and any Additional Bonds Outstanding.

Special Tax Fund
The Indenture provides that the Trustee will establish and maintain a separate fund designated the “Special Tax Fund.” The Indenture requires that the District transfer Special Tax Revenues (other than prepaid Special Taxes) to the Trustee for deposit into the Special Tax Fund as soon as practicable after the District’s receipt thereof, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt. No later than the Business Day immediately preceding each Interest Payment Date, after having made any requested transfers to the Administrative Expense Fund, as requested by the District, to have sufficient amounts available therein to pay Administrative Expenses, the Trustee is required by the Indenture to make transfers from the Special Tax Fund to the Interest Account in the Bond Fund, the Principal Account in the Bond Fund and the Reserve Fund in the amounts and in the priority specified in the Indenture. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE.” As soon as practicable after the District’s receipt of prepaid Special Taxes, but in any event no later than ten Business Days prior to the Interest Payment Date after such receipt, the District is required to transfer any prepaid Special Taxes to the Trustee and, in connection therewith, deliver to the Trustee a Written Certificate identifying such amounts as prepaid Special Taxes, identifying the portion of such prepaid Special Taxes so transferred that is to be applied to the Redemption Price of the Bonds and any Additional Bonds and identifying the portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds and any Additional Bonds to be so redeemed. The portion of such prepaid Special Taxes that is to be applied to the Redemption Price will be deposited by the Trustee in the Redemption Fund and will be applied to the redemption of the Bonds and any Additional Bonds pursuant to the Indenture. The portion of such prepaid Special Taxes that is to be applied to the payment of interest on the Bonds and any Additional Bonds to be so redeemed will be deposited by the Trustee in the Interest Account and will be applied to the payment of such interest.

Reserve Fund
The Indenture provides that the Trustee will establish and maintain a special fund designated the “Reserve Fund.” On the Closing Date, the Trustee will deposit in the Reserve Fund the amount specified under the caption “ESTIMATED SOURCES AND USES OF FUNDS.” The Trustee is also required, not later than the Business Day immediately preceding each Interest Payment Date, to transfer from the Special Tax Fund (after the requisite transfers to the Administrative Expense Fund, the Interest Account and the Principal Account) the amount, if any, necessary to cause the amount on deposit in the Reserve Fund to be equal to the Reserve Requirement. The Indenture defines “Reserve Requirement” to mean, as of the date of any 1066
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calculation, the least of (i) “10% of the proceeds of the issue,” within the meaning of Section 148 of the Code (excluding Bonds refunded with the proceeds of additional bonds secured by Special Taxes on a parity with the Bonds), (ii) Maximum Annual Debt Service and (iii) 125% of Average Annual Debt Service.

Except as otherwise provided in the Indenture, all amounts deposited in the Reserve Fund are to be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account in accordance with the Indenture in the event that, on the Business Day prior to an Interest Payment Date, amounts in the Interest Account are insufficient to pay the interest on the Bonds and any Additional Bonds due and payable on such Interest Payment Date, (ii) making transfers to the Principal Account in accordance with the Indenture in the event that, on the Business Day prior to a September 1 on which principal of the Bonds and any Additional Bonds is due and payable (including principal due and payable by reason of mandatory sinking fund redemption of the Bonds), amounts in the Principal Account are insufficient to pay such principal, and (iii) redeeming Bonds and any Additional Bonds in accordance with the Indenture as described in the following paragraph.

Whenever Bonds or any Additional Bonds are to be optionally redeemed or redeemed from Special Tax prepayments, a proportionate share (determined as provided below) of the amount on deposit in the Reserve Fund will, on the date on which amounts to redeem such Bonds and any Additional Bonds are deposited in the Redemption Fund or otherwise deposited with the Trustee, be transferred by the Trustee from the Reserve Fund to the Redemption Fund or to such deposit held by the Trustee and will be applied to the redemption of said Bonds and any Additional Bonds; provided that, such amount will be so transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds and any Additional Bonds to be redeemed).

Such proportionate share will be equal to the largest integral multiple of the minimum Authorized Denomination for said Bonds and any Additional Bonds that is not larger than the amount equal to the product of (i) the amount on deposit in the Reserve Fund on the date of such transfer, times (ii) a fraction, the numerator of which is the principal amount of Bonds and any Additional Bonds to be so redeemed and the denominator of which is the principal amount of Bonds and any Additional Bonds to be Outstanding on the day prior to the date on which such Bonds and any Additional Bonds are to be so redeemed.

Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay Outstanding Bonds and any Additional Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Trustee will, upon receipt of a Written Request of the District, transfer the amount in the Reserve Fund to the Interest Account, Principal Account and/or Redemption Fund, as applicable, to be applied, on the next succeeding Interest Payment Date to the payment and redemption of all of the Outstanding Bonds and any Additional Bonds. If, as a result of the scheduled payment of principal of or interest on the Bonds and any Additional Bonds, the Reserve Requirement is reduced, the Trustee will transfer an amount equal to the amount of such reduction to the Interest Account.

Investment of Moneys
All moneys held by the Trustee in any of the funds or accounts established pursuant to the Indenture are required to be invested by the Trustee solely in Permitted Investments, as directed in writing by the District. As used in the Indenture, the phrase “Permitted Investments” includes a variety of investments, some of which may not be rated by a national rating service. See Appendix F — “SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE — Definitions.”
No Additional Bonds Except for Refunding Bonds
So long as any of the Bonds remain Outstanding, the District will not issue any obligations payable from Net Special Tax Revenues senior to the Bonds. The District may issue Additional Bonds or obligations payable on a parity with the Bonds, if, among other things: (i) upon the issuance of such Additional Bonds, no Event of Default will occur or be continuing under the Indenture; (ii) the proceeds of the Additional Bonds will 1067
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be applied to refund the Bonds or any Additional Bonds previously issued under the Indenture, pay Costs of Issuance incurred in connection with the issuance of such Additional Bonds, and/or make any requisite deposit to the Reserve Fund; and (iii) the Annual Debt Service in each Bond Year, calculated for all Bonds and any Additional Bonds that will be Outstanding after the issuance of such Additional Bonds, will be less than or equal to Annual Debt Service in such Bond Year, calculated for all Bonds and any Additional Bonds that are Outstanding immediately prior to the issuance of such Additional Bonds.

The District may issue obligations payable from Net Special Tax Revenues on a basis subordinate to the Bonds.

THE COMMUNITY FACILITIES DISTRICT
General Information Regarding the District
The District was organized by the City Council under the Act to provide for the financing of public improvements to meet the needs of new development related to the District. The qualified electors within the boundaries of the District, being the then owners of all property in the District, authorized the District to incur bonded indebtedness to finance certain public facilities to meet the needs of new development within the District and approved the Rate and Method for and authorized the levy of the Special Tax.

The District includes approximately 37.19 gross acres and is located in the northern portion of the City. The District is generally bounded by Lytle Creek Road to the west and existing residential and vacant lands to the east, south and north. The District is being developed into a community known as “Mountainview” by D.R. Horton consisting of a total of 156 single family detached homes. The District is located in Tract Map No. 20018, recorded on December 10, 2020.

As of May 1, 2022, the date of value of the Appraisal, within the District, 75 single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, 11 homes over 95% complete (all of which were in escrow), 61 homes under construction (19 of which were in escrow) and 6 lots in a finished lot condition (none of which were in escrow). As of July 1, 2022, within the District, __ single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, __ homes over 95% complete (__ of which were in escrow), __ homes under construction (__ of which were in escrow) and __ lots in a finished lot condition (__ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. 150 building permits had been obtained within the District as of May 1, 2022. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
The District is zoned R-M (Medium Density Residential) by the City allowing for single-family residential units with a density of up to 12 dwellings per acre. The minimum lot size is approximately 5,000 square feet.

Water and sewer service to the property within the District will be supplied by the City. Electricity will be supplied by Southern California Edison, gas by Southern California Gas Company and schools by the Fontana Unified School District.

Like all of Southern California, the land within the District is subject to seismic activity. The District is not located in a County Designated Fault Zone or an Earthquake Fault Zone Boundary. However, the District is located approximately 1.5 miles from the Cucamonga Fault Zone and approximately 5.6 miles from the San Jacinto Fault Zone. The San Andreas Fault is located approximately 9.1 miles north of the District. In addition, the Lytle Creek Fault is shown approximately 4.8 miles north of the District in the State Earthquake Fault Zone Map. See “SPECIAL RISK FACTORS — Geologic, Topographic and Climatic Conditions.” 1068
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In recent years, wildfires have caused extensive damage throughout the State. The last major wildfire in the vicinity of the City was the Grand Prix Fire in October 2003. There have been smaller fires, such as the 147-acre Sierra Fire that burned in November 2018 and the 277-acre Karen Fire in July of 2020. While the District is not aware of any particular risk of wildfire within the District, there can be no assurances that wildfires won’t occur within the District. See “SPECIAL RISK FACTORS — Wildfires.” The Federal Emergency Management Agency has determined that the District is located in a Zone “X” flood area (an area of minimal flooding, outside the 500-year flood plain), and flood insurance will not be required.

An aerial photo showing the taxable property within the District and a map showing the general location of the District and the surrounding area appears on the pages before page 1. More detailed information about the property therein is contained in Appendix B — “APPRAISAL REPORT,” and information about the ownership of such property is set forth under the caption “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” General information about the City is set forth in Appendix E.

The Acquisition Facilities
The City, the District and the Original Landowner entered into an Acquisition and Funding Agreement, dated as of July 1, 2021 (the “Acquisition Agreement”), providing for, among other things, the means by which certain public facilities will be financed in connection with the development within the District, consisting of various street, storm drain and sewer system improvements (the “Acquisition Facilities”).

Pursuant to the Acquisition Agreement, the Original Landowner has agreed to construct, and the City agreed to accept, the Acquisition Facilities with the proceeds of the Bonds and available Special Taxes deposited into the Acquisition Account of the Improvement Fund under the Indenture pursuant to certain requirements contained in the Acquisition Agreement and the Indenture. The Acquisition Agreement also provides guidelines pursuant to which the City may acquire completed segments of the Acquisition Facilities with the proceeds of the Bonds and available Special Taxes deposited into the Acquisition Account of the Improvement Fund. The Original Landowner has completed construction of all Acquisition Facilities.

Pursuant to the Acquisition Agreement, the Original Landowner has agreed to pay all costs of the Acquisition Facilities that it constructs pursuant to the Acquisition Agreement in excess of the moneys available therefor in the Acquisition Account of the Improvement Fund. Further, any lack of availability of amounts in the Acquisition Account of the Improvement Fund to pay the acquisition costs of the Acquisition Facilities shall in no way diminish any obligation of the Original Landowner with respect to the construction of the Acquisition Facilities.

In addition to the Acquisition Facilities constructed by the Original Landowner under the Acquisition Agreement, proceeds of the Bonds may be deposited into the Construction Account of the Improvement Fund under the Indenture to finance the costs of certain facilities to be constructed by the City, for which the Original Landowner will receive a credit for permit fees, or be reimbursed for permit fees previously paid.

Following the issuance of the Bonds, after the payment of the costs of issuance of the Bonds and the funding of the Reserve Fund, a portion of the proceeds of the Bonds shall be deposited in the Acquisition Account of the Improvement Fund in the amount of $_________ to finance the acquisition of the Acquisition Facilities.
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Assigned Special Taxes and Development Summary
The following table sets forth the Assigned Special Taxes that are projected to be levied on the property within the District at buildout of the development.

TABLE 1

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

SPECIAL TAX AND DEVELOPMENT SUMMARY
Rate and Method Land Use Classes
Number of
Permitted
Units/Acres as
of May 1,
2022(1)
Remaining
Number of
Units/Acres(2)
Assigned
Facilities
Special Tax
Projected
Assigned
Facilities
Special
Taxes at
Build-Out
Developed Property
Residential Property (2,700 sq. ft. or greater) 20 0 $ 3,618 $ 72,360 Residential Property (2,550 to less than 2,700 sq. ft.) 32 2 3,547 120,598 Residential Property (2,400 to less than 2,550 sq. ft.) 25 2 3,501 94,527 Residential Property (2,250 to less than 2,400 sq. ft.) 0 0 3,434 0 Residential Property (2,100 to less than 2,250 sq. ft.) 28 0 3,367 94,276 Residential Property (1,950 to less than 2,100 sq. ft.) 0 0 3,276 0 Residential Property (1,800 to less than 1,950 sq. ft.) 24 0 3,185 76,440 Residential Property (1,650 to less than 1,800 sq. ft.) 0 0 3,099 0 Residential Property (1,500 to less than 1,650 sq. ft.) 21 2 3,013 69,299 Residential Property (less than 1,500 sq. ft.) 0 0 2,984 0 Non-Residential Property 0.00 0.00 25,180 0
TOTAL 150 6 N/A $ 527,500
(1) Represents the classification of 150 parcels of Taxable Property as Developed Property for Fiscal Year 2022-23, comprised of approximately 20.1 acres, based upon the building permits that have been obtained for such properties as of May 1, 2022. (2) Represents the projected Developed Property classification of 6 parcels of Taxable Property, comprised of approximately

0.7 acres that will be classified as Undeveloped Property for Fiscal Year 2022-23, assuming such properties are constructed at the home sizes identified in the development plan submitted by the Developer.

Source: DTA, Inc.

Direct and Overlapping Debt
The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing indebtedness payable from taxes and assessments that may be levied upon the property within the District is shown in Table 2 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments. 1070
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TABLE 2

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

DIRECT AND OVERLAPPING DEBT SUMMARY (TAXABLE PROPERTY)
Overlapping District
Percent of Levy on
Taxable Parcels
in the District(1)
Total Debt
Outstanding(2)
District Share
of Total Debt
Outstanding
Fontana Unified School District G.O. Bonds 0.06715% $280,075,300 $ 188,080 Chaffey Community College District G.O. Bonds 0.00994 315,490,000 31,360 Metropolitan Water District Mid-Valley G.O. Bonds 0.00027 26,830,000 80 Estimated Share of Overlapping Debt Allocable to District $ 219,520 Plus: The Bonds 6,785,000*
Estimated Share of Direct and Overlapping Debt Allocable to District $ 7,004,520* * Preliminary, subject to change.
(1) Based on the District’s estimated share of the Fiscal Year 2021-22 levy for each applicable overlapping district. (2) Based on overlapping tax and assessment debt as of May 1, 2022. Excludes debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof.

Source: DTA, Inc., San Bernardino County.

As shown in Table 3, the projected average total effective tax rate for Fiscal Year 2022-23 for completed single family detached homes conveyed to individual homeowners as of May 1, 2022 in the District ranges from approximately 1.617% to approximately 1.649% of the concluded value as identified in the Appraisal. Such estimates assume that the Rate and Method is not amended in accordance with Section C thereof.
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TABLE 3

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

PROJECTED TOTAL EFFECTIVE TAX RATES FOR

INDIVIDUALLY OWNED RESIDENTIAL PROPERTY
Plan Types within Mountainview
DESCRIPTION Plan 1 Plan 2 Plan 3 Plan 4 Plan 5 Plan 6
Number of Units Sold(1) 14 15 14 13 13 6
Unit Size(1) 1,576 1,898 2,239 2,537 2,617 2,722
Base Current Market Value (1) $ 614,640 $ 683,280 $ 694,090 $ 710,360 $ 719,675 $ 734,940 Less: Homeowner Exemption (7,000) (7,000) (7,000) (7,000) (7,000) (7,000) Equals: Assumed Taxable Value(2) $ 607,640 $ 676,280 $ 687,090 $ 703,360 $ 712,675 $ 727,940 AD VALOREM PROPERTY TAXES (2)(3)
Property
Tax Rate
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Base Property Tax 1.0000% $ 6,076 $ 6,763 $ 6,871 $ 7,034 $ 7,127 $ 7,279 Fontana Unified School District G.O. Bonds 0.0520 316 352 357 366 371 379 Chaffey Community College District G.O. Bonds 0.0177 108 120 122 124 126 129 Metropolitan Water District G.O. Bonds 0.0035 21 24 24 25 25 25 Subtotal Ad Valorem Property Tax Rate/Taxes 1.0732% $ 6,521 $ 7,259 $ 7,374 $ 7,549 $ 7,649 $ 7,812 PARCEL CHARGES, ASSESSMENTS AND SPECIAL TAXES(4)
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Metropolitan Water District Water Standby Charge $ 8 $ 8 $ 8 $ 8 $ 8 $ 8 Fontana Vector Control Charge 6 6 6 6 6 6
City of Fontana Sewer User Fee(5) N/A N/A N/A N/A N/A N/A Fontana CFD No. 106 (Mountain View) Services Special Tax(6) 590 590 590 590 590 590 Fontana CFD No. 106 (Mountain View) Facilities Special Tax(7) 3,013 3,185 3,367 3,501 3,547 3,618 Subtotal Parcel Charges, Assessments And Special Taxes $ 3,617 $ 3,789 $ 3,971 $ 4,105 $ 4,151 $ 4,222 PROJECTED TOTAL PROPERTY TAXES $ 10,138 $ 11,048 $ 11,345 $ 11,654 $ 11,800 $ 12,034 PROJECTED EFFECTIVE TAX RATE (% OF BASE PRICE VALUE) 1.649% 1.617% 1.635% 1.641% 1.640% 1.637% (1) Number of units sold, unit sizes, and base current market value for units that have closed to individual homeowners based on the Appraisal. (2) Assumed Taxable Value and ad valorem taxes incorporate owner-occupied assessed value exemption of $7,000. (3) Based on the Fiscal Year 2021-22 ad valorem rates for the tax rate area(s) within the District. Rates subject to change in future years. (4) Based on the Fiscal Year 2021-22 charges identified on the San Bernardino County issued property tax bills. Charges subject to change in future years. (5) Excluded from the effective tax rate determination pursuant to the City of Fontana Community Facilities and Assessment District Policy Guidelines. (6) Based on the levy of the Assigned Services Special Tax. (7) Based on the levy of the Assigned Facilities Special Tax.

Source: DTA, Inc., Kitty Siino & Associates, Inc., City of Fontana, County of San Bernardino. 1072
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Property Values
Appraisal. In order to provide information with respect to the value of the land within the District, the District engaged Kitty Siino & Associates, Inc. to prepare the Appraisal. The principal of the Appraiser, who was actively involved in the preparation of the Appraisal, has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land secured municipal bonds. The Appraiser was selected by the District and has no material relationships with the City, the District or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal and other similar engagements for the City. The City instructed the Appraiser to prepare its analysis and report in conformity with City-approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the commission now known as California Debt and Investment Advisory Commission. A copy of the Appraisal is included as Appendix B to this Official Statement.

The purpose of the Appraisal was to estimate the minimum market value of the fee simple estate, subject to special tax and special assessment liens, of the property within the District in its current condition Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraiser concluded that, as of May 1, 2022, the minimum market value of the Taxable Property within the District was not less than $77,634,098, consisting of $51,571,515 for the 75 completed units conveyed to individual homeowners, and $26,062,583 for the 3 completed model homes, 11 homes over 95% complete, 61 lots in various stages of construction and 6 finished lots owned by D.R. Horton. See Appendix B — “APPRAISAL REPORT.”
Reference is made to Appendix B for a complete list and full discussion of the applicable contingencies, assumptions and limiting conditions and the methodology employed by the Appraiser. In the event that any of the contingencies, assumptions and limiting conditions are not actually realized, the value of the property within the District may be less than the amount reported in the Appraisal. In any case, there can be no assurance that any portion of the property within the District would actually sell for the amount indicated by the Appraisal.

The Appraisal merely indicates the Appraiser’s opinion as to the minimum market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the date of value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not adversely change in the future.

The Appraiser has specifically consented to the inclusion of the Appraisal in this Official Statement.

Nevertheless, the Appraisal contains the following statement:

The acceptance of and/or use of this appraisal report by the client or any third party constitutes acceptance of the following conditions:

The liability of Kitty Siino &Associates, Inc. and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further, there is no accountability, obligation or liability to any third-party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer’s written consent, does so at his own risk.

If the client or any third party brings legal action against Kitty Siino &Associates, Inc. or the signer of the Appraisal and the appraisers prevail, the party initiating such legal action shall reimburse Kitty Siino &Associates, Inc. and/or the appraisers for any and all costs of any nature, including attorneys’ fees, incurred in their defense. 1073
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It is a condition precedent to the issuance of the Bonds that the Appraiser deliver to the District a certification to the effect that nothing has come to the attention of the Appraiser subsequent to the date of value of the Appraisal that would cause the Appraiser to believe that the value of property in the District is less than the minimum value reported in the Appraisal.

Value-to-Lien Ratios
The value of the property within the District is significant because, in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its “share” of the Bonds is important because it provides an indication of the extent of the relative burden imposed on each parcel by the applicable Special Tax. As indicated above, the minimum market value of the property within the District is not less than $77,634,098. The ratio of that value to the $6,785,000*total principal amount of the Bonds is approximately 11.44*-to-1. This ratio does not include other overlapping general obligation debt within the District. At this time there is no other overlapping land secured special tax or assessment debt within the District. See “— Direct and Overlapping Debt.” Taking the $6,785,000*principal amount of the Bonds and other overlapping general obligation debt within the District into account, the ratio of the minimum market value to the total amount of direct and overlapping bonded debt for the District of $7,004,520*is approximately 11.08*-to-1. Table 4 sets forth the minimum market value-tolien ratios of all the taxable property within the District by development status as of May 1, 2022, based on the projected Fiscal Year 2022-23 Special Tax levy.

Each of the aforesaid value-to-lien ratios is for the entire District, however, the ratios of the value of individual lots within the District to their respective shares of the principal amount of the Bonds can be expected to vary substantially depending upon the selling price thereof. The following Table 5 sets forth the value-to-lien ratios within the District by land use class under the Rate and Method using the principal amount of the Bonds allocated based on the projected Fiscal Year 2022-23 Special Tax levy.

Additionally, the following Table 6 sets forth the stratification of value-to-liens of the parcels within the District, based on the appraised value of such parcels set forth in the Appraisal and such parcels’ respective shares of the principal amount of the Bonds (allocated to each parcel based upon its respective share of the total Fiscal Year 2022-23 Special Tax levy) and the ratio of the appraised value to its share of the Bonds.

Taxable property within the District is classified as “Developed Property” for purposes of the Fiscal Year 2022-23 Special Tax levy if a building permit for such property is obtained by May 1, 2022. Based on the development status within the District as of May 1, 2022, building permits had been issued for 150 residential parcels of Taxable Property within the District and will thus be classified as Developed Property for purposes of the Fiscal Year 2022-23 Special Tax levy.
* Preliminary, subject to change.
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TABLE 4

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN RATIOS BASED ON BONDS ONLY

ALLOCATED BY PROPERTY OWNER/DEVELOPMENT STATUS
(Projected Fiscal Year 2022-23 Special Tax Levy)
Property Owner/
Development Status(1)
Number of
Taxable
Parcels
Projected
Fiscal Year
2022-23
Facilities
Special Tax(1)
Percent of
Projected Fiscal
Year 2022-23
Facilities
Special Tax
Pro Rata
Share of
Bonds(2)*
Minimum
Market Value(3)*
Estimated
Minimum Market
Value-to-Lien
Ratios(4)*
D.R. Horton
Model Homes 3 $ 9,673 2.02% $ 136,843 $ 1,691,453 12.36 95%+ Completed Homes 11 36,356 7.58 514,340 6,201,996 12.06 Homes Under Construction 61 196,851 41.04 2,784,939 16,542,047 5.94 Finished Lots/Pads (Undeveloped Property)(5) 6 0 0.00 0 1,627,087 NA Subtotal 81 $ 242,880 50.64% $ 3,436,122 $ 26,062,583 7.58 Individual Homeowners 75 $ 236,712 49.36% $ 3,348,878 $ 51,571,515 15.40 TOTAL 156 $ 479,592 100.00% $ 6,785,000 $ 77,634,098 11.44 * Preliminary, subject to change.
(1) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and the development status as of May 1, 2022. (2) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the projected Fiscal Year 2022-23 Facilities Special Tax. (3) Based on the Appraisal with a date of value as of May 1, 2022. (4) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column. (5) Under the Rate and Method, parcels of Taxable Property are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. Furthermore, since the 6 parcels identified in the Appraisal as finished lots have not obtained building permits prior to May 1, 2022; all such lots will be classified as Undeveloped Property for Fiscal Year 2022-23 and are not expected to be taxed.

Source: DTA, Inc.
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TABLE 5

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN RATIOS BASED ON BONDS ONLY

ALLOCATED BY LAND USE CLASSES
(Projected Fiscal Year 2022-23 Special Tax Levy)
Rate and Method Land Use Classes
Number of
Units/
Acres(1)
Fiscal Year
2022-23
Assigned /
Maximum
Facilities
Special Tax(2)
Projected
Fiscal Year
2022-23
Facilities
Special Tax(3)
Pro Rata
Share of
Bonds(4)*
Minimum
Market
Value(5)
Estimated
Minimum
Market Valueto-Lien
Ratios(6)*
Developed Property
Residential Property (2,700 sq. ft. or greater) 20 $ 72,360 $ 68,397 $ 967,647 $ 9,084,086 9.39 Residential Property (2,550 to less than 2,700 sq. ft.) 32 113,504 107,288 1,517,853 15,971,399 10.52 Residential Property (2,400 to less than 2,550 sq. ft.) 25 87,525 82,732 1,170,445 13,074,126 11.17 Residential Property (2,250 to less than 2,400 sq. ft.) 0 0 0 0 0 N/A Residential Property (2,100 to less than 2,250 sq. ft.) 28 94,276 89,113 1,260,720 14,099,069 11.18 Residential Property (1,950 to less than 2,100 sq. ft.) 0 0 0 0 0 N/A Residential Property (1,800 to less than 1,950 sq. ft.) 24 76,440 72,254 1,022,206 13,275,103 12.99 Residential Property (1,650 to less than 1,800 sq. ft.) 0 0 0 0 0 NA Residential Property (1,500 to less than 1,650 sq. ft.) 21 63,273 59,808 846,129 10,503,228 12.41 Residential Property (less than 1,500 sq. ft.) 0 0 0 0 0 N/A Non-Residential Property 0.0 0 0 0 0 N/A
Subtotal 150 $ 507,378 $ 479,592 $ 6,785,000 $ 76,007,011 11.20 Undeveloped Property 0.7 $ 20,531 $ 0 $ 0 $ 1,627,087 NA TOTAL N/A $ 527,909 $ 479,592 $ 6,785,000 $ 77,634,098 11.44 * Preliminary, subject to change.
(1) Based on the development status as of May 1, 2022. Under the Rate and Method, parcels of Taxable Property are classified as Developed Property if a building permit has been obtained for such parcel by May 1 of the fiscal year preceding the Special Tax levy. (2) Based on the Assigned Facilities Special Tax revenues generated by residential dwelling units for which building permits have been obtained as of May 1, 2022, and the Maximum Facilities Special Tax revenues generated by 6 parcels of Taxable Property, comprised of approximately 0.7 acres that will be classified as Undeveloped Property for Fiscal Year 2022-23, for which building permits have not been obtained as of May 1, 2022. (3) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and the development status as of May 1, 2022. (4) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the Projected Fiscal Year 2022-23 Facilities Special Tax. (5) Based on the Appraisal.
(6) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column.

Source: DTA, Inc.
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TABLE 6

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106 (MOUNTAINVIEW)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN STRATIFICATION

BASED ON BONDS ONLY
(Projected Fiscal Year 2022-23 Special Tax Levy)
Estimated
Minimum Market
Value-to-Lien Ratio
Category
Number
of
Parcels
Subject
to
Facilities
Special
Tax(1)
Projected
Fiscal Year
2022-23
Facilities
Special Tax(2)
Percent of
Projected
Fiscal Year
2022-23
Facilities
Special Tax
Pro Rata
Share of
Bonds(3)*
Minimum
Market
Value(4)
Estimated
Minimum
Market
Value-to-Lien
Ratios(5)*
14:00:1 and above 75 $ 236,713 49.36% $ 3,348,883 $ 51,571,515 15.40

11.00:1 to 13.99:1 14 46,028 9.60 651,179 7,893,449 12.12

8.00:1 to 10.99:1 0 0 0.00 0 0 NA
Less than 8:00:1(6) 61 196,851 41.04 2,784,938 16,542,047 5.94 TOTAL 150 $ 479,592 100.00% $ 6,785,000 $ 76,007,011 11.20 * Preliminary, subject to change.
(1) The Facilities Special Tax levied against 150 parcels of Taxable Property as Developed Property for Fiscal Year 2022-23 is sufficient to fund Administrative Expenses and debt service on the Bonds. Therefore, no Facilities Special Tax is anticipated to be levied against the remaining 6 parcels of Taxable Property that will be classified as Undeveloped Property for Fiscal Year 2022-23.
(2) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and the development status as of May 1, 2022.
(3) There are currently no overlapping assessment districts and/or other community facilities districts encumbering the District (excluding debt secured by any tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof). The Bonds are allocated based on a proportionate share of the projected Fiscal Year 2022-23 Facilities Special Tax. (4) Based on the Appraisal.
(5) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column. (6) No parcel has a value-to-lien of less than 5:00:1
Source: DTA, Inc.

Delinquency History
Fiscal Year 2021-22 was the first year in which Special Taxes were levied in the District. For Fiscal Year 2021-22, Facilities Special Taxes totaling $66,992 were levied on 20 parcels classified as Developed Property with respect to the Facilities Special Tax. For Fiscal Year 2021-22, Services Special Taxes totaling $92,040 were levied on 156 parcels classified as Developed Property with respect to the Services Special Tax.

As of June 1, 2022, there were no parcels delinquent in their payment of Facilities Special Taxes and 3 parcels were delinquent in their payment of Services Special Taxes in the amount of $885.00 for a delinquency rate of

0.96%.

PROPERTY OWNERSHIP AND THE DEVELOPMENT
Representatives of D.R. Horton have provided the information in this section regarding D.R. Horton and its development in the District. Neither the Underwriter nor the City has independently confirmed or verified the information in this section of the Official Statement nor does any such party make any representation as to accuracy or adequacy of this information. Further, there may be material adverse changes in this information after the date of this Official Statement.

The information in this section of the Official Statement regarding ownership of certain taxable property in the District has been included because it is considered relevant to an informed evaluation of the 1077
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Bonds. The inclusion in this Official Statement of information related to D.R. Horton should not be construed to suggest that the Bonds, or the Special Taxes that will be used to pay the Bonds, are recourse obligations of D.R. Horton or any other property owner in the District. A property owner may sell or otherwise dispose of land within the District or a development or any interest therein at any time.

No assurance can be given that the proposed development within the District will occur as described below. As the proposed land development progresses and parcels are sold, it is expected that the ownership of the land within the District will become more diversified. No assurance can be given that development of the land within the District will occur in a timely manner or in the configuration or intensity described herein, or that any landowner described herein will obtain or retain ownership of any of the land within the District.

The Bonds and the Special Taxes are not personal obligations of D.R. Horton or any other current or subsequent property owners and, in the event that D.R. Horton or any other current or subsequent property owner defaults in the payment of the Special Taxes, the City may proceed with judicial foreclosure but has no direct recourse to the assets of D.R. Horton or any other current or subsequent property owner. As a result, other than as provided in the Official Statement, no financial statements or information is, or will be, provided about D.R. Horton or any other current or subsequent property owner. The Bonds are secured solely by the Net Special Tax Revenues and other amounts pledged under the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS.”
General Description of the Development
The District is being developed into a community known as “Mountainview” by D.R. Horton consisting of a total of 156 single family detached homes. The District is located in Tract Map No. 20018, recorded on December 10, 2020.

As of May 1, 2022, the date of value of the Appraisal, within the District, 75 single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, 11 homes over 95% complete (all of which were in escrow), 61 homes under construction (19 of which were in escrow) and 6 lots in a finished lot condition (none of which were in escrow). As of July 1, 2022, within the District, __ single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, __ homes over 95% complete (__ of which were in escrow), __ homes under construction (__ of which were in escrow) and __ lots in a finished lot condition (__ of which were in escrow). Sales contracts are subject to cancelation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. 150 building permits had been obtained within the District as of May 1, 2022. While the information set forth in this Official Statement reflects D.R. Horton’s current development expectations, no assurance can be given that final home construction and conveyance to individual home buyers will be carried out as described in this Official Statement.

Fontana 37
As previously defined in this Official Statement the “Original Landowner” or “Fontana 37” is Fontana 37, LLC, a Delaware limited liability company. Fontana 37 was the original landowner of the property in the District before selling the property to D.R. Horton for $27,000,000 in 2021 over two takedowns. The first takedown occurred in March 2021 and the second occurred in October 2021.

D.R. Horton
As previously defined in this Official Statement “D.R. Horton” or the “Developer” is D.R. Horton Los Angeles Holding Company, Inc., a California corporation. D.R. Horton is a wholly-owned subsidiary of D.R.

Horton, Inc., a Delaware corporation (“D.R. Horton, Inc.”). D.R. Horton, Inc. is a public company whose common stock is traded on the New York Stock Exchange under the symbol “DHI.” Founded in 1978 and 1078
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headquartered in Arlington, Texas, D.R. Horton, Inc. constructs and sells homes through its operating divisions in 90 markets in 29 states under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes.

D.R. Horton, Inc. is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly, D.R. Horton, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, as filed with the SEC on November 18, 2021, and D.R. Horton’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, as filed with the SEC on April 27, 2022, which set forth certain data relative to the consolidated results of operations and financial position of D.R. Horton, Inc. and its subsidiaries, including D.R. Horton, as of such dates.

The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on these Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these Internet sites. None of D.R. Horton or D.R. Horton, Inc. is obligated to advance funds to pay for development or construction costs 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 Bonds.

Development Plan
General. D.R. Horton plans to construct a total of 156 single-family homes on its property in the District in a community known as Mountainview.

Mountainview includes six floor plans ranging in size from approximately 1,576 square feet to approximately 2,722 square feet. As of May 1, 2022, base sales prices within Mountainview ranged from approximately $659,490 to approximately $789,990. 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.

Mountainview includes 156 single family detached homes, which, as of May 1, 2022, consisted of 75 completed homes conveyed to individual homeowners, an additional 3 model homes completed and owned by D.R. Horton, 11 homes over 95% complete (all of which were in escrow), 61 homes under construction (19 of which were in escrow) and owned by the Developer, and 6 finished lots owned by the Developer. As of July 1, 2022, an additional __ homes had been completed and conveyed to individual homeowners. Sales of homes within Mountainview began in August 2021 and D.R. Horton expects that construction will be complete within Mountainview by November 22, 2022.

COVID-19 Impact. The development of the D.R. Horton’s planned development within the District is subject to disruption due to the COVID-19 pandemic and related public health and governmental authorities’ orders and actions, which could have a material adverse effect on the D.R. Horton’s ability to complete its proposed development within the District and sell completed homes in the time frame and budget, and at the sales prices, described in this Official Statement. D.R. Horton has largely continued, with certain modifications, its home construction and sales activities in the District to date, including taking steps at the model home sites, sales offices and jobsites, as applicable, to limit the spread of the COVID-19 outbreak and implementing certain changes to the home sales process in an effort to mitigate the spread of COVID-19. D.R.

Horton has provided the option of touring homes virtually online, by appointment, or currently, in person.

However, in the event that D.R. Horton believes it is advisable to, or is required to, implement additional measures in response to a resurgence of COVID-19 or other public health risks, it may experience further negative impacts on its business and operations.
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As of the date of this Official Statement, D.R. Horton has experienced increases in certain construction costs, supply chain delays, labor shortages, and increased cycle time for construction projects generally. However, D.R. Horton has not experienced any significant development delays resulting from work stoppages, reduced attendance of workers, or the ability to obtain necessary inspections and approvals for homes, which may be attributed, directly or indirectly, to the COVID-19 pandemic. While the cost increases and delays may have been and may continue to be intermittently affected by COVID-19, the majority of cost increases and delays can be attributable to production backlogs due to prior shutdowns or shelter in place orders, the strength of the housing market and the result of vendors not anticipating the scale of the demand for housing materials.

The COVID-19 outbreak is ongoing and, among other things, the ultimate geographic spread of the virus, the emergence and spread of new strains or variants of COVID-19, the duration and severity of the outbreak, the availability and acceptance of effective vaccines, adequate testing and treatments and the prevalence of widespread immunity to COVID-19, and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to address its impact remain uncertain. The ultimate effects of COVID-19 on the District and D.R. Horton’s operations and financial condition, homebuyers' willingness and ability to pay the Special Tax when due, and the real estate market and United States economy in general are unknown. Such effects, if and as they arise, could have a material adverse effect on the ability to complete the development within the District and/or sell homes as planned, and no assurance can be provided that D.R.

Horton will be able to (a) complete in whole or in any part, or within any particular time, its construction of homes within the District; (b) avoid additional material increases in development costs or delays resulting from work stoppages, reduced attendance of workers, shortages or delays in the delivery of building materials, and/or delays in obtaining necessary inspections and approvals; or (c) sell homes, and close home sales or not experience purchase contract cancellations, due in each case to public health or governmental restrictions, further spread of COVID-19, an economic downturn driven by the pandemic, or otherwise.

See “SPECIAL RISK FACTORS—COVID-19 (Coronavirus) Pandemic” herein.

Required Infrastructure. All backbone infrastructure required to build-out all 156 single-family lots has been completed.

Entitlement Status. Other than certain permits required in the normal course of home construction, all discretionary entitlements required to complete the development and sales of homes in the District have been received. All environmental approvals have been secured in order to complete the development in the District.

Conditions of Approval. None of the remaining infrastructure improvements are required to be completed as a condition of receiving building or occupancy permits.

Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of development, D.R.

Horton has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within the District as described in the Official Statement.

Financing Plan
As of May 1, 2022, D.R. Horton had expended approximately $28,141,651 in land acquisition, improvements, home construction costs, and other development costs (excluding interest) related to the development within the District. D.R. Horton estimates that as of May 1, 2022 it remains to incur approximately $1,592,541 for intract infrastructure/development costs and approximately $6,188,059 in homebuilding, marketing, and sales costs for the District. D.R. Horton expects to use home sales revenues and internal funding to complete its development in the District. D.R. Horton believes that it will have 1080
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sufficient funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement.

To date, D.R. Horton has financed its land acquisition, site development and home construction costs related to its property in the District through internally generated funds. D.R. Horton expects to use homes sales revenue and internally generated funds to complete development of its property in the District. D.R.

Horton believes that such funding sources will be sufficient to complete its proposed development in the District as described herein. No assurance can be given that amounts necessary to fund the remaining planned development of D.R. Horton’s property within the District will be available when needed. Neither D.R.

Horton nor any other entity or person is under any legal obligation of any kind to expend funds for the development of D.R. Horton’s property in the District. Any contributions by D.R. Horton 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 D.R. Horton’s planned development within the District, the remaining portions of such development may not be completed. See “SPECIAL RISK FACTORS — Failure to Develop Properties.”
Although D.R. Horton expects to have sufficient funds available to complete its planned development in the District commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from D.R. Horton or any other source when needed. Neither D.R. Horton, 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 the District, or the payment of ad valorem property taxes or the Special Taxes. Any contributions by D.R. Horton to fund the costs of such development are entirely voluntary.

If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by D.R. Horton within the District and other financing by D.R. Horton is not put into place, there could be a shortfall in the funds required to complete the planned development by D.R. Horton in the District, and the remaining portions of D.R. Horton’s project in the District may not be completed. See “SPECIAL RISK FACTORS — Failure to Develop Properties” herein.

SPECIAL RISK FACTORS
The principal source of payment of debt service on the Bonds will be payments of the Special Tax made with respect to the Taxable Property. As discussed under “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes,” the Special Tax is to be levied annually against all such Taxable Property either at the maximum rate authorized by the Rate and Method or at such lower rates as are determined by the District Administrator to raise sufficient funds to comply with the agreements, conditions, covenants and terms contained in the Indenture, and in accordance with the Act. The Special Tax is to be collected on the tax roll of the District at the same time and in the same manner as general ad valorem real property taxes are collected. The Special Tax cannot be levied at a tax rate higher than the maximum tax rate even if the maximum tax rate will not produce sufficient Net Special Tax Revenues to pay the principal and interest then payable with respect to the Bonds. See discussions below under “— Levy of the Special Tax” and “— Collection of the Special Tax.”
Payment of the Special Tax levied on a parcel is secured by a continuing lien against such parcel. In the event an installment of the Special Tax included in the tax bill for a parcel of Taxable Property is not paid when due, the District has covenanted to institute foreclosure proceedings in court to cause the parcel to be sold in order to attempt to recover the delinquent amount from the sale proceeds. Foreclosure and sale may not always result in the recovery of the full amount of delinquent installments of the Special Tax.

See “— Collection of the Special Tax.” The sufficiency of the foreclosure sale proceeds to cover the delinquent amount depends in part upon the market for and the value of the parcel at the time of the sale.

Sufficiency of the foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. Further, other governmental claims, such as hazardous substance claims, may 1081
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affect the realizable value even though such claims may not rise to the status of liens. See “— Hazardous Substances.”
Timely foreclosure and sale proceedings with respect to a parcel of Taxable Property may be forestalled or delayed by a stay in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Not only may foreclosure and sale proceedings be forestalled or delayed, but the sale of a parcel may also be similarly affected by a bankruptcy stay. Further, should the stay not be lifted, payment of the Special Tax may be subordinated to bankruptcy law priorities. See “— Bankruptcy and Legal Delays.” Although bankruptcy proceedings may forestall or delay a foreclosure and sale or a tax sale of a delinquent parcel of Taxable Property, the Special Tax is secured by a lien which, assuming proper procedures are followed, may be enforced against the parcel. There may not be any recourse against a bankrupt property owner since the owner is not personally obligated to pay the Special Tax. Further, if proper disclosure of the authorization of the Special Tax is not made to the owner, the willingness or ability of an owner to pay the Special Tax may be adversely affected. See “— Payment of the Special Tax is Not a Personal Obligation of the Owners.”
The District is not obligated to advance funds to pay such debt service except from moneys on deposit in the Reserve Fund. See “— Bonds Are Limited Obligations.” Even if debt service is timely paid, interest on the Bonds may have to be included in the gross income of the owner of the Bonds by reason of some circumstance occurring subsequent to issuance of the Bonds, thereby reducing the after-tax yield. See “— Loss of Tax Exemption.” Risks of Real Estate Secured Investments Generally – Declines in Value Purchasers of the Bonds will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, 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, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses.

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

Levy of the Special Tax
The principal source of money with which to pay debt service on the Bonds is the proceeds derived from the annual levy and collection of the Special Tax applicable to the Taxable Property in the District. The amount of the Special Tax that can be levied is limited to the maximum tax rates authorized pursuant to the Rate and Method. Additionally, pursuant to Section 53321(d) of the Government Code, the Special Tax levied against any Assessor’s parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other Assessor’s parcel within the District by more than ten percent above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, it is possible that the District may not be able to increase the tax levy to the Assigned Facilities Special Tax on residential parcels in all years. The levies cannot be made at higher rates even if the failure to do so would result in insufficient Net Special Tax Revenues to pay the principal of and interest on the Bonds as the same become due and payable. 1082
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The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of a particular parcel and the amount of the levy of the Special Tax against such parcel. Thus, there will rarely, if ever, be a uniform relationship between the value of a parcel and its proportionate share of the debt service on the Bonds. The Special Tax levied in any particular Fiscal Year on a parcel is based upon the revenue needs of the District and the application of the Rate and Method. The application of the Rate and Method will, in turn, be dependent upon certain development factors with respect to each parcel by comparison with similar development factors with respect to the other parcels in the District. Thus, in addition to annual variations in the revenue needs of the District that must be met from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular parcel to vary from the Special Tax that might otherwise be expected:

Reduction in the number of parcels of Taxable Property, for reasons such as acquisition of such parcels by a governmental entity and failure of the governmental entity to pay the 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 parcels of Taxable Property; and Failure of the owners of certain parcels of Taxable Property to pay the applicable Special Tax and delays in the collection of or inability to collect such Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property.

Collection of the Special Tax
The timely payment of the principal of and interest on the Bonds is ultimately dependent upon the timely payment of all Special Taxes. Any money on deposit in the Reserve Fund can be used to make such payment in the event of delinquencies, but the replenishment of the Reserve Fund will be dependent on the recovery of such delinquencies. The Indenture provides that the Special Tax is to 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 (or in such other manner as the City Council shall determine, including direct billing of the affected property owners) and, except as provided in the special covenant for foreclosure described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure” and in the Act, is to be subject to the same proportionate penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem taxes on real property.

Pursuant to the Act, in the event of any delinquency in the payment of the Special Tax, the District 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. Such judicial foreclosure action is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds that it will institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installments of the Special Tax under certain circumstances. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.” In the event that foreclosure proceedings are commenced, such foreclosure proceedings could be stayed by the commencement of bankruptcy proceedings by or against the owner of the property being foreclosed. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Fund is depleted.

The District may be unable to make full or timely payment of debt service on the Bonds if property owners in the District fail to pay installments of the Special Tax when due, if the Reserve Fund is depleted, or if the District is unable to sell foreclosed parcels for amounts sufficient to cover the delinquent installments of the Special Tax.
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Failure to Develop Properties
Development of property within the District may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of D.R. Horton, or any other property owner to pay the Special Taxes prior to delinquency. Land development is subject to comprehensive federal, State and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained or, if obtained, will not be obtained on a timely basis. Failure to obtain any such agency approval or satisfy such governmental requirements would adversely affect planned land development.

Development of land in the District is also subject to the availability of water. Finally, development of land is subject to economic considerations.

As of May 1, 2022, 75 single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, 11 homes over 95% complete (all of which were in escrow), 61 homes under construction (19 of which were in escrow) and 6 lots in a finished lot condition (none of which were in escrow). As of May 1, 2022 all of the property within the District had been mass-graded and virtually all sewer, water, storm drains, streets, curbs and gutters were complete for all 156 lots within the District. As of July 1, 2022, within the District, __ single family detached homes had been completed and conveyed to individual homeowners and D.R. Horton owned 3 completed model homes, __ homes over 95% complete (__ of which were in escrow), __ homes under construction (__ of which were in escrow) and __ lots in a finished lot condition (__ of which were in escrow). A total of 150 building permits had been obtained within the District as of May 1, 2022. See “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” However, no assurance can be given that the remaining proposed residential development will be partially or fully completed; and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and unimproved.

Undeveloped or partially developed land is inherently less valuable than developed land and provides less security to the Bond Owners should it be necessary for the District to foreclose on the property due to the nonpayment of Special Taxes. The failure to complete development in the District as planned, or substantial delays in the completion of the development may reduce the value of the property within the District and increase the length of time during which Special Taxes will be payable from undeveloped property, and may affect the willingness and ability of the owners of property within the District to pay the Special Taxes prior to delinquency.

There can be no assurance that land development operations within the District will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property ownership, or the national economy. A slowdown of the development process and the absorption rate could adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Taxes. In that event, there could be a default in the payment of principal of, and interest on, the Bonds when due.

Bond Owners should assume that any event that significantly impacts the ability to develop land in the District would cause the property values within the District to decrease substantially from those estimated by the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the Special Taxes prior to delinquency.

Concentration of Property Ownership
Based on the development and ownership status as of May 1, 2022, D.R. Horton is expected to be responsible for approximately 50.64% of the projected Fiscal Year 2022-23 Special Tax levied within the 1084
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District. While the District includes 75 completed single family detached homes owned by individual homeowners as of May 1, 2022, the inability or refusal of D.R. Horton to pay the Special Tax applicable to its property when due could result in the depletion of the Reserve Fund prior to reimbursement thereof from sale or foreclosure proceedings, and/or insufficient money with which to pay the principal of and interest on the Bonds as the same became due. Additionally, pursuant to the Act, the Special Taxes levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or default. As a result, while the Maximum Special Taxes pursuant to the Rate and Method may be higher, Maximum Special Taxes on parcels of residential parcels cannot be greater than 110% of the projected actual Special Tax levy on such parcels.

Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property in the District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested.

In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property in the District, it may be unconstitutional. If for any reason property in the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Properties in the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax.

Moreover, if a substantial portion of property in the District becomes exempt from the Special Tax because of public ownership, or otherwise, the Maximum Annual Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest.

Constitutional Limitations on Taxation and Appropriations Articles XIIIA and XIIIB of the California Constitution. On June 6, 1978, California voters approved an amendment to the California Constitution, commonly known as Proposition 13 (the Jarvis/Gann Initiative), which added Article XIIIA to the California Constitution. The effect of Article XIIIA is to significantly limit the imposition of new ad valorem taxes, special taxes, transaction taxes, and sales taxes. On November 7, 1978, California voters approved Proposition 8, which made certain clarifications to Article XIIIA.

Article XIIIA of the California Constitution limits the amount of ad valorem taxes on real property to 1% of “full cash value” as determined by the county assessor. Article XIIIA defines “full cash value” to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The “full cash value” is subject to annual adjustment to reflect increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors.

Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and allows local governments to raise their property tax rates above the 1085
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constitutionally mandated 1% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or improvement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise generally precluding the imposition of any additional ad valorem taxes, special taxes, transaction taxes, and sales taxes. In addition, Article XIIIA requires the approval of two-thirds of all members of the California Legislature to change any State laws resulting in increased tax revenues.

Enactment of Article XIIIA has reduced the amount of general property tax revenues received by the City. This reduction in such revenues makes it less likely that the City or the District will have surplus funds, other than the Reserve Fund for the Bonds, with which to advance funds to make any payments or to cure any deficiency in the Interest Account or Principal Account of the Special Tax Fund, should the City or the District, as applicable, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Reserve Fund for the Bonds, none of the City or the District has any obligation to transfer into the Interest Account or Principal Account of the Special Tax Fund the amount of any such delinquencies out of any surplus moneys of the City.

On July 2, 1979, the Fifth District Court of Appeal rendered a 3-0 decision in the case of County of Fresno v. Malmstrom (94 Cal.App.3d 974), that determined that special assessments are not subject to the limitations of Article XIIIA (Proposition 13). The Court held the one percent tax limitation imposed by California Constitution Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915 Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within the definition of “special taxes” in Article XIIIA, the Constitution does not require the levy of assessments and the issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court’s decision.

At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIIIB to the California Constitution.

Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city, county, school district, authority, or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The “base year” for establishing such appropriation limit is the fiscal year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies.

Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance, and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax rates or fee schedules over the subsequent two years.

On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of Article XIIIB (Proposition 4). The Court held that the definition of “proceeds of taxes” imposed by California Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed. 1086
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The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any one year) if other funds are not available to cover delinquencies.

In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties. Since Article XIIIA provides that property may only be assessed up to 2%, per year, except upon change of ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to comment in any way on the constitutionality of Article XIIIA.

Based on this decision, however, property owners in California brought three suits challenging the acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of Article XIIIA’s assessment rules and concluded that the West Virginia case did not apply to California’s laws. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but the plaintiff subsequently decided to drop the case.

On October 7, 1991, the U.S. Supreme Court granted the plaintiff’s petition for a writ of certiorari and agreed to hear the Nordlinger v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger decision (112 U.S. 2326) of the California Court of Appeal, Second Appellate District, which previously held that Article XIIIA does not violate the U.S. Constitution.

The City cannot predict whether any other pending or future challenges to the State’s present system of property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate effect any decision regarding the State’s present system of property tax assessment will have on the City’s revenues or on the State’s financial obligations to local governments.

Articles XIIIC and XIIID of the California Constitution. Proposition 218, a state ballot initiative known as the “Right to Vote on Taxes Act,” was approved by California voters on November 6, 1996.

Proposition 218 added Articles XIIIC and XIIID to the State Constitution, and, with the exception of certain provisions, Articles XIIIC and XIIID became effective on November 6, 1996.

Among other things, Proposition 218 imposed certain voting requirements and other limitations on the imposition of new or increased taxes, assessments, and property-related fees and charges. Under Proposition 218 (i) all taxes imposed by local governments are deemed to be either general taxes, or special taxes, (ii) no local government may impose, extend, or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote, and (iii) no local government may impose, extend, or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote. Special purpose districts, including community facilities districts and assessment districts, have no power to levy general taxes. The City believes that the issuance of the Bonds does not require the conduct of further proceedings under the Refunding Act, the 1915 Act, the 1913 Act, the Mello-Roos Act, or Proposition 218, as applicable, other than as described herein.

Proposition 218 provides that the initiative power shall “not be prohibited or otherwise limited in matters reducing or repealing any local tax, assessment, fee or charge...” Thus, Proposition 218 removes limitations on the initiative power in matters of, among other things, the Special Taxes. Consequently, it is conceivable that the voters of the City or the District could, by future initiative, repeal, reduce, or prohibit the future imposition or increase of any Special Tax, subject to overriding federal constitutional principles relating to impairment of contracts.
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Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative power cannot be used to reduce or repeal the unpaid Special Taxes that are pledged as security for payment of the Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the County Auditor with respect to the unpaid Special Taxes that are pledged as security for payment of the Bonds.

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

The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district.

The facts of the San Diego Decision show that there were hundreds of thousands of registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). There were no registered voters in the District at the time of formation. In the San Diego Decision, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court’s holding does not apply to the Special Tax elections in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. Voters in the District approved the Special Tax and the issuance of bonds on January 22, 2019. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, the City believes the Special Tax is being levied in accordance with the Rate and Method and the Act.

The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination.

Maximum Special Tax
Within the limits of the Special Tax, the District may adjust the Special Tax levied on all property in the District to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to cure delinquencies and replenish the Reserve Fund to an amount equal to the Reserve Requirement for the respective Bonds and to pay Administrative Expenses. However, the amount of the Special Tax that may be levied against any property in the District is subject to the Maximum Special Tax applicable to it. There is no assurance that the Maximum Special Tax on the property in the District will be sufficient to pay the amounts required to be paid by the Indenture at all times. Additionally, pursuant to the Act, the Special Taxes levied in any fiscal year against any parcel of residential property in the District may not be increased as a consequence of delinquency or default by the owners of any other parcels within the District by more than 10% above the amount that would have been levied in that fiscal year had there never 1088
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been any such delinquencies or defaults. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes.”
Payment of the Special Tax is Not a Personal Obligation of the Owners An owner of a parcel of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation only against the parcel of Taxable Property. If the value of a parcel is not sufficient, taking into account other obligations also payable thereby, to fully secure the Special Tax, the District has no recourse against the owner.

Disclosures to Future Purchasers
The District has recorded a notice of the 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, a home or a commercial or industrial facility in the District or the lending of money thereon. The Act requires the subdivider (or its agent or representative) of a subdivision 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 the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Parity Taxes and Special Assessments
The ability or willingness of a property owner in the District to pay the Special Tax could be affected by the existence of other taxes and assessments imposed upon the property. The Special Tax and any penalties thereon will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special tax and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, other special taxes, and certain special assessments regardless of when they are imposed upon the same property. The Special Tax has priority over all existing and future private liens imposed on the property. In addition, other public agencies whose boundaries overlap those of the District could, with or in some circumstances without the consent of the owners of the land in the District, impose additional taxes or assessment liens on the property in the District in order to finance public improvements to be located inside or outside of the District.

The District has no control over the ability of other entities and districts to issue indebtedness secured by special tax or assessments payable from all or a portion of the property in the District. In addition, the City is not prohibited itself from establishing assessment districts, community facilities districts or other districts which might impose assessments or taxes against property in the District. In the event any additional improvements are financed pursuant to the establishment of an assessment district, community facilities district or other district, any taxes or assessments levied to finance such improvements will have a lien on a parity with the lien of the Special Tax. The imposition of additional liens on a parity with the Special Tax could reduce the ability or willingness of the property owners to pay the Special Tax and increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Tax or the principal of and interest on the Bonds when due.
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Depletion of Reserve Fund
The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. Money in said fund may be used to pay debt service on the Bonds in the event the proceeds of the levy and collection of the Special Tax against property in the District are insufficient. If funds in the Reserve Fund are used to pay debt service on the Bonds, the funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid pursuant to the Indenture.

However, no replenishment from the proceeds of a levy of the Special Tax can occur as long as the proceeds that are collected from the levy of the Special Tax at the maximum tax rates, together with other available funds, remain insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted by its use to pay such amounts and will not be replenished by the levy of the Special Tax. There is no assurance that the amount in the Reserve Fund will, at any particular time, be sufficient to pay all such amounts or that any amounts of the Reserve Requirement used for debt service on the Bonds will be fully replenished from the proceeds of the levy and collection of the Special Tax.

Bankruptcy and Legal Delays
The payment of the Special Tax and the ability of the District to foreclose the lien of a delinquent unpaid tax, as discussed in “SECURITY AND SOURCES OF PAYMENT 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. In addition, the prosecution of a foreclosure action could be delayed due to crowded local court calendars or delays in the legal process. The various legal opinions to be delivered concurrently with the delivery of the 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 obligation to pay the Special Tax to become extinguished, the bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings because federal bankruptcy laws may provide for an automatic stay of foreclosure and sale of tax sale proceedings. Any such delays could increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent tax installments not being paid in full. Moreover, if the value of the subject property is less than the lien of the Special Tax, such excess could be treated as an unsecured claim by the bankruptcy court. Further, should remedies be exercised under the federal bankruptcy laws against Taxable Property, payment of the Special Tax may be subordinated to bankruptcy law priorities. Thus, certain claims may have priority over the Special Tax in a bankruptcy proceeding even though they would not outside of a bankruptcy proceeding.

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

In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the 1090
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Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the non-payment of taxes.

The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County, California, in United States Bankruptcy Court and in Federal District Court.

The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre-receivership liens based upon delinquent property tax.

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

In the case of Fannie Mae and Freddie Mac, in the event a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or in the event a private deed of trust secured by a parcel of Taxable Property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of Taxable Property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest.

The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Internal Revenue Service and the Drug Enforcement Administration) have or obtain an interest.

Geologic, Topographic and Climatic Conditions
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The District is not located within an identified earthquake study zone.

The Federal Emergency Management Agency has determined that the District is located in a Zone “X” flood area (an area of minimal flooding, within the 500-year flood plain), and flood insurance will not be required. The area is protected by a levee.

In recent years, wildfires have caused extensive damage throughout the State. In some instances, entire neighborhoods have been destroyed. Several of the fires that occurred in recent years damaged or 1091
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destroyed property in areas that were not previously considered to be at risk from such events. The last major wildfire in the vicinity of the City was the Grand Prix Fire in October 2003. There have been smaller fires, such as the 147-acre Sierra Fire that burned in November 2018 and the 277-acre Karen Fire in July of 2020.

The property within the District is located in an area which the Department of Forestry and Fire Protection of the State of California has designated as a very high fire hazard severity zone. Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. Property damage due to wildfire could result in a significant decrease in the market value of property in the District and in the ability or willingness of property owners to pay Special Taxes.

In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of one or more of such events, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.

Hazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a parcel of Taxable Property, other less common claims may be relevant. One example is a claim with regard to a hazardous substance.

In general, the owners and operators of a parcel 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. 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 the property that is realizable upon a delinquency and foreclosure.

While the District is not aware that the owner (or operator) of any of 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 District is not aware of them. D.R. Horton has also represented to the District that it is not aware of any substances currently classified as hazardous by the federal government or the State located on its property within the District.

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 which 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 which 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 a parcel of Taxable Property that is realizable upon a delinquency.

No Acceleration Provision
The Indenture does not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture. 1092
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Bonds Are Limited Obligations
Neither the faith and credit nor the taxing power of the District (except to the limited extent set forth in the Indenture), the City, the State or any political subdivision thereof is pledged to the payment of the Bonds. The Bonds are limited obligations of the District; and, except as provided in the Indenture, they are payable solely from Net Special Tax Revenues and the other assets pledged therefore under the Indenture. Net Special Tax Revenues could be insufficient to pay debt service on the Bonds as a result of delinquencies in the payment of Special Taxes or the insufficiency of proceeds derived from the sale of land within the District following a delinquency in the payment of the applicable Special Tax. The District has no obligation to pay debt service on the Bonds in the event of insufficient Net Special Tax Revenues, except to the extent that money is available for such purpose in the Reserve Fund. The District’s only obligation with respect to delinquent Special Taxes is to pursue judicial foreclosure proceedings under the circumstances described in the Indenture. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Covenant for Superior Court Foreclosure.”
Loss of Tax Exemption
As discussed under “TAX MATTERS,” interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the District subsequent to the issuance of the Bonds in violation of the District’s covenants with respect to the Bonds. Should interest become includable in gross income, the Bonds are not subject to redemption by reason thereof and will remain outstanding until maturity or unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Tax.

Potential Early Redemption of Bonds from Special Tax Prepayments Property owners within the District are permitted to prepay their Special Taxes at any time. Such payments will result in a mandatory redemption of Bonds from Special Tax prepayments on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of such Special Tax prepayment. The resulting redemption of Bonds purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments.”
Cybersecurity
The City, like many other public and private entities, relies on a large and complex technology environment to conduct its operations. As a recipient and provider of personal, private, or sensitive information, the City is subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the City’s digital systems for the purposes of misappropriating assets or information or causing operational disruption and damage. To date, the City has not experienced an attack on its computer operating systems which resulted in a breach of its cybersecurity systems that are in place. However, no assurances can be given that the City’s efforts to manage cyber threats and attacks will be successful or that any such attack will not materially impact the operations or finances of the City.

In May 2021, a public facing web server of the City that was responsible for building permit and inspection scheduling was compromised. The system contained vendor and database account credentials that were promptly changed. An investigation revealed that the credentials had not been used since the compromise and that changing the credentials prevented any further unauthorized access. All traces of the compromise were removed. Mitigation measures, including a web application firewall and Secure Sockets Layer (SSL) decryption, were put into place to prevent future compromises and additional prevention measures 1093
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have been implemented. No data was lost and no damage to any systems, financial or otherwise, occurred.

There were no costs associated with remediation.

COVID-19 (Coronavirus) Pandemic
The spread of novel strains of coronavirus called COVID-19 (“COVID-19”) is having significant negative impacts throughout the world, including in the District. The World Health Organization has declared the COVID-19 outbreak to be a pandemic, and states of emergency have been declared by the County, State and the United States. The purpose behind these declarations are to coordinate and formalize emergency actions across federal, state and local governmental agencies, and to proactively prepare for a wider spread of the virus.

The COVID-19 pandemic is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak, and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impacts are uncertain. However, the impact of the COVID-19 outbreak could adversely impact development within the District, including, but not limited to, one or more of the following ways: (i) potential supply chain slowdowns or shutdowns resulting from the unavailability of workers in locations producing construction materials; (ii) slowdowns or shutdowns by local governmental agencies in providing governmental permits, inspections, title and document recordation, and other services and activities associated with real estate development; (iii) delays in construction where one or more members of the workforce becomes infected with COVID-19; (iv) continued extreme fluctuations in financial markets and contraction in available liquidity; (v) extensive job losses and declines in business activity across important sectors of the economy; (vi) declines in business and consumer confidence that negatively impact economic conditions or cause an economic recession; (vii) the failure of government measures to stabilize the financial sector and introduce fiscal stimulus to counteract the economic impact of the pandemic; (viii) delays in sales or fewer sales due to lower traffic at model home complexes and real estate offices; and (ix) delays in sales, or cancellations, due to mortgage lending issues. The ultimate adverse impact of COVID-19 on the District, D.R. Horton’s operations, finances and ability to complete their development within the District as planned, homebuyers’ willingness and ability to pay Special Taxes when due, and the real estate market in general is unknown.

Increasing Mortgage Interest Rates
Between approximately November 2021 and June 2022, mortgage interest rates have increased from approximately 3.1% to 5.8%. Mortgage interest rates are expected to continue to increase in the near term. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in the District 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, the new home would likely have a higher interest rate on a new mortgage loan as well as higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home.

CONTINUING DISCLOSURE
Community Facilities District
Pursuant to a Continuing Disclosure Agreement (the “District Continuing Disclosure Agreement”) with U.S. Bank Trust Company, National Association, in its capacity as Trustee and in its capacity as dissemination agent, the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at 1094
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www.emma.msrb.org (“EMMA”), on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events.

The District’s covenants have been made in order to assist the Underwriter in complying with the Rule.

The District has not previously entered into any undertaking with respect to the Rule. However, the City, as well as the Fontana Public Financing Authority (the “Authority”), the Successor Agency to the Fontana Redevelopment Agency (the “Successor Agency”) and various community facilities districts within the City (each, a “CFD”), all of which are entities with the City Council as the legislative body, have entered into numerous continuing disclosure undertakings.

Within the last five years, the City and the Authority have timely filed all regular annual reports pursuant to such undertakings. However, the Successor Agency, as successor to the undertakings of the former Fontana Redevelopment Agency (the “Former Agency”), failed to file one annual report for one issue of the Former Agency’s bonds and failed to link one annual report to the relevant CUSIPs for one issue of the Former Agency’s bonds. Additionally, a CFD failed to file one annual report for one issue of bonds for which the official statement relating to such bonds contained all of the information required to be contained in such report. Further, the District is aware that not all of the required information was included with respect to a number of annual report filings by the City, the Authority, the Successor Agency and several CFDs, including required tabular information. Additionally, the Authority, the Successor Agency and several CFDs failed to timely file Fiscal Year 2021 unaudited financial statements. The Authority, Successor Agency and the CFDs will file Fiscal Year 2021 audited financial statements when available. Additionally, the City, the Authority, the Successor Agency and two CFDs failed to timely file certain notices of ratings changes. The City has since made filings on behalf of itself and its related entities to correct material omissions with respect to the filings that were required to have been made within the past five years, and has adopted written procedures to ensure future compliance with the City’s disclosure undertakings and those of its related entities.

Except as disclosed in this Official Statement, within the last five years, the City, the Successor Agency and the Authority have not failed to timely comply with their respective prior continuing disclosure obligations under the Rule in all material respects. The full text of the form of the District Continuing Disclosure Agreement is set forth in Appendix G.

The Developer
Although the Underwriter has concluded that D.R. Horton is not an obligated person under Rule 15c2-12, pursuant to the Developer Continuing Disclosure Certificate, D.R. Horton has agreed to provide, or cause to be provided, to EMMA, on a semi-annual basis certain information concerning D.R. Horton and its property ownership and development within the District. D.R. Horton has further agreed to provide notice to EMMA of certain listed events. D.R. Horton’s obligation to provide semi-annual reports and notices of certain listed events will terminate upon the earlier to occur of certain events, including at such time as at least 125 of the planned 156 residential units within the District have been conveyed to individual homeowners. A default under the Developer Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Indenture, and the sole remedy under the Developer Continuing Disclosure Certificate in the event of any failure of D.R. Horton or the dissemination agent, as applicable, to comply with the Developer Continuing Disclosure Certificate will be an action to compel performance. See APPENDIX H — “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE” for a description of the specific nature of the semi-annual reports to be filed by D.R. Horton and notices of listed events to be provided by D.R. Horton.

Neither the District nor the City has considered, or reached any conclusion as to, whether or not D.R.

Horton is an obligated person under Rule 15c2-12 and takes no responsibility for any such conclusion.

Additionally, neither the District nor the City has participated in the preparation, negotiation or implementation of the Developer Continuing Disclosure Certificate or in discussions regarding the form or content thereof.

Neither the District nor the City take any responsibility for such form or content or for the adequacy of the Developer Continuing Disclosure Certificate for its intended purpose. 1095
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Neither the District nor the City is a party to the Developer Continuing Disclosure Certificate, and neither the District, the City nor the Trustee has any obligation or responsibility to monitor, nor any right or obligation to enforce, compliance by D.R. Horton with its undertaking pursuant to the Developer Continuing Disclosure Certificate, and neither the District nor the City will be so monitoring or enforcing such compliance.

D.R. Horton has represented that, based on a review of prior continuing disclosure undertakings, other than as described below, D.R. Horton and its affiliates have not failed to comply in any material respect with any previous undertaking by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities districts or assessment districts in Southern California within the past five years.

TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D hereto.

To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and exempt from State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements 1096
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designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants.

Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.

Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, 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 or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts.

Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, Beneficial Owners would have little, if any, right to participate in the audit examination process.

Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the District or the Beneficial Owners to incur significant expense.

Payments on the Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate Beneficial Owner of Bonds may be subject to backup withholding with respect to “reportable payments,” which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the 1097
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payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against a Beneficial Owner’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain Beneficial Owners (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. The failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

ABSENCE OF LITIGATION
In connection with the issuance of the Bonds, the City Attorney of the City will deliver a certificate to the effect that, to the City Attorney’s actual knowledge, after due inquiry and investigation, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or threatened, or any unfavorable decision, ruling or finding, against or affecting the City or the District, which would adversely impact the ability of the City or the District to complete the transactions described in, or contemplated by, the Indenture or this Official Statement, restrain or enjoin the collection of the Special Taxes, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Taxes, or the transactions described herein.

ABSENCE OF RATINGS
The District has not made, and does not contemplate making, application to any rating organization for a rating on the Bonds.

CERTAIN LEGAL MATTERS
Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the District, will render an opinion with respect to the validity and enforceability of the Indenture and as to the validity of the Bonds. A copy of the form of such approving opinion is attached hereto as Appendix D. Copies of such approving opinion will accompany each Bond. Bond Counsel has not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the Bonds and expresses no opinion relating thereto. Certain legal matters will be passed upon for the City by the City Attorney and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, San Francisco, California.

Although it is serving as Bond Counsel to the District in connection with the issuance and sale of the Bonds, Bond Counsel represents the Underwriter in connection with other financings and matters unrelated to the Bonds. Disclosure Counsel and the City Attorney also represent the Underwriter in connection with other financings and matters unrelated to the Bonds.

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

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

The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.

Under certain circumstances, the Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the offering prices stated on the inside front cover page hereof. The offering prices may be changed from time to time by the Underwriter.
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FINANCIAL INTERESTS
The fees being paid to the Municipal Advisor, Bond Counsel, Disclosure Counsel, Underwriter, and Underwriter’s Counsel are contingent upon the issuance and delivery of the Bonds.

MUNICIPAL ADVISOR
The District has retained CSG Advisors Incorporated, San Francisco, California, as municipal advisor (the “Municipal Advisor”) for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

CSG Advisors Incorporated is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to prospective buyers of the Bonds.

Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions.

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

CITY OF FONTANA COMMUNITY FACILITIES
DISTRICT NO. 106 (MOUNTAINVIEW)
By:

City Manager
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APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX

RATE AND METHOD OF APPORTIONMENT FOR
CITY OF FONTANA COMMUNITY FACILITIES DISTRICT No. 106
(MOUNTAINVIEW)
A Special Tax as hereinafter defined shall be levied on all Assessor’s Parcels of Taxable Property in City of Fontana Community Facilities District No. 106 (Mountainview) (“CFD No. 106”) and collected each Fiscal Year, in an amount determined by the City Council of the City of Fontana, through the application of the Rate and Method of Apportionment as described below. All of the real property in CFD No. 106, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Acre” or “Acreage” means the land area expressed in acres of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County map or the land area calculated to the reasonable satisfaction of the CFD Administrator using the boundaries set forth on such map or plan. The square footage of an Assessor’s Parcel is equal to the Acreage of such parcel multiplied by 43,560.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 (commencing with Section 53311) of the California Government Code. “Administrative Expenses” means the following actual or reasonably estimated costs directly related to the administration of CFD No. 106, including but not limited to: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 106 or any designee thereof of complying with arbitrage rebate requirements with respect to the Special Tax and CFD No. 106 Bonds; the costs to the City, CFD No. 106 or any designee thereof of complying with disclosure requirements of the City, CFD No. 106 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 106, or any designee thereof related to the reduction of the Assigned Facilities Special Tax and Backup Facilities Special Tax in accordance with Section C.1 herein; the costs of the City, CFD No. 106 or any designee thereof related to an appeal of the Special Tax; and the City’s annual administration fees and third party expenses related to CFD No. 106 Bonds. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 106 for any other administrative purposes of CFD No. 106, including attorney’s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. “Assessor” means the Assessor of the County.
“Assessor’s Parcel” means a lot or parcel to which an Assessor’s parcel number is assigned as determined from an Assessor’s Parcel Map or the applicable assessment roll. 1100
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“Assessor’s Parcel Map” means an official map of the Assessor designating parcels by Assessor’s Parcel number.
“Assigned Facilities Special Tax” means the Facilities Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.1.a.(2) below. “Assigned Services Special Tax” means the Services Special Tax, determined in accordance with Section C.2.b herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Developed Property. “Authorized Facilities” means those facilities eligible to be funded by CFD No. 106. “Authorized Services” means those services eligible to be funded by CFD No. 106 in accordance with the Act, including, but not limited to, fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the City.
“Backup Facilities Special Tax” means the Facilities Special Tax applicable to each Assessor’s Parcel of Developed Property, as determined in accordance with Section C.1.a.(3) below. “Buildout” means, for CFD No. 106, that all expected building permits for residential dwelling units and/or non-residential development to be constructed within CFD No. 106 have been issued, as determined by the CFD Administrator.
“CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, providing for the levy and collection of the Special Taxes, and performing other duties as set forth herein. “CFD No. 106” means City of Fontana Community Facilities District No. 106 (Mountainview). “CFD No. 106 Bonds” means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 106 and secured by the Facilities Special Tax levy on property within the boundaries of CFD No. 106 under the Act.
“City” means the City of Fontana, California.
“Contractual Impositions” means (a) a voluntary contractual assessment established and levied on an Assessor’s Parcel pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code (commencing with Section 5898.10 et seq.), as amended from time to time, (b) a special tax established and levied on an Assessor’s Parcel pursuant to Section 53328.1 of the California Government Code and related provisions of the Act, as amended from time to time, and (c) any other fee, charge, tax or assessment established and levied on an individual Assessor’s Parcel pursuant to a contractual agreement or other voluntary consent by the owner thereof.
“Council” means the City Council of the City acting as the legislative body of CFD No. 106. “County” means the County of San Bernardino.
“Developed Property” means, for each Fiscal Year, (i) with respect to the Facilities Special Tax, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which a building permit for new construction, other than the construction of a garage, parking lot, or parking structure, was issued after January 1, 2021 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Facilities Special Taxes are being levied, and (ii) with respect to the Services Special Tax, all 1101
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Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, (a) for which the Final Residential Subdivision was recorded prior to the Fiscal Year for which the Services Special Taxes are being levied, or (b) for which a building permit has been issued with respect to NonResidential Property on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Services Special Taxes are being levied.
“Facilities Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Taxable Property within CFD No. 106 to fund the Special Tax Requirement for Facilities, as set forth in Section C.1 herein.
“Final Residential Subdivision” means a Final Subdivision that creates individual lots for which building permits may be issued for residential dwelling units without further subdivision of such property. “Final Subdivision” means (i) a subdivision of property by recordation of a final map, parcel map, or lot line adjustment approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots or parcels for which building permits may be issued, or (ii) for condominiums, a final map approved by the City and a condominium plan recorded pursuant to California Civil Code Section 4285 that creates an individual lot(s) for which a building permit(s) may be issued without further subdivision. The term “Final Subdivision” shall not include any Assessor’s Parcel Map or subdivision map or portion thereof that does not create individual lots for which a building permit may be issued, including Assessor’s Parcels that are designated as remainder parcels. Notwithstanding the above, a condominium plan for which one or more building permits have been issued, but no individual lots have been created for such building permits, shall be considered a Final Subdivision, and the portion of the condominium plan for which building permits have been issued shall be defined as Developed Property. “Fiscal Year” means the period starting July 1 and ending on the following June 30. “Indenture” means the indenture, fiscal agent agreement, trust agreement, resolution or other instrument pursuant to which CFD No. 106 Bonds are issued, as modified, amended and/or supplemented from time to time.
“Land Use Class” means any of the classes listed in Table 1, Table 2, or Table 3 herein. “Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of CFD No. 106 that is entitled to a welfare exemption under subdivision (g) of Section 214 of the California Revenue and Taxation Code (or any successor statute), as indicated in the County’s assessment roll finalized as of the last preceding January 1. “Maximum Facilities Special Tax” means the maximum Facilities Special Tax, determined in accordance with Section C.1 herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Taxable Property. “Maximum Services Special Tax” means the maximum Services Special Tax, determined in accordance with Section C.2 herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Developed Property. “Minimum Sale Price” means the minimum price at which parcels of a given Land Use Class have sold or are expected to be sold in a normal marketing environment and shall not include prices for such parcels that are sold at a discount to expected sales prices for the purpose of stimulating the initial sales activity with respect to such Land Use Class.
“Non-Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit(s) has been issued by the City permitting the construction of one or more non-residential structures or facilities.
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“Outstanding Bonds” means all CFD No. 106 Bonds which are outstanding under the Indenture. “Price Point Consultant” means any consultant or firm of such consultants selected by CFD No. 106 that (a) has substantial experience in performing price point studies for residential dwelling units within community facilities districts or otherwise estimating or confirming pricing for residential dwelling units in community facilities districts, (b) has recognized expertise in analyzing economic and real estate data that relates to the pricing of residential dwelling units in community facilities districts, (c) is in fact independent and not under the control of CFD No. 106 or the City, (d) does not have any substantial interest, direct or indirect, with or in (i) CFD No. 106, (ii) the City, (iii) any owner of real property in CFD No. 106, or (iv) any real property in CFD No. 106, and (e) is not connected with CFD No. 106 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 106 or the City. “Price Point Study” means a price point study or a letter updating a previous price point study prepared by the Price Point Consultant pursuant to Section C herein.
“Property Owner Association Property” means, for each Fiscal Year, (i) any property within the boundaries of CFD No. 106 for which the owner of record, as determined from the County’s assessment roll for the Fiscal Year in which the Special Tax is being levied, is a property owner’s association, including any master or subassociation, or (ii) any property located in a Final Subdivision that was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Subdivision, is or will be open space, a common area recreation facility, or a private street. Notwithstanding the foregoing, any property previously classified as Developed Property and subsequently owned in fee or by easement, or dedicated to, a property owner association, including any master or sub-association, shall remain classified as Developed Property.
“Proportionately” means that the ratio of the actual Facilities Special Tax levy to the Assigned Facilities Special Tax is equal for all Assessor’s Parcels of Developed Property, and that the ratio of the actual Services Special Tax levy to the Assigned Services Special Tax is equal for all Assessor’s Parcels of Developed Property. For Undeveloped Property, “Proportionately” means that the ratio of the actual Facilities Special Tax levy per Acre to the Maximum Facilities Special Tax per Acre is equal for all Assessor’s Parcels of Undeveloped Property. The term “Proportionately” shall similarly be applied to other categories of Taxable Property as listed in Section D herein.
“Public Property” means, for each Fiscal Year, any property within the boundaries of CFD No. 106 that is (i) owned by, irrevocably offered or dedicated to the federal government, the State, the County, the City, or any local government or other public agency, provided, however, that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use; or (ii) encumbered by a public utility easement making impractical its use for any purpose other than that set forth in the easement.
“Rate and Method of Apportionment” means this Rate and Method of Apportionment for CFD No. 106. “Residential Floor Area” means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor’s Parcel shall be as set forth in the building permit(s) issued for such Assessor’s Parcel and/or as set forth in the appropriate records kept by the Building and Safety Department of the City, or other applicable City department, as determined by the CFD Administrator. “Residential Property” means all Assessor’s Parcels of Developed Property for which a building permit(s) has been issued by the City permitting the construction thereon of one or more residential dwelling units. 1103
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“Services Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Developed Property within CFD No. 106 to fund the Special Tax Requirement for Services, as set forth in Section C.2 herein.
“Special Tax” means the Facilities Special Tax and/or Services Special Tax, as applicable. “Special Tax Requirement for Facilities” means, for any Fiscal Year, that amount required, after taking into account available amounts held in the funds and accounts under the Indenture, for the following items: (i) debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) periodic costs with respect to the CFD No. 106 Bonds, including but not limited to, costs of credit enhancement and federal rebate payments due in the calendar year commencing in such Fiscal Year; (iii) pay all or a portion of Administrative Expenses; (iv) any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) without duplicating any amounts described in clause (iv), above, reasonably anticipated Facilities Special Tax delinquencies based on the delinquency rate for the Facilities Special Tax in the previous Fiscal Year, as said levy for delinquencies shall be limited by the Act; and (vi) pay directly for the acquisition or construction of Authorized Facilities, provided that the inclusion of such amount does not increase the Facilities Special Tax levy beyond the first step in Section D.1 herein. “Special Tax Requirement for Services” means that amount required in any Fiscal Year for CFD No. 106 to (i) pay directly for the Authorized Services; (ii) pay Administrative Expenses not funded through the Special Tax Requirement for Facilities as determined by the CFD Administrator; (iii) pay for reasonably anticipated Services Special Tax delinquencies based on the delinquency rate for the Services Special Tax levy in the previous Fiscal Year; less (iv) a credit for funds available to reduce the annual Services Special Tax levy, as determined by the CFD Administrator, so long as the amount required is not less than zero. “State” means the State of California.
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of CFD No. 106 which are not exempt from the Special Tax pursuant to applicable law or Section E herein. “Taxable Property Owner Association Property” means all Assessor’s Parcels of Property Owner Association Property that are not exempt pursuant to Section E herein. “Taxable Public Property” means all Assessor’s Parcels of Public Property that are not exempt pursuant to Section E herein.
“Total Tax Burden” means, for a parcel of residential property within a Land Use Class, for the Fiscal Year in which Total Tax Burden is being calculated, the sum of (a) the Assigned Facilities Special Tax for such Fiscal Year, plus (b) the Assigned Services Special Tax for such Fiscal Year, plus (c) the ad valorem property taxes, special assessments, special taxes for any overlapping community facilities districts, and any other governmental fees, charges (other than fees or charges for services such as sewer and trash), taxes and assessments (which, for purposes of clarity, do not include Contractual Impositions) collected by the County on ad valorem tax bills and that the CFD Administrator estimates would be levied or imposed on such residential property in such Fiscal Year if the residential dwelling unit thereon or therein had been completed and sold, and was subject to such fees, charges, taxes and assessments in such Fiscal Year. “Trustee” means the trustee or fiscal agent under the Indenture. “Undeveloped Property” means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Public Property or Taxable Property Owner Association Property.

Please refer to additional definitions in Section H herein relating to the Prepayment of Facilities Special Tax. 1104
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B. ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, commencing with Fiscal Year 2021-2022, all Taxable Property within CFD No. 106 shall be classified as Developed Property, Undeveloped Property, Taxable Public Property or Taxable Property Owner Association Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D herein.

C. MAXIMUM SPECIAL TAX RATE

1. Facilities Special Tax
At least 30 days prior to the issuance of the first series of CFD No. 106 Bonds, the Assigned Facilities Special Tax on Developed Property (set forth in Table 1) shall be analyzed in accordance with and subject to the conditions set forth in this Section C. At such time, the CFD Administrator shall request the Price Point Consultant to prepare a Price Point Study setting forth the Minimum Sale Price of residential property within each Land Use Class. If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to one or more Land Use Classes of residential property constructed or to be constructed within CFD No. 106 shall exceed 1.95% of the Minimum Sale Price of such residential property constructed or to be constructed within CFD No. 106, the CFD Administrator shall reduce the Assigned Facilities Special Tax to the extent necessary to cause the Total Tax Burden that shall apply to residential property within such Land Use Class(es) to not exceed 1.95% of the Minimum Sale Price of such residential property. Each Assigned Facilities Special Tax reduction for a Land Use Class shall be calculated separately, and it shall not be required that such reduction be proportionate among Land Use Classes. In connection with any reduction in the Assigned Facilities Special Tax, the CFD Administrator shall also reduce the Backup Facilities Special Tax in accordance with Section C.1.a.(3) herein. Upon determining the reductions, if any, in the Assigned Facilities Special Tax and Backup Facilities Special Tax required pursuant to this Section C, the CFD Administrator shall complete the Certificate to Amend Facilities Special Tax substantially in the form attached hereto as Exhibit A (the “Certificate to Amend”) and shall execute such completed Certificate to Amend and shall deliver such Certificate to Amend to CFD No. 106. Upon receipt thereof, if in satisfactory form, CFD No. 106 shall execute such Certificate to Amend. The reduced Assigned Facilities Special Tax and Backup Facilities Special Tax specified in such Certificate to Amend shall become effective upon the execution of such Certificate to Amend by CFD No. 106. The Assigned Facilities Special Tax and Backup Facilities Special Tax reductions permitted pursuant to this Section C shall be reflected in an amended notice of Special Tax lien which CFD No. 106 shall cause to be recorded with the San Bernardino County Recorder as soon as practicable after execution of the Certificate to Amend by CFD No. 106. If based upon such Price Point Study the CFD Administrator calculates that the Total Tax Burden applicable to each Land Use Class of residential property constructed or to be constructed within CFD No. 106 does not exceed 1.95% of the Minimum Sale Price of each such Land Use Class of residential property constructed or to be constructed within CFD No. 106, then there shall be no reduction in the Assigned Facilities Special Tax, nor shall there be a reduction in the Backup Facilities Special Tax.
a. Developed Property
(1). Maximum Facilities Special Tax
The Maximum Facilities Special Tax for each Assessor’s Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Facilities Special Tax or (ii) the amount derived by application of the Backup Facilities Special Tax.
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(2). Assigned Facilities Special Tax
Residential Property shall be assigned to Land Use Classes 1 through 10 as listed in Table 1 below based on the Residential Floor Area for each residential dwelling unit. NonResidential Property shall be assigned to Land Use Class 11. The Assigned Facilities Special Tax that shall be levied in any Fiscal Year for each Land Use Class is shown below in Table 1.

Table 1
Assigned Facilities Special Tax for Developed Property
City of Fontana CFD No. 106 (Mountainview)
Land
Use
Class Description
Residential Floor Area
(square feet)
Assigned Facilities
Special Tax
1 Residential Property 2,700 or Greater $3,618 per unit 2 Residential Property 2,550 to less than 2,700 $3,547 per unit 3 Residential Property 2,400 to less than 2,550 $3,501 per unit 4 Residential Property 2,250 to less than 2,400 $3,434 per unit 5 Residential Property 2,100 to less than 2,250 $3,367 per unit 6 Residential Property 1,950 to less than 2,100 $3,276 per unit 7 Residential Property 1,800 to less than 1,950 $3,185 per unit 8 Residential Property 1,650 to less than 1,800 $3,099 per unit 9 Residential Property 1,500 to less than 1,650 $3,013 per unit 10 Residential Property Less than 1,500 $2,984 per unit 11 Non-Residential Property NA $25,180 per Acre
(3). Backup Facilities Special Tax
The Backup Facilities Special Tax for an Assessor’s Parcel of Developed Property shall equal the lesser of (a) $27,980 per Acre, or (b) in connection with any reduction in the Assigned Facilities Special Tax as set forth in Section C.1 herein, the amount per Acre calculated pursuant to the formula below:

BFST = AFST - ATP
These terms have the following meaning:

BFST = the reduced Backup Facilities Special Tax
AFST = The total estimated Assigned Facilities Special Tax levy for CFD No. 106 based on the reduced Assigned Facilities Special Taxes for Developed Property permitted pursuant to Section C.1 herein which could be levied on all expected development assuming Buildout of CFD No. 106.

ATP = The sum of the Acreage of all Taxable Property within a Final Subdivision (assuming Buildout) within CFD No. 106 (after excluding Public Property and Property Owner Association Property as set forth in Section E.1 herein) multiplied by 90%.

Furthermore, all Assessors’ Parcels within CFD No. 106 shall be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Facilities Special Tax if the CFD Administrator calculates that (i) the annual debt service required for the Outstanding 1106
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Bonds, when compared to the Assigned Facilities Special Tax that shall be levied against all Assessors’ Parcels of Developed Property in CFD No. 106 results in 110% debt service coverage (i.e., the Assigned Facilities Special Tax that shall be levied against all Developed Property in CFD No. 106 in each remaining Fiscal Year based on the then existing development is at least equal to the sum of (a) 1.10 times the debt service necessary to support the remaining Outstanding Bonds in each corresponding Fiscal Year, and (b) Administrative Expenses), and (ii) all authorized CFD No. 106 Bonds have already been issued or the Council has covenanted that it shall not issue any additional CFD No. 106 Bonds (except refunding bonds) to be supported by the Facilities Special Tax in CFD No. 106.
(4). Multiple Land Uses
In some instances, an Assessor’s Parcel may contain both Developed Property and Undeveloped Property. In such cases, the Acreage of the Assessor’s Parcel shall be allocated between Developed Property and Undeveloped Property based on the portion of the Assessor’s Parcel for which building permits had been issued prior to May 1 of the prior Fiscal Year and the portion of the Assessor’s Parcel for which building permits had not been issued prior to May 1 of the prior Fiscal Year.

Furthermore, Developed Property may contain more than one Land Use Class. In such cases, the Acreage that is considered Developed Property shall be allocated between Residential Property and Non-Residential Property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor’s Parcel. The Maximum Facilities Special Tax that can be levied on such Assessor’s Parcel shall be the sum of the Maximum Facilities Special Tax that can be levied on each type of property located on that Assessor’s Parcel.

The CFD Administrator’s allocation to each type of property shall be final. b. Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property
The Maximum Facilities Special Tax for each Assessor’s Parcel of Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property shall be $27,980 per Acre and shall not be subject to escalation and shall therefore remain the same in every Fiscal Year.

2. Services Special Tax
For purposes of the Services Special Tax, an Assessor’s Parcel(s) of Developed Property within a Final Residential Subdivision shall be assigned to Land Use Class 1 as identified in Table 2 and Table 3 below.

Non-Residential Property shall be assigned to Land Use Class 2. Furthermore, the Services Special Tax levied against each Assessor’s Parcel within a Final Residential Subdivision shall be based on the number of residential dwelling units for which building permits have been issued or are expected to be issued for such Assessor’s Parcel, as determined by the CFD Administrator based on such Final Residential Subdivision of other available documents.
a. Maximum Services Special Tax
The Fiscal Year 2021-2022 Maximum Services Special Tax for each Land Use Class of Developed Property is shown below in Table 2.
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Table 2
Maximum Services Special Tax for Developed Property
City of Fontana CFD No. 106 (Mountainview)
Fiscal Year 2021-2022
Land
Use
Class Description
Maximum Services
Special Tax
1 Final Residential Subdivision $830 per unit
2 Non-Residential Property $6,220 per Acre
b. Assigned Services Special Tax
The Fiscal Year 2021-2022 Assigned Services Special Tax for each Land Use Class of Developed Property is shown below in Table 3.

Table 3
Assigned Services Special Tax for Developed Property
City of Fontana CFD No. 106 (Mountainview)
Fiscal Year 2021-2022
Land
Use
Class Description
Assigned Services
Special Tax
1 Final Residential Subdivision $590 per unit
2 Non-Residential Property $4,420 per Acre
c. Increase in the Maximum Services Special Tax
On each July 1, commencing on July 1, 2022, the Maximum Services Special Tax shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.
d. Increase in the Assigned Services Special Tax
The Assigned Services Special Tax above shall be applicable for Fiscal Year 2021-2022, and shall increase thereafter, commencing on July 1, 2022, and on each July 1 thereafter in an amount estimated to fund the Special Tax Requirement for Services for the Fiscal Year commencing on such July 1. However, in no case shall the Assigned Services Special Tax for an Assessor’s Parcel of Developed Property exceed the applicable Maximum Services Special Tax for such Assessor’s Parcel of Developed Property in any Fiscal Year. e. Multiple Land Uses
In some instances, an Assessor’s Parcel of Developed Property may contain more than one Land Use Class. In such cases, the Acreage of Developed Property shall be allocated between Residential Property and Non-Residential Property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor’s Parcel. The Maximum Services Special Tax that can be levied on such Assessor’s Parcel shall be the sum of the Maximum Services Special Tax that can be levied on each type of property located on that Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.
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D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

1. Facilities Special Tax
Commencing with Fiscal Year 2021-2022, and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement for Facilities and shall provide for the levy of the Facilities Special Tax each Fiscal Year as follows:

First: The Facilities Special Tax shall be levied on each Assessor’s Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Facilities Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Facilities Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property at up to 100% of the Maximum Facilities Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Facilities Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Facilities Special Tax is determined through the application of the Backup Facilities Special Tax shall be increased in equal percentages from the Assigned Facilities Special Tax up to the Maximum Facilities Special Tax for each such Assessor’s Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Facilities Special Tax shall be levied Proportionately on each Assessor’s Parcel of Taxable Public Property and Taxable Property Owner Association Property at up to 100% of the Maximum Facilities Special Tax for Taxable Public Property and Taxable Property Owner Association Property, as needed to satisfy the Special Tax Requirement for Facilities.

Notwithstanding the above, the CFD Administrator shall, in any Fiscal Year, calculate a levy Proportionately less than 100% of the Assigned Facilities Special Tax in step one (above), when (i) the CFD Administrator is no longer required to provide for the levy of the Facilities Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; and (ii) all authorized CFD No. 106 Bonds have already been issued or the Council has covenanted that it shall not issue any additional CFD No. 106 Bonds (except refunding bonds) to be supported by the Facilities Special Tax.

Further notwithstanding the above, under no circumstances shall the Facilities Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property for which an occupancy permit for private residential use has been issued (in accordance with Section 53321(d)(3) of the California Government Code), be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel within CFD No. 106 by more than ten percent above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Facilities Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Facilities Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Facilities Special Tax.

2. Services Special Tax
Commencing with Fiscal Year 2021-2022 and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement for Services and shall provide for the levy of the Services Special Tax until the total Services Special Tax levy equals the Special Tax Requirement for Services. The Services Special Tax shall be levied each Fiscal Year as follows:
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First: The Services Special Tax shall be levied Proportionately each Fiscal Year on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Services Special Tax as needed to satisfy the Special Tax Requirement for Services;
Second: If additional monies are needed to satisfy the Special Tax Requirement for Services after the first step has been completed, then the levy of the Services Special Tax on each Assessor’s Parcel of Developed Property shall be increased in equal percentages from the Assigned Services Special Tax up to the Maximum Services Special Tax for each such Assessor’s Parcel.

E. EXEMPTIONS

1. Facilities Special Tax
No Facilities Special Tax shall be levied on up to 15.5 Acres of Public Property and/or Property Owner Association Property in CFD No. 106. Tax-exempt status shall be assigned by the CFD Administrator in the chronological order in which property in CFD No. 106 becomes Public Property or Property Owner Association Property. However, should an Assessor’s Parcel no longer be classified as Public Property or Property Owner Association Property, it shall, from that point forward, be subject to the Facilities Special Tax.

Notwithstanding the above, an Assessor’s Parcel in CFD No. 106 that is transferred to a public agency or property owner’s association prior to the issuance of the first series of CFD No. 106 Bonds that causes the Acreage of Public Property and Property Owner Association Property to exceed the 15.5 Acreage limit that can be designated by the CFD Administrator under this Section E.1 shall also be exempted from paying the Special Tax.

Public Property or Property Owner Association Property that is not exempt from the Facilities Special Tax under this Section E.1 shall be subject to the levy of the Facilities Special Tax and shall be taxed Proportionately as part of the fourth step in Section D herein, at up to 100% of the applicable Maximum Facilities Special Tax for Taxable Public Property and Property Owner Association Property.

In addition, no Facilities Special Tax shall be levied on Lower Income Households Welfare Exemption Property, provided that if, in any Fiscal Year, applicable law does not require that an Assessor’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Facilities Special Tax, then the Facilities Special Tax shall be levied on such Assessor’s Parcel in accordance with this Rate and Method of Apportionment as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property.

2. Services Special Tax
No Services Special Tax shall be levied on Undeveloped Property, Taxable Public Property, Taxable Property Owner Association Property, Public Property, or Property Owner Association Property.

In addition, no Services Special Tax shall be levied on Lower Income Households Welfare Exemption Property, provided that if, in any Fiscal Year, applicable law does not require that an Assessor’s Parcel that is Lower Income Households Welfare Exemption Property be exempt from the Services Special Tax, then the Services Special Tax shall be levied on such Assessor’s Parcel in accordance with this Rate and Method of Apportionment as if such Assessor’s Parcel were not classified as Lower Income Households Welfare Exemption Property.

F. MANNER OF COLLECTION
The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 106 may directly bill the Special Tax, and/or may collect Special 1110
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Taxes at a different time or in a different manner if necessary to meet financial obligations, and, to the extent of the Facilities Special Tax, may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels.

G. APPEALS AND INTERPRETATIONS
Any landowner or resident who feels that the amount of the Special Tax levied on his/her Assessor’s Parcel is in error may submit a written appeal to the CFD Administrator, provided that the appellant is current in his/her payment of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, a cash refund shall not be made (except for the last year of levy), but the amount of the Special Tax levied shall be appropriately modified through an adjustment to the Special Tax levy in the following Fiscal Year. If the CFD Administrator disagrees with the appellant and the appellant is dissatisfied with the determination, the appellant then has 30 days in which to appeal to the Council by filing a written notice of appeal with the City Clerk, provided that the appellant is current in his/her payment of Special Taxes. This second appeal must specify the reasons for its disagreement with the CFD Administrator’s determination.

The CFD Administrator shall interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the CFD Administrator shall be subject to appeal to the Council whose decision shall be final and binding as to all persons.

H. PREPAYMENT OF FACILITIES SPECIAL TAX
Under this Rate and Method of Apportionment, an Assessor’s Parcel within CFD No. 106 is permitted to prepay the Facilities Special Tax. The obligation of the Assessor’s Parcel to pay the Facilities Special Tax may be fully or partially prepaid and permanently satisfied as described herein, provided that a prepayment may be made only for Assessor’s Parcels of Developed Property, or for an Assessor’s Parcel of Undeveloped Property for which a building permit has been issued after January 1, 2021, and only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Facilities Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor’s Parcel. The CFD Administrator may charge such owner a reasonable fee for providing this service. If there are Outstanding Bonds, prepayment must be made not less than 30 days prior to a date that notice of redemption of CFD No. 106 Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture that is specified in the report of the Facilities Special Tax Prepayment Amount (defined below).

The following additional definitions apply to this Section H:
“CFD Public Facilities Costs” means either $6,160,700 in 2021 dollars, which shall increase by the Construction Inflation Index on July 1, 2022, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide funding for the Authorized Facilities under the authorized bonding program for CFD No. 106, or (ii) shall be determined by the Council concurrently with a covenant that it shall not issue any more CFD No. 106 Bonds (except refunding bonds) to be supported by the Facilities Special Tax levy under this Rate and Method of Apportionment. “Construction Inflation Index” means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the month of December in the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction 1111
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Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. “Future Facilities Costs” means the CFD Public Facilities Costs minus (i) costs of Authorized Facilities previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund available to pay costs of Authorized Facilities, and (iii) the amount the CFD Administrator reasonably expects to derive from the reinvestment of these funds.
“Improvement Fund” means a fund or account specifically identified in the Indenture (or prior to the issuance of the first series of CFD No. 106 Bonds a fund or account held by the City) to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities. “Previously Issued Bonds” means, for any Fiscal Year, all Outstanding Bonds that are outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year.

1. Prepayment in Full
The Facilities Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below):

Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
less Capitalized Interest Credit
Total: equals Facilities Special Tax Prepayment Amount
As of the proposed date of prepayment, the Facilities Special Tax Prepayment Amount shall be calculated according to the following paragraphs:

1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel.

2. For Assessor’s Parcels of Developed Property, compute the Assigned Facilities Special Tax and Backup Facilities Special Tax for the Assessor’s Parcel to be prepaid. For Assessor’s Parcels of Undeveloped Property for which a building permit has been issued after January 1, 2021, compute the Assigned Facilities Special Tax and Backup Facilities Special Tax for that Assessor’s Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for such Assessor’s Parcel.

3. (a) Divide the Assigned Facilities Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Facilities Special Tax levy for CFD No. 106 based on the Assigned Facilities Special Taxes for Developed Property which could be levied on all expected development assuming Buildout of CFD No. 106, excluding any Assessor’s Parcels which have been prepaid, and
(b) Divide the Backup Facilities Special Tax computed pursuant to paragraph 2 by the total estimated Backup Facilities Special Taxes at Buildout for the entire CFD No. 106, excluding any Assessor’s Parcels which have been prepaid.
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4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be redeemed (the “Bond Redemption Amount”).

5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price minus 100%), if any, on the Previously Issued Bonds to be redeemed (the “Redemption Premium”).

6. Compute the current Future Facilities Costs.

7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the “Future Facilities Amount”).

8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the redemption date for the Previously Issued Bonds specified in the report of the Facilities Special Tax Prepayment Amount.

9. Determine the Facilities Special Tax levied on the Assessor’s Parcel in the current Fiscal Year which has not yet been paid.

10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Facilities Special Tax Prepayment Amount, less any interest earnings attributed to the Future Facilities Amount, and less any interest earnings attributed to the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment.

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

12. The administrative fees and expenses of CFD No. 106 are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 106 Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the “Administrative Fees and Expenses”).

13. The reserve fund credit (the “Reserve Fund Credit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture).

14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment date (the “Capitalized Interest Credit”). 1113
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15. The Facilities Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the “Facilities Special Tax Prepayment Amount”).

2. Prepayment in Part
The amount of the prepayment shall be calculated as in Section H.1; except that a partial prepayment shall be calculated according to the following formula:

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

PP = the partial prepayment.

PE = the Facilities Special Tax Prepayment Amount calculated according to Section H.1.

F = the percentage, expressed as a decimal, by which the owner of the Assessor’s Parcel is partially prepaying the Facilities Special Tax.

A = the Administrative Fees and Expenses calculated according to Section H.1.

3. General Provisions Applicable to the Prepayment of Facilities Special Tax (a). Use of the Facilities Special Tax Prepayment Amount The Facilities Special Tax Prepayment Amount, less the Administrative Fees and Expenses calculated according to Section H.1 which shall be retained by CFD No. 106, and less the Future Facilities Amount calculated according to Section H.1 which shall be deposited into the Improvement Fund, shall be deposited into specific funds established under the Indenture, to fully or partially redeem as many Outstanding Bonds as possible, and, if amounts are less than $5,000, to make debt service payments on the Outstanding Bonds.
(b). Full Prepayment of Facilities Special Tax
Upon confirmation of the payment of the current Fiscal Year’s entire Facilities Special Tax obligation, the CFD Administrator shall remove the current Fiscal Year’s Facilities Special Tax levy for such Assessor’s Parcel from the County tax rolls. With respect to any Assessor’s Parcel that is prepaid in accordance with Section H.1, the CFD Administrator shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Facilities Special Tax and the release of the Facilities Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay the Facilities Special Tax shall cease.
(c). Partial Prepayment of Facilities Special Tax
With respect to any Assessor’s Parcel that is partially prepaid, the CFD Administrator shall (i) distribute or cause to be distributed the funds remitted to it according to Section H.3.(a) and (ii) indicate in the records of CFD No. 106 that there has been a partial prepayment of the Facilities Special Tax and that a portion of the Facilities Special Tax with respect to such Assessor’s parcel, equal to the outstanding percentage (1.00 – F) of the remaining Maximum Facilities Special Tax, shall continue to be levied on such Assessor’s Parcel pursuant to Section D herein. (d). Debt Service Coverage
Notwithstanding the foregoing, no prepayment of the Facilities Special Tax shall be allowed unless the amount of Facilities Special Tax that may be levied on Taxable Property (assuming Buildout) 1114
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within CFD No. 106 in each future Fiscal Year (after excluding Public Property and Property Owner Association Property as set forth in Section E.1 herein), after the proposed prepayment, is at least equal to the sum of (i) 1.10 times the debt service necessary to support the remaining Outstanding Bonds in each corresponding Fiscal Year, and (ii) Administrative Expenses.

I. TERM OF SPECIAL TAX
The Facilities Special Tax shall be levied for a period not to exceed fifty years commencing with Fiscal Year 2021-2022. The Services Special Tax shall be levied in perpetuity to fund the Special Tax Requirement for Services.
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EXHIBIT A

CERTIFICATE TO AMEND FACILITIES SPECIAL TAX
CFD No. 106 CERTIFICATE

1. Pursuant to Section C.1 of the Rate and Method of Apportionment (the “Rate and Method”) for City of Fontana Community Facilities District No. 106 (Mountainview) (“CFD No. 106”), the Assigned Facilities Special Tax and the Backup Facilities Special Tax for Developed Property within CFD No. 106 has been reduced as described herein.
(a) The information in Table 1 of the Rate and Method relating to the Assigned Facilities Special Tax for Developed Property within CFD No. 106 shall be modified as follows:

Land
Use
Class Description
Residential Floor Area
(square feet)
Assigned Facilities
Special Tax
1 Residential Property 2,700 or Greater $[_____] per unit 2 Residential Property 2,550 to less than 2,700 $[_____] per unit 3 Residential Property 2,400 to less than 2,550 $[_____] per unit 4 Residential Property 2,250 to less than 2,400 $[_____] per unit 5 Residential Property 2,100 to less than 2,250 $[_____] per unit 6 Residential Property 1,950 to less than 2,100 $[_____] per unit 7 Residential Property 1,800 to less than 1,950 $[_____] per unit 8 Residential Property 1,650 to less than 1,800 $[_____] per unit 9 Residential Property 1,500 to less than 1,650 $[_____] per unit 10 Residential Property Less than 1,500 $[_____] per unit 11 Non-Residential Property NA $[_____] per Acre
(b) The Backup Facilities Special Tax for Developed Property, as stated in Section C.1.a.(3) of the Rate and Method, shall be reduced from $27,980 per Acre to $[_____] per Acre.

2. The Assigned Facilities Special Tax and the Backup Facilities Special Tax for Developed Property may only be reduced prior to the first issuance of CFD No. 106 Bonds.

3. Upon execution of the certificate by CFD No. 106, CFD No. 106 shall cause an amended notice of Special Tax lien for CFD No. 106 to be recorded reflecting the reductions set forth herein.

All capitalized terms used herein shall have the meanings set forth in the Rate and Method.

By: Date:

CFD Administrator
By execution hereof, the undersigned acknowledge, on behalf of CFD No. 106, receipt of this certificate and modification of the Rate and Method as set forth in this certificate.

CITY OF FONTANA COMMUNITY FACILITIES DISTRICT No. 106 (MOUNTAINVIEW) By: Date:
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APPENDIX B

APPRAISAL REPORT
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APPENDIX C

UPDATED PRICE POINT STUDY
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APPENDIX D

FORM OF OPINION OF BOND COUNSEL
[TO BE ATTACHED]
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APPENDIX E

GENERAL INFORMATION CONCERNING

THE CITY OF FONTANA
This appendix sets forth general information about the City of Fontana (“Fontana”) including information with respect to its finances. The following information concerning Fontana, the County of San Bernardino (the “County”) and, the State of California (the “State”) are included only for general background purposes. The Bonds are not obligations of the City, County or State or any political subdivision thereof and neither the faith and credit nor the taxing power of the City, County or the State, or any political subdivision thereof, is pledged to the payment of the Bonds.

General
The City of Fontana encompasses approximately 42.4 square miles of land and has an estimated population in 2022 of approximately 212,809. The City is located 50 miles east of Los Angeles, and approximately 10 miles west of the cities of Riverside and San Bernardino. Founded in 1913, Fontana is the second largest city in San Bernardino County, and the 20th largest in the State. The Riverside-San Bernardino area is often referred to as Southern California’s “Inland Empire.” As one of the cities in the Inland Empire, Fontana is part of a region whose population base exceeds 4.4 million people.

The earliest recorded landowner in the Fontana area was Don Antonio Maria Lugo, who received a land grant in 1813. A second grant, in 1842, secured the land known as Rancho de San Bernardino for his sons. The Lugo sons sold a portion of their land, which included part of what is now Fontana, to a group of Mormon settlers in 1851. The Mormon settlers eventually returned to Salt Lake City, and the Semi-Tropical Land & Water Company gained control of the Rancho. Active development of the area, however, did not begin until the early 1900’s when the Fontana Development Company acquired the acreage and began a community called Rosena - a name that was changed to Fontana in 1913.

Fontana quickly became a diversified agricultural area, with citrus, grain, grapes, poultry, and swine being the leading agricultural commodities. The community faced a transition beginning in 1942 when the Fontana area was selected as the site for a steel mill. Fontana incorporated in 1952 and the area became Southern California’s leading producer of steel and steel related products.

The steel industry dominated the City’s economy from the time the mill was built until the mid-1980’s. In the late 1970’s, however, Kaiser Steel began to cut down on production and manpower, and the steel mill closed in 1984. The mill site, located outside of City limits, is in the process of being developed into an integrated community of transportation-related industrial, commercial and business park uses to take advantage of the sites excellent highway and rail access. The plate steel and rolling mill plant was acquired by California Steel Industries, which continues to produce steel products. In addition, railroad and trucking operations and a number of industrial facilities and warehousing/distribution centers are located in Fontana because of its convenient geographical location and excellent transportation network.

Auto Club Speedway (formerly California Speedway) is a two-mile (3 km), low-banked, D-shaped oval superspeedway in Fontana, California which has hosted NASCAR racing annually since 1997. The track was also used for open wheel racing events until 2005. The racetrack is located near the former locations of Ontario Motor Speedway and Riverside International Raceway. The track is currently owned and operated by International Speedway Corporation and is the only track owned by ISC to have naming rights sold. The speedway is served by the nearby Interstate 10 and Interstate 15 freeways as well as a Metrolink station located behind the backstretch.
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City Government
The City was incorporated as a general law city in 1952, and is governed by a Mayor and four council members elected by geographical district to serve four-year terms. The City operates under the Council - Manager form of government. The City Council appoints the City Manager who is responsible for the day-today administration of City business and the coordination of all departments of the City.

The City of Fontana provides police protection, street sweeping, park maintenance, building inspection, library sewer, storm drain and sanitation services. The City contracts with the County for fire protection services. Numerous hospitals and health care facilities are located near Fontana.

Population
Fontana has been one of the most rapidly growing cities in Southern California. The adopted 1990 General Plan calls for a careful balance of residential, commercial and industrial development to ensure a quality urban environment with a broad range of employment and housing opportunities.

The population in Fontana increased approximately 6.13% from 2013 to 2022. The population growth in the City, County and State is shown on the following chart.

POPULATION ESTIMATES
City of Fontana, County of San Bernardino and State of California 2013-2022
Year(1) City of Fontana
County of San
Bernardino State of California
2013 200,522 2,084,443 38,269,864
2014 201,790 2,094,951 38,556,731
2015 203,790 2,112,187 38,865,532
2016 205,180 2,122,579 39,103,587
2017 208,003 2,139,520 39,352,398
2018 209,113 2,150,017 39,519,535
2019 211,123 2,165,876 39,605,361
2020 211,519 2,175,424 39,648,938
2021 213,944 2,175,909 39,466,855
2022 212,809 2,187,665 39,185,605
(1) January 1 estimate.

Source: State of California, Department of Finance.

Transportation
The City of Fontana is strategically located in the hub of surface, rail and air transportation facilities.

Union Pacific and Burlington Northern/Santa Fe rail lines provide rail service to Fontana. Switch yards and multi-modal terminals are located nearby.

Major interstate freeways and state highways provide direct access to the City, making shipping and transportation to and from sea ports, North American Free Trade Agreement ports of entry, and the rest of the nation highly dependable. Interstate 10 traverses the southern section of the City, Interstate 15 borders the western portion of the City, and Interstate 210, which is the extension of Route 30, opened in November 2002, links the San Bernardino Valley with the San Fernando Valley and traverses the northern portion of the City.

State freeways 57, 60 and 91 are minutes from Fontana.
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The LA/Ontario International Airport is a medium-hub, full-service airport, which offers more than 70 daily flights to cities in the U.S., Mexico and Taiwan and is served by nine commercial carriers. The airport is owned and operated by Ontario International Airport Authority, a joint powers agency, and is served by AeroMexico, Alaska Airlines, American Airlines, Delta Air Lines, Southwest Airlines, United Airlines/United Express, US Airways and Volaris. Various airlines provide freight services at Ontario International Airport.

With the completion of its twin terminals, it is able to handle approximately 10 million passengers annually. When passenger traffic reaches 10 million in two consecutive years, a third terminal will be constructed. LA/Ontario International Airport is the Western States Regional Terminal for United Parcel Service. It is a member of the Los Angeles World Airports system and is ideally situated as an airfreight center for Pacific Rim and European cargo. Over 5.5 million passengers used the airport in 2019, 9.1 % more than the same period in 2018, and over 781,000 tons of air freight were shipped, an increase of 4.1% over the same period last year.

Transit services are provided by Metrolink commuter rail service to Los Angeles with connections to the numerous surrounding cities provided by Omnitrans bus service, Dial-a-Ride, Yellow Cab Company and Bell Cab Company.

Education
Five school districts serve students in the City of Fontana. There are thirty public elementary schools, seven middle schools, five high schools, three alternative high schools, seven private elementary/middle schools, one School of Language Development and one adult school. Local colleges and universities include:

Universal Technical Institute of California Inc., Chaffey College, San Bernardino Valley College, California State University-San Bernardino, Riverside Community College, Westech College and the University of California-Riverside.
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Employment
The following table summarizes the labor force, employment and unemployment figures for the years 2017 through 2021 for the City, the County, the State and the United States.

CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT RATE
City of Fontana, San Bernardino County, State of California and United States 2017 through 2021
(1)
Year and Area Labor Force Employment(2) Unemployment(3) Unemployment
Rate (%)
2017
City of Fontana 96,900 92,400 4,600 4.7%
San Bernardino County 944,300 897,800 46,500 4.9
State of California 19,205,300 18,285,500 919,800 4.8
United States 160,320,000 153,337,000 6,982,000 4.4
2018
City of Fontana 98,500 94,700 3,800 3.9%
San Bernardino County 956,083 916,725 39,375 4.1
State of California 19,281,092 18,460,433 820,650 4.3
United States 162,075,000 155,761,000 6,314,000 3.9
2019
City of Fontana 99,600 96,100 3,500 3.6%
San Bernardino County 967,700 930,708 37,017 3.8
State of California 19,408,271 18,623,900 784,375 4.0
United States 163,539,000 157,538,000 6,001,000 3.7
2020
City of Fontana 99,500 90,300 9,200 9.2%
San Bernardino County 966,200 874,900 91,300 9.4
State of California 18,821,200 16,913,100 1,908,100 10.1 United States 160,472,000 147,795,000 12,947,000 8.1
2021
City of Fontana 102,100 94,800 7,300 7.1%
San Bernardino County 988,600 915,100 73,500 7.4
State of California 18,923,200 17,541,900 1,381,200 7.3 United States 161,204,000 152,581,000 8,623,000 5.3
Note: Data is not seasonally adjusted.
(1) Annual averages, unless otherwise specified.
(2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table.

Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. 2021 Benchmark.
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Listed below are the major employers in the City.

CITY OF FONTANA - MAJOR EMPLOYERS – 2020
Employer Number of Employees
Kaiser Hospital & Med. Group 6,248
Fontana Unified School District 5,898
Amazon.com Services LLC 3,008
City of Fontana (includes part-time employees) 995
Estes West 352
Water of Life Community Church 300
Saia Motor Freight Line LLC 289
Schlosser Forge Company 287
Walmart Store #1756 286
Costco Wholesale #627 275
Crown Technical Systems 275
Source: City of Fontana Fiscal Year Ending June 30, 2020 Annual Comprehensive Financial Report.

Listed below are the major employers in the County.

PRINCIPAL EMPLOYERS
San Bernardino County
2021
Rank Name of Business
Approximate No. of
San Bernardino
County
Employees(1) Type of Business
1 County of San Bernardino ≥10,000 Public Administration 2 Loma Linda University ≥10,000 Education
3 Amazon 5,000-9,999 Electronic Commerce
4 Ontario International Airport 5,000-9,999 Airport
5 Plaxicon Holding Corporation 5,000-9,999 Plastics Manufacturer 6 California State University, San
Bernardino
5,000-9,999 Medical Center
7 James Jones Company 2,500-4,999 Water Products
8 Barrett Business Services, Inc. 2,500-4,999 Management Consulting 9 Damao Luggage International Inc. 2,500-4,999 Retailer 10 San Manuel Tribe & Casino 2,500-4,999 Casino
(1) Due to confidentiality of reporting number of employees, ranges have been provided.

Source: San Bernardino County Comprehensive Annual Report for the year ending June 30, 2021. 1124
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Industries
Residents of the City find employment throughout the Riverside-San Bernardino-Ontario Labor Market Area. This labor market area, as defined for reporting purposes by the California Employment Development Department, has boundaries coterminous with those of Riverside and San Bernardino Counties.

The following table sets forth certain employment data for the Riverside - San Bernardino-Ontario Metropolitan Statistical Area and the County for the period from 2017 through 2021.

RIVERSIDE-SAN BERNARDINO-ONTARIO METROPOLITAN STATISTICAL AREA

INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE
2017 2018 2019 2020 2021
Civilian Labor Force 2,012,900 2,045,000 2,074,500 2,088,600 2,118,200 Civilian Employment 1,909,500 1,956,800 1,989,700 1,880,500 1,961,800 Civilian Unemployment 103,400 88,200 84,800 208,100 156,400 Civilian Unemployment Rate 5.1% 4.3% 4.1% 10.0% 7.4%
Total Farm 14,500 14,500 15,400 14,100 13,900
Total Nonfarm 1,453,300 1,506,600 1,552,800 1,495,200 1,569,100 Total Private 1,202,300 1,249,400 1,291,600 1,247,200 1,325,400 Goods Producing 196,400 206,100 208,900 201,300 205,400 Mining & Logging 1,000 1,200 1,200 1,300 1,400
Construction 97,400 105,200 107,200 104,900 109,200
Manufacturing 98,000 99,800 100,600 95,100 94,800
Service Providing 1,256,900 1,300,500 1,343,800 1,293,900 1,363,700 Trade, Transportation & Utilities 363,900 379,400 395,100 406,900 443,100 Wholesale Trade 63,100 66,100 67,700 65,600 67,000
Retail Trade 180,900 181,200 180,700 168,800 177,600
Transportation, Warehousing & Utilities 119,900 132,100 146,600 172,500 198,600 Information 11,600 11,400 11,500 9,400 9,600
Financial Activities 44,700 44,600 45,000 44,100 44,900 Professional & Business Services 147,300 152,000 158,700 155,400 167,300 Educational & Health Services 226,700 239,500 250,300 248,700 253,300 Leisure & Hospitality 166,300 170,600 175,900 141,300 158,900 Other Services 45,400 45,800 46,200 40,200 43,000
Government 251,000 257,200 261,200 248,000 243,600
Total, All Industries 1,467,800 1,521,100 1,568,100 1,509,300 1,583,000 Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The “Total, All Industries” data is not directly comparable to the employment data found in this Appendix D.

Source: State of California, Employment Development Department, March 2021 Benchmark. 1125
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Tax Levy and Tax Collection
Below is a chart which indicates the tax levy and collection records for the City for fiscal years 2010 through 2020.

Fiscal Year
Percent of Levy
Collected
Total Tax Collections
to Tax Levy to Date
2010 97.40% $96,581,878
2011 96.70 91,393,702
2012 36.93(1) 34,465,021
2013 50.76(1) 47,985,784
2014 47.39(1) 45,980,226
2015 44.90(1) 47,694,338
2016 43.35(1) 48,471,707
2017 44.35(1) 52,046,433
2018 43.84(1) 54,606,892
2019 46.47(1) 65,091,616
2020 48.58(1) 73,672,999
(1) Due to the dissolution of the former redevelopment agency, the property taxes collected in the former project areas is no longer remitted to the agencies. Assembly Bill 1X26 provides that revenues will only be allocated to make payments on the indebtedness; all remaining collections will be distributed to the other taxing entities based on the tax sharing formula.

Source: City of Fontana Fiscal Year Ending June 30, 2020 Comprehensive Annual Financial Report.

Largest Taxpayers
The principal property taxpayers in the City for 2020 are as follows:

Taxpayer
2020 Assessed
Valuation
% of Total
Assessed
Valuation
Duke Realty LP $ 142,552,795 0.67%
San Gabriel Valley Water Company 137,264,772 0.65
Vintage Park East LLC 131,420,454 0.62
Target Corporation 119,369,115 0.56
Sierra Lakes Commerce LLC 109,023,747 0.52
Citrus Avenue LLC 101,427,188 0.48
Prologis Usla Newca 1 LLC 91,618,153 0.43
Francisco Street LP 91,279,694 0.43
Intex Properties Inland Empire Corp 87,030,328 0.41
DCT Jurupa Ranch LLC 83,728,342 0.40
TOTAL: $1,094,714,568 5.17%
Source: City of Fontana Fiscal Year Ending June 30, 2020 Comprehensive Annual Financial Report. 1126
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Taxable Sales
The table below presents taxable sales for the years 2017 through 2021 for the City.

TAXABLE SALES
City of Fontana
2017 through 2021
(Dollars in Thousands)
Year
Retail and Food
Permits
Retail and Food
Taxable
Transactions Total Permits
Total Outlets
Taxable
Transactions
2017 3,955 2,507,859 5,495 $3,380,666
2018 3,944 2,650,007 5,597 3,596,722
2019 4,101 2,688,821 5,870 3,698,999
2020 4,467 2,752,323 6,543 3,615,021
2021 3,997 3,384,646 5,969 4,359,378
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2017-2021.

The table below presents taxable sales for the years 2017 through 2021 for the County.

TAXABLE SALES
San Bernardino County
2017 through 2021
(Dollars in Thousands)
Year
Retail and Food
Permits
Retail and Food
Taxable
Transactions Total Permits
Total Outlets
Taxable
Transactions
2017 39,067 $25,603,171 58,956 $38,399,373
2018 39,837 26,905,784 61,838 40,554,024
2019 40,964 27,585,905 64,771 41,768,748
2020 44,330 28,745,277 71,145 43,265,512
2021 40,801 38,261,479 66,585 55,254,235
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2017-2021. 1127
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Personal Income
The following tables show the personal income and per capita personal income for the City, County, State of California and United States from 2015 through 2020.

PERSONAL INCOME
City of Fontana, County of San Bernardino, State of California, and United States 2015-2020
Year
City of
Fontana
County of
San Bernardino California United States
2015 $3,963,623 $76,919,474 $2,172,930,000 $15,717,140,000 2016 4,013,591 80,401,688 2,273,557,000 16,151,881,000
2017 4,159,001 83,401,792 2,383,130,000 16,937,582,000
2018 4,444,518 86,995,697 2,514,503,000 17,839,255,000
2019 4,775,796 91,658,300 2,632,280,000 18,542,262,000
2020 n/a 98,143,792 2,814,011,000 19,679,715,000
Note: Dollars in Thousands.

Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Fontana Comprehensive Annual Financial Report for the year ending June 30, 2020.

PER CAPITA PERSONAL INCOME(1)
City of Fontana, County of San Bernardino, State of California, and United States 2015-2020
Year
City of
Fontana
County of
San Bernardino California United States
2015 $19,400 $36,361 $55,853 $49,003
2016 19,122 37,713 58,074 49,995
2017 19,545 38,774 60,581 52,096
2018 20,965 40,150 63,759 54,581
2019 22,519 42,043 66,745 56,474
2020 n/a 44,831 71,480 59,729
(1) Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S.

Bureau of the Census. All dollar estimates are in current dollars (not adjusted for inflation).

Source: City of Fontana Comprehensive Annual Financial Report for the year ending June 30, 2020, Bureau of Economic Analysis for County, State and U.S.
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Construction Trends
Below is a table indicating residential and non-residential building permits valuations for the City.

CITY OF FONTANA

BUILDING PERMIT VALUATION
(in thousands of dollars)
Type 2016 2017 2018 2019 2020
Valuation ($000’s)
Residential: $129,741 $157,429 $145,610 $241,481 $311,547 Non-Residential: 228,059 131,572 197,379 290,767 149,761 Total Valuation: $357,800 $289,001 $342,989 $532,248 $461,308 New Housing Units:

Single Family 439 600 413 642 848
Multi Family 33 69 85 202 234
Total Units: 472 669 498 844 1,082
Note: Totals may not add to sums because of independent rounding.

Source: Construction Industry Research Board.

Recreation
The City of Fontana maintains over 40 parks, tot lots, sports facilities and other facilities in the community. The City of Fontana operates eight centers throughout the community. The Center Stage Theatre was originally built in 1937 as a single screen movie theatre and was remodeled in 2008 and re-opened as the premiere performing arts venue in the City of Fontana.
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APPENDIX F

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
[TO COME FROM BOND COUNSEL]
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APPENDIX G

FORM OF DISTRICT CONTINUING DISCLOSURE AGREEMENT
[TO COME FROM BOND COUNSEL]
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APPENDIX H

DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
[TO BE PROVIDED]
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APPENDIX I

INFORMATION CONCERNING THE DEPOSITORY TRUST COMPANY

AND ITS BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect 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.

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered Bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 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 bookentry 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 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to 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 Bonds 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 Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such 1133
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other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, 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 the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC.

THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY

FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY

ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE

VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 1134

APPRAISAL REPORT

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 106
(Mountainview)
City of Fontana, San Bernardino County, California
(Appraisers’ File No. 2022-1260)
Prepared For
City of Fontana
8353 Sierra Avenue
Fontana, CA 92335
Prepared By
Kitty Siino & Associates, Inc.
115 East Second Street, Suite 100
Tustin, California 92780
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KITTY SIINO & ASSOCIATES, INC.

REAL ESTATE APPRAISERS & CONSULTANTS
June 29, 2022
Jessica Brown, Management Services Director
City of Fontana
8353 Sierra Avenue
Fontana, CA 92335
Reference: Appraisal Report
City of Fontana
Community Facilities District No. 106
Mountainview
East side of Lytle Creek Road, North of Summit Avenue, Fontana Dear Ms. Brown:

At the request and authorization of the City of Fontana, we have completed an Appraisal Report for The City of Fontana Community Facilities District No. 106 (“Fontana CFD No. 106”) which consists of a residential neighborhood known as Mountainview, in the City of Fontana.

Mountainview includes 156 single family detached homes situated on lots containing a minimum of 5,000 square feet. This report includes the entirety of the Mountainview community. D.R.

Horton (“Horton”) is the builder and is actively marketing the homes. Mountainview offers singlestory and two-story floorplans ranging in size from 1,576 to 2,722 square feet.

Out of the 156 proposed units within the subject, 75 have closed to individual homeowners to date with an additional 30 in escrow which are due to close upon completion. The builder-owned property ranges from completed model homes to homes under construction to finished lots.

The valuation methods used in this report are the Sales Comparison Approach, a Discounted Cash Flow Analysis and a Mass Appraisal Technique as defined within this report. The fee simple estate of the subject property has been valued subject to the Fontana CFD No. 106 special tax lien. This report is written with the hypothetical condition that the subject property is enhanced by the improvements and/or fee credits to be funded by the special tax bonds of Fontana CFD No. 106. As a result of our investigation, the concluded minimum market value for the subject property is shown below.

Mountain View:

D.R. Horton Ownership (67 lots & 14 houses) $ 26,062,583 Individual Owners (75 houses) $ 51,571,515
Total Aggregate Value CFD No. 106 $ 77,634,098
115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] 1136
Jessica Brown
City of Fontana
June 29, 2022
Page Two
The values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of May 1, 2022.

Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. This Appraisal Report is intended to comply with both the Uniform Standards of Professional Appraisal Practice (“USPAP” January 2020) and with the Appraisal Standards of the California Debt and Investment Advisory Commission (“CDIAC”). The appraiser is not responsible for unauthorized use of this report.

This letter of transmittal is part of the attached report, which sets forth the data and analyses upon which our opinion of value is, in part, predicated.

Respectfully submitted,
KITTY SIINO & ASSOCIATES, INC.

Kitty S. Siino, MAI
California State Certified General
Real Estate Appraiser (AG004793)
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TABLE OF CONTENTS
Assumptions and Limiting Conditions............................................................................... i Hypothetical Condition ....................................................................................................iii Extraordinary Assumption ...............................................................................................iii Aerial Photo of Fontana CFD No. 106 (Mountainview)....................................................iv Purpose of the Appraisal................................................................................................ 1 The Subject Property...................................................................................................... 1 Intended Use of the Report ............................................................................................. 1 Definitions ...................................................................................................................... 2 Property Rights Appraised ............................................................................................. 4 Effective Date of Value................................................................................................... 4 Date of Report................................................................................................................ 4 Scope of Appraisal ........................................................................................................ 4 Regional Area Map.......................................................................................................... 7 County of San Bernardino Area Description................................................................... 8 City of Fontana Area Map & Description ....................................................................... 19 Immediate Surroundings ............................................................................................... 24 Community Facilities District No. 106 ........................................................................... 26 Subject Property Descriptions ....................................................................................... 29 Inland Empire Housing Market ...................................................................................... 36 Highest and Best Use Analysis ..................................................................................... 46 Valuation Analyses and Conclusions ............................................................................ 50 Appraisal Report Summary ........................................................................................... 68 Appraiser’s Certification ............................................................................................... 69

ADDENDA
Fontana CFD No. 106 Boundary Map
Tract Map No. 20018
Discounted Cash Flow Analysis
Finished Lot Land Sales Map and Summary Chart
Improved Residential Sales Map and Summary Chart
Appraiser’s Qualifications
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ASSUMPTIONS AND LIMITING CONDITIONS

1. This report might not include full discussions of the data, reasoning and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Some supporting documentation concerning the data, reasoning and analyses may be retained in the appraiser’s files. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report.

2. No responsibility is assumed for legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated in this report.

3. It is assumed that the subject property is subject to the special tax lien of Fontana CFD No. 106.

4. Responsible ownership and competent property management are assumed unless otherwise stated in this report.

5. The information furnished by others is believed to be reliable; however, no warranty is given for its accuracy.

6. All engineering is assumed to be correct. Any plot plans and illustrative material used in this report are included only to assist the reader in visualizing the property and may not be to scale.

7. It is assumed that there are no hidden or unapparent conditions of either property, subsoil or structures that would render them more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

8. It is assumed that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in this report.

9. It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined and considered in this appraisal report.

10. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based.

11. Any sketch or photograph included in this report may show approximate dimensions and is included only to assist the reader in visualizing the properties. Maps, photographs and exhibits found in this report are provided for reader reference purposes only. No guarantee regarding accuracy is expressed or implied unless 1139
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otherwise stated in this report. No survey has been made for the purpose of this report.

12. It is assumed that the utilization of the land and improvements (if any) are within the boundaries or property lines of the property described and that there is no encroachment or trespass unless otherwise stated in this report.

13. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substances should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert relating to asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials that may affect the value of the property. The appraiser’s value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value unless otherwise stated in this report. No responsibility is assumed for any environmental conditions or for any expertise or engineering knowledge required to discover them. The appraiser’s descriptions and resulting comments are the result of the routine observations made during the appraisal process.

14. Proposed improvements, if any, are assumed to be completed in a good workmanlike manner in accordance with the submitted plans and specifications.

15. The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings, if any, must not be used in conjunction with any other appraisal and are invalid if so used.

16. The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992 and have been updated several times since then. The appraiser has made no specific compliance survey and analysis of the property to determine whether they conform to the various detailed requirements of the ADA, nor is the appraiser a qualified expert regarding the requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect upon the value of the property.

Since the appraiser has no direct evidence relating to this issue, a possible noncompliance with requirements of the ADA in estimating the value has not been considered.

17. It is assumed there are no environmental concerns that would slow or thwart development of the subject properties and that the soils are adequate to support the highest and best use conclusions.
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18. Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event, only with proper qualification and only in its entirety. Permission is given for this appraisal to be published as a part of the Official Statement or similar document for the Fontana CFD No. 106 special tax bonds

19. It is assumed that there are no conditions of approval or hindrances which could slow or thwart the obtaining of occupancy permits on the 156 subject residential units. This is the case per D.R. Horton; however, we were unable to verify via the various conditions of approval.

HYPOTHETICAL CONDITION

1. It is assumed that all improvements and benefits to the subject properties, which are to be funded by the City of Fontana CFD No. 106 Special Tax Bond Proceeds are completed and in place.

EXTRAORDINARY ASSUMPTION

1. It is assumed that the sales information and remaining development costs as reported by the builder and summarized in the report are correct. We have not reviewed escrow documents on the home sales however, per our review the sales as reported by the builder appear to be reasonable. While we have reviewed the costs and they appear reasonable, we are not experts in the field of construction cost estimation and are relying on the costs received in the valuation analysis. If the actual land development costs differ, the final values may change 1141
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PURPOSE OF THE APPRAISAL
The purpose of this appraisal report is to estimate the value of the fee simple interest of the subject property, subject to the lien of the Fontana CFD No. 106 Special Tax Bonds.

THE SUBJECT PROPERTY
The subject property consists of 156 proposed single family detached homes being developed into a community known as Mountainview in the City of Fontana (“City”).

Mountainview is located along the east side of Lytle Creek Road, north of Summit Avenue, and southeast of Interstate 15. Mountainview is being built and sold by D.R. Horton, and features homes sized from 1,576 to 2,722 square feet. The subject community is encompassed by Tract Map 20018, which subdivides the subject lands into 156 singlefamily detached residential lots with a minimum size of 5,000 square feet. Within Mountainview, 75 of the 156 lots have been completed and closed to individuals. The remaining lots vary in status from completed models, to under homes construction to finished lots. The ownership and condition of the lands are detailed in the chart below.

Description No.

Lots Owner Product / Condition / Status
Mountainview – Tract 20018
Lots 1-31, 51-77, 81-89, 143-150 75 Individuals Completed Homes Lots 154-156 3 D.R. Horton Model Homes (0 in Escrow)
Lots 32-37, 46-50 11 D.R. Horton Over 95% Complete (11 in Escrow) Lots 38-45, 90-142 61 D.R. Horton Under Construction (19 in Escrow) Lots 78-80, 151-153 6 D.R. Horton Finished Lots (0 in Escrow) TOTAL CFD No. 106 156

INTENDED USE OF THE REPORT
It is the appraiser’s understanding that the client, the City of Fontana, will utilize this report in disclosure documents related to the sale of the Fontana CFD No. 106 Special Tax Bonds. This report may be included in the Official Statement or similar document to be 1143
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distributed in connection with the marketing and offering of the bonds. It is the appraiser’s understanding that there are no other intended uses of this report.

DEFINITIONS
Market Value
The term “Market Value” as used in this report is defined as:
"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”1
Inherent in the Market Value definition is exposure time or the time the subject property would have been exposed on the open market prior to the appraisal in order to sell at the concluded values. In the case at hand and considering current market conditions, the exposure time for each individually owned property or the entire developer owned property in a bulk sale, is less than one year.

Finished Lot
The term “Finished Lot” is defined as:
“A parcel which has legal entitlements created by a recorded subdivision map, whose physical characteristics are a fine graded level pad per lot with infrastructure contiguous to each individual lot, asphalt paved roads and the necessary utilities. This term assumes the payment of all applicable development fees with the exception of building permit and plan check fees.”
1 The Appraisal of Real Estate, 13th Edition
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Minimum Market Value
The term “Minimum Market Value” as used in this report is defined as:
“The base market value of a new home. That is, most buyers purchase some upgrades, options and/or lot premiums when purchasing a new home.

The sales price for the new home typically includes the base price for the plan, plus any upgrades, options or lot premiums, less concessions, if any, which were given or paid for by the builder. The concluded minimum market value is for the base value of the plan only, not taking into consideration any upgrades, options or premiums.”
Mass Appraisal Technique
The term “Mass Appraisal” as used in this report is defined as:
“The process of valuing a universe of properties as of a given date using standard methodology employing common data and allowing for statistical testing”2
In the case at hand, the statistical testing included reviewing all original builder sales and reviewing the Multiple Listing Service (“MLS”) for any re-sales and/or current listings of each plan type. In addition, we have determined the actual range of sales prices for each plan type which will be utilized in the valuation process. The search of the MLS resulted in no resales and no current resale listings within the subject property.

Hypothetical Condition
The term “Hypothetical Condition” is defined by USPAP as:
“A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis” The Hypothetical Condition within this report is that subject property is enhanced by the improvements and/or fee credits to be funded by bonds issued by Fontana CFD No. 106.

Extraordinary Assumptions
The term “Extraordinary Assumption” is defined by USPAP as:
2 USPAP 2018-2019 Edition
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“An assignment specific assumption as of the effective date regarding uncertain information used in an analysis which, if found to be false, could alter the appraiser’s opinions or conclusions”
There is one Extraordinary Assumption within this report which is that the sales information and the cost information as received from Lennar are true and accurate. We have not reviewed actual escrow documents on the sales of the new homes. However, we have reviewed each sale as reported by the builder and the sales prices appear reasonable. In addition, we have reviewed the remaining land development costs and they appear reasonable; however, we are not experts in the field of cost estimating. It should be noted that these costs were relied upon for the value conclusion and, if the remaining land development costs differ, it may change the value conclusions.

PROPERTY RIGHTS APPRAISED
The property rights being appraised are of a fee simple estate interest, subject to easements of record and subject to Fontana CFD No. 106. The definition of “fee simple estate” is defined as:
“absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”3

EFFECTIVE DATE OF VALUE
The subject property is valued as of May 1, 2022.

DATE OF REPORT
The date of this report is June 29, 2022.

SCOPE OF APPRAISAL
As previously stated, the purpose of this appraisal is to report the appraiser’s best estimate of the market value for the subject property, Fontana CFD No. 106, which is 3 The Appraisal of Real Estate, 13th Edition
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known as the community of Mountainview. The subject property consists of the entirety of the Mountainview community, and is being built and sold by D.R. Horton. There are a total of 156 proposed homes within the subject. This appraisal will be presented in the following format:
• County of San Bernardino Description
• City of Fontana Description
• Immediate Surroundings Description
• Brief Description of Fontana CFD No. 106
• Subject Property Description
• Inland Empire Residential Market Analysis
• Highest and Best Use Analysis
• Valuation Procedure, Analysis and Conclusions
• Appraisal Report Summary
In valuing the subject property, the value estimates will be based upon the highest and best use conclusion using the Sales Comparison Approach. The Sales Comparison Approach to value is defined as:
“…a set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, then applying appropriate units of comparison and making adjustments to the sales prices of the comparables based on the elements of comparison. The Sales Comparison Approach may be used to value improved properties, vacant land or land being considered as though vacant; it is the most common and preferred method of land valuation when an adequate supply of comparables is available.”4 In the Sales Comparison Approach, market value is estimated by comparing properties similar to the subject that have recently been sold, are listed for sale or are under contract.

Neither a cost or income approach was utilized as they were not considered necessary to arrive at credible results. In addition, we have utilized a mass appraisal technique which included reviewing all builder sales and searching the MLS for any resales and/or resale listings.

The due diligence of this appraisal report included the following:
4 Dictionary of Real Estate Appraisal, Fourth Edition, 2002 1147
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1. Compiled demographic information and related that data to the subject property to perform a feasibility/demand analysis.

2. Gathered and analyzed information on the subject marketplace, reviewed several real estate brokerage publications on historical and projected growth in the subject market and researched the micro- and macro-economic outlook within San Bernardino County and the Fontana area.

3. Inspected the subject property between April 1, 2022 and May 15, 2022.

4. Had the site flown by an aerial photographer on May 1, 2022.

5. Interviewed representatives from D.R. Horton and/or their representatives in order to obtain project information.

6. Reviewed a preliminary title report on portions of the subject property.

7. Searched the area for relevant comparable residential land sales, inspected and verified each sale with a buyer or seller or broker familiar with the transaction.

8. Searched the area for relevant comparable new home residential projects, including sales prices and concessions and interviewed representatives from each comparable project.

9. Reviewed the sales brochure and website for the subject community.

10. Reviewed developer sales information on each home within the community.

11. Reviewed Multiple Listing Service information to determine if there are any resales, pending resales or listings of resale homes.
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REGIONAL AREA MAP
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COUNTY OF SAN BERNARDINO AREA DESCRIPTION
Location
The subject property is located in the southwestern portion of San Bernardino County, in the northern portion of the City of Fontana. More specifically, Gabion Ranch is located less than one-quarter mile southeast of Interstate 15 (“I-15”), and about one- and onehalf miles north of Interstate 210 (“I-210”).

San Bernardino County (the “County”) is the largest county in the United States by area containing over 20,100 square miles, and includes large expanses of undeveloped deserts, valleys, canyons and mountains with deserts comprising about 90 percent of the acreage. The County is a major beneficiary of outward urban pressure from Los Angeles, Orange and Riverside Counties. Although located at the periphery of most urban activity in Southern California, the southwestern portion of San Bernardino County has been a major growth area and is perceived by most observers as an area expected to continue to grow. Riverside and San Bernardino Counties are considered distinct from Los Angeles and Orange Counties, and belong to the same Metropolitan Statistical Area (“MSA”). This area, consisting of San Bernardino and Riverside Counties, is commonly referred to as the Inland Empire.

Transportation
The subject property is situated just southeast of I-15, about one- and one-half miles north of I-210, and approximately six and one-half miles north of Interstate 10 (“I-10”). The I-15 is the nearest interstate providing access to the subject via the Beech/Summit Avenue or Duncan Canyon Road on/off ramps. While the subject is near the freeway, there is not currently a direct route to get on the I-15 without traveling to Summit Avenue or Duncan Canyon Road. Currently, there are bollards preventing travel up Lytle Creek just north of the entrance to the subject Mountainview community. I-15 travels in a northerly/southerly direction and provides access to Barstow and Nevada to the north and San Diego to the south. I-10 begins from the west in Los Angeles and provides access into Arizona to the east. In the vicinity of the subject, I-210 provides additional east/west access about two miles north of I-10 beginning in Santa Clarita in Los Angeles County and provides access 1150
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near the City of San Bernardino. The subject is located three and one-half miles north of the historical Route 66, the original Los Angeles to Chicago cross country route.

The County is served by Amtrak and Metrolink as well as several rail-freight lines. The Ontario International Airport provides regional international air service and is located approximately 10 miles southwest of the subject property. San Bernardino International Airport is located approximately 13 miles southeast of the subject. In addition, the County has extensive trucking corridors along the previously referred to interstates, highways and state freeways.

Population
The County has experienced population growth for several decades and is anticipated to continue to do so in the foreseeable future. Per the California Department of Finance, the July 1, 2021 (latest available) County population was 2.175 million. This represents a one-year increase of 0.0 percent. This compares to an average annual growth rate over the past 20 years of 2.1 percent. Current projections for San Bernardino County per the California Department of Finance suggest the population is anticipated to reach approximately 2.32 million by 2030, indicating an average annual increase of approximately 0.7 percent over the next nine years. The current zero growth rate is lower than the previous 20-year annual average of 2.1 percent, likely due to the disruption of the COVID pandemic. The future growth of 0.7 percent annually was predicted assuming a more stable market than was seen prior to the Great Recession, however doesn’t take into effect the COVID pandemic.

Economy
Beginning February 20, 2020, the U.S. began experiencing an unprecedented economic disruption due to the COVID-19 pandemic. Original predictions were for deaths due to the virus overwhelming hospitals and staff. While the U.S. has lost over 900,000 lives due to COVID-19, except for a few exceptions, hospitals have, thus far, had the capacity to treat the patients. January 2021 was the deadliest month in the U.S.; however, cases then declined rapidly as vaccination rates rose. The summer of 2021 began new variants of 1151
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the disease which increased rates once again; however, thus far not to the extent of last winter with hospitalizations of vaccinated people significantly lower. The Federal, State, County and City Governments (“Governments”) originally shut down non-essential businesses and areas where social gatherings occur in March 2020 in order to slow the spread of the virus. This created a strain on small and large businesses alike. Restaurants and hotels were hit hard and travel reduced drastically as citizens were urged to stay home. Layoffs occurred with reports of 40 million people filing for unemployment the first few months of the pandemic. This disruption originally caused extreme volatility in the stock market with an overall drop of 37 percent in March 2020 (based on the Dow Jones Industrial Average “DJIA”); however, as of April 27, 2022, the DJIA has shown an increase of 13.28 percent over the previous high in February 2020. It should be noted that the DJIA is down 8.97 percent thus far in 2022 with the volatility thought to be due to the Federal Reserve Board tapering off their bond buying and the anticipation of a rise in interest rates. On February 24, 2022 Russia began invading Ukraine which is causing volatility in world economics.

The Federal Government attempted to curtail the job losses and hardships with the approval of the Coronavirus Aid, Relief and Economic Security (CARES) Act which was signed into law on March 27, 2020. The CARES Act appropriated over two-trillion dollars to people and businesses that were financially stunted by the COVID-19 pandemic. On April 9, 2020 the Federal Reserve took additional action to provide up to $2.3 trillion in loans to support the economy. Additionally, on April 23, 2020, Congress passed an additional $484 billion in relief for small businesses and hospitals. Over the summer of 2020 some business openings occurred. However, in the fall and winter of 2020 the pandemic surged and businesses shut down once again. In December 2020, the Federal Government passed an additional $900 billion in stimulus that included jobless benefits and additional dollars for vaccine distribution. In March 2021 the new National Administration approved the American Rescue Plan Act which appropriated an additional $1.9 trillion in help to our nation for vaccine distribution and more economic relief for the pandemic. It appears these stimuli totaling $5.6 trillion in COVID relief to date have helped 1152
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shore up the U.S. economy; however, due to the significant amount of new money, inflation began.

Inflation is occurring in the United States at a rate not seen for 40 years. As of the end of April 2022, inflation is running at over eight percent from the previous year. Whether it’s from supply chain issues or from the addition of money entering the economy, it is hitting Americans hard. The recent Russian invasion of Ukraine is creating significant volatility in gas prices, which has further increased the rate of inflation. The Federal Reserve Board announced the beginning of several increases in the Federal Reserve Rate coming in 2022. The recent increases at one-quarter and one-half percent have created further volatility in the stock market.

While some jobs have come back, job losses were huge with the Nation’s unemployment rate going from 3.5 percent in February 2020 to 14.4 percent in April 2020 with the March 2022 National unemployment rate at 3.6 percent (latest available per the Bureau of Labor Statistics). At the beginning of 2021, California was a hot spot with COVID cases surging and Southern California was put under another stay-at-home order. The vaccine roll-out was quicker than anticipated and cases had declined substantially, and then California “reopened” June 15, 2021. In the fall of 2021 variants caused concern with hospital cases increasing for unvaccinated people and mandates once again occurring. While the news in mid-2021 had been positive with the vaccination roll-out, the new variants and the winter surge caused the State of California to institute a new indoor mask mandate for January 2022. Most mandates have been rescinded, and the COVID pandemic appears to be transitioning to an endemic. The fall out has been the supply chain disruption along with the prevalent inflation.

The Nation’s gross domestic product (GDP) rate of growth was 5.7 percent in 2021, which is the largest annual increase since 1984. It should be noted the rate is compared to the 2020 year which included the stopped economy due to the introduction of COVID. The International Monetary Fund is projecting GDP growth of 4 percent in 2022, which would outpace the annual average from 2010 to 2019. It should be noted that these estimates 1153
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were made prior to the Russian invasion of Ukraine. At this time, it is still unknown what effects this may have on the U.S. economy.

Prior to the COVID-19 pandemic, the nation was experiencing a strong economy. As with the rest of the nation, the Inland Empire experienced a strong multi-year recession, now referred to as the Great Recession, between 2006 and 2012. The MSA, which had strong employment over the ten previous years saw unemployment rates increase significantly between December 2006 and early 2010, at which time a leveling off occurred followed by continued employment growth (generally since July 2011) until the pandemic hit.

The unemployment rate for the MSA was estimated at 4.3 percent (as of March 2022 per the Employment Development Department). This reflects a decrease from the peak during the Great Recession of 15.1 percent in 2010 and a decrease from the peak during the COVID pandemic of 14.9 percent; however, this represents an increase from February 2020’s 4.0 percent, prior to the pandemic outbreak. As of March 2022, Both San Bernardino and Riverside counties each had an unemployment rate of 4.3 percent. The current unemployment rate for the MSA of 4.3 percent is similar to the California rate at

4.2 percent and significantly higher than the March 2022 National rate of 3.6 percent.

Below is a table comparing San Bernardino County’s unemployment rate to the unemployment rates of the surrounding counties as of March 2022.

Jurisdiction As of Unemployment Rate*
Los Angeles County 3/22 4.9%
Riverside County 3/22 4.3%
San Bernardino County 3/22 4.3%
Orange County 3/22 3.1%
San Diego County 3/22 3.4%
Source: State of California E.D.D.; *Not Seasonally Adjusted While unemployment rates have been decreasing, there is an anomaly where, in the overall nation, while unemployment is at 3.6 percent, there are an estimated 2.1 million workers that never came back to work after the pandemic. These jobs were typically lower paying jobs and it is now believed these workers made a choice not to come back, rather 1154
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than no jobs available. Employers are having trouble filling lower paying jobs throughout the Country causing pay increases in order to entice employees to these jobs.

Over the past 25 years, the Inland Empire economy has had significant cycles with home prices almost doubling from 1995 to 2005, then falling by over 50 percent during the Great Recession, taking prices back to 2002 levels. Home values appeared to hit bottom in 2009 then remained essentially flat for two to three years with the majority of the Inland Empire’s housing market seeing an improvement beginning in mid-2012. While coastal Southern California housing enjoyed significant increases between 2012 and 2015, the Inland Empire bounced back slower with overall San Bernardino County finally passing the previous median home price peak in early 2020 (prior to the pandemic). Contrary to homebuilder’s original thoughts of a slowdown due to the pandemic, new home buyers stepped up in the spring of 2020 and new home sales were significantly higher during the second half of 2020 versus the previous year. In addition, since May 2020 there has been a significant increase in residential builder land purchases in the Inland Empire. While land purchases essentially stopped in February, March and April, beginning in May 2020 builders began looking for land and entering escrow on land purchases with residential land currently moving at a brisk pace. The exceptional activity in new home sales is thought to be due to several factors, including a tight resale supply of homes; historically low interest rates; millennials finally buying homes; and, the work from home factor during the pandemic which is allowing residents to live in more suburban areas without long commutes. Along with dropping the interest rate to 0 - 0.25 percent at the beginning of the pandemic, the Federal Reserve Board (“Board”) began quantitative easing by buying 80 billion in Treasury Bonds and 40 billion in Mortgage-Backed Securities each month.

This has also helped shore up the national economy. At the beginning of November 2021, the Board decided that the quantitative easing will begin to taper in mid-November and in March 2022 increased the Federal Reserve Rate 0.25 percent for the first time since 2018 and in May increased it an additional 0.5 percent.

During the Great Recession, the Federal Government attempted to correct the struggling economy by implementing several economic stimulus packages. The Federal Reserve 1155
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Board (“Board”) kept interest rates below historical averages, dropping rates to near zero in December 2008 until December 2015, when the Board began raising interest rates until December 2018 when the ninth increase appeared to affect the economy with home sales slowing and stock market volatility. Since then, interest rates dropped three times until the COVID pandemic when the Board dropped the rate 50 basis points due to the stock market reaction to the COVID pandemic and then again on March 16, 2020 when they dropped the rate another 100 basis points to the historically low level of 0 - 0.25 percent.

Along with dropping the interest rate at the beginning of the pandemic, the Board began quantitative easing by buying 80 billion in Treasury Bonds and 40 billion in mortgagebacked securities each month which also helped shore up the national economy. In March 2022 the Board increased the rate 0.25 percent followed by an 0.50 percent increase in May. The Board also stated they anticipate several additional increases this year. Most homebuyers currently in escrow are locked in to their mortgage rates. It is too early to tell if this increase has affected homebuying at this time. The Federal Interest Rate (“Rate”) in the US averaged 5.69 percent from 1971 to 2019 reaching an all-time high of 20 percent in March 1980 and the previous low of .25 percent in December 2008 along with the early 2021 low of 0.25 percent. The recent historically low rates had spurred home sales within the Inland Empire, which was identified as one of the tightest housing markets in the nation in October 2020.

The latest UCLA Anderson Forecast (“Forecast”) was issued March 9, 2022 and is cautious due to the unknown’s associated with Russia’s invasion of Ukraine. The Forecast comes with considerable uncertainty as it depends on the future course of the pandemic and on how long the war in Ukraine will last and if it will spread to other countries. The National Forecast states that Inflation is a main concern with higher oil and energy prices considered key factors. They expect oil prices to remain high at least through the second quarter of 2022. The Forecast anticipates that following the average GDP growth of 5.7 percent in 2021, a 4.3 percent growth in 2022, 2.8 percent growth in 2023 and a 2.3 percent growth in 2024. These GDP numbers are dependent on the Federal Reserve Board coordinating a “soft landing” for the economy which means reining in inflation by increasing the interest rates without sacrificing employment and output. 1156
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The Forecast for California says while some sectors in the State are showing new growth with the technology sector leading the way, there are still some weaknesses. Sectors that require a high level of human contact in the sale of their services have the greatest disparity between the number of jobs before the pandemic and their current employment levels. The Forecast cites four sectors where job growth was strong in the latter part of 2021 with technology, logistics and construction expecting to be strong drivers of the California economy in both the short and the long term. However, they anticipate the leisure and hospitality sector to remain a drag on economic growth. The risks to California per the Forecast are a possible new virulent wave of the pandemic and an acceleration of residents leaving the state while upside risk include increased international immigration and accelerated onshoring of technical manufacturing. At time of the Forecast, the State unemployment rate is estimated at 5.5 percent for 2022; 4.5 percent for 2023 and 4.3 percent for 2024. Per the latest California E.D.D. numbers, the March 2022 unemployment rate for the State was at 4.2 percent.

The Forecast for Southern California is for the recovery to continue with the Inland Empire’s economy forecast to grow at a higher rate because of a continued influx of residents drawn by the lower cost of living and the resilient logistics sector. Coastal Southern California is expected to grow at a slower rate. This increase is shown in the zero percent population increase for San Bernardino County between July 2020 and July 2021 as compared to the State of California which lost 0.44 percent of its population during this time period.

According to John Husing’s most recent Inland Empire Economic Report dated October 2021, the Inland Empire, along with the State and the Nation, is going through a most unusual year. The pandemic downturn was severe and second only to the Great Depression. However, Husing states that the combination of Federal and state legislation efforts combined with the impact of vaccinations has created the opportunity for most of what was lost to be regained. Within the Inland Empire at the end of 2020, Husing notes that the economy was down an average of 65,600 jobs, but his 2021 forecast sees the 1157
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Inland Empire recovering the majority of these jobs. Affecting the growth is the unexpected occurrence of the disruption of the supply chain as families used the funds allocated for COVID by the government to buy goods, which increased demand. This has impacted the Inland Empire due to its concentration of trucking firms, e-commerce operations, warehouses, distribution and wholesale trade firms in the area. One benefit of this disruption is the logistics employment statistics which have soared in the Inland Empire, adding 21,100 jobs in 2020 and an estimated additional 25,300 jobs in 2021.

As mentioned in the UCLA California Forecast, one bright spot in the COVID economy has been sales of new homes. While existing homeowners were reluctant to put their houses on the market during COVID, new home sales in the Inland Empire soared.

Among other factors, historically low interest rates appear to have finally brought the millennial generation to the new home market. In addition, the new work-from-home factor has made non-homeowners realize they can afford a house further outside of the economic areas while they work and buying a home in a more affordable, suburban area makes sense if they don’t have to drive to the office each day. The need for home offices combined with the overall stress on social distancing has incentivized city dwellers to move out of denser urban areas into more suburban neighborhoods with more space.

The minimal existing home inventory, coupled with these factors has put pressure on pricing with new homes prices in the Inland Empire increasing well over 10 percent yearover-year. This will be discussed further in the Inland Empire Housing Market section later within this report.

As a final indicator of overall economic activity for the region we have reviewed the rise or fall of TEUs (Twenty-foot Equivalent Units – i.e., containers) being processed in the local ports. This is especially important for the Inland communities as it represents much of the growth in development of West Coast distribution centers and warehouses linked to supply-chain nodes in the Pacific Rim. The chart below shows TEU activity at the Ports of Los Angeles and Long Beach. Generally, there has been increases since 2009 with the exception of a slight dip in 2016 and again in 2019 which ended with a 5.6 percent downturn. In December 2021, year to date TEU’s were running over 15 percent above 1158
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the previous year. As of February 2022, the ports were running 3.2 percent above the previous year. The ports are a big part of the recovery with both the Port of Long Beach and the Port of Los Angeles backed up significantly due to the economic disruption of COVID which has created supply-chain issues. While it has been improving, there is still ample evidence of supply chain challenges.

Education
The subject area is served by the Fontana Unified School District (“FUSD”). The subject is assigned to Sierra Lakes Elementary School (K-5), Wayne Ruble Middle School, and Summit High School. The district operates 45 schools serving students from preschool through adult education. Community Colleges are available near the subject at Chaffey College in Rancho Cucamonga (six miles southwest), at Chaffey College’s Fontana campus (five miles south of the subject in Fontana), and San Bernardino Community College (13 miles southeast). Higher education is available approximately eight miles to the northwest at California State University San Bernardino, about 15 miles southeast is University of California at Riverside, 14 miles west in the private Claremont Colleges area which include Claremont McKenna College, Pitzer College, Harvey Mudd College, Pomona College and Scripps College, and 22 miles to the southwest at Cal Poly Pomona.

Conclusion
Population in the County has increased over the past 30 years with predictions for continued population growth. The nation’s economy stalled during the Great Recession due to the housing downturn, unemployment and the credit crisis. The housing market

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'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 TEU's (millions)
Year
Port of Long Beach TEUs
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saw a resurgence beginning the second half of 2012 with sales and prices rising since then. While the economy was slowing slightly in late 2019, the COVID pandemic brought the economy to a halt in March 2020. The one bright spot over the past two years has been the new home market, which has been extremely strong in the Inland Empire. The region’s affordability coupled with the rising prices in the coastal market and the need for new housing set up a potential boom in the Inland Empire. This appears to be occurring in part due to residents leaving urban areas for more suburban areas due to COVID factors, coupled with historically low interest rates. Current concerns in the Inland Empire housing market include possible variants of the pandemic, the high prices of homes, rising interest rates, inflation, supply chain issues, and most recently the Russian invasion of Ukraine which are all creating volatility in financial markets. In conclusion, the County is expected to continue to grow in population due to its Southern California location, the availability of land and the relatively lower land and housing prices in comparison to adjacent Orange, Los Angeles and San Diego Counties.
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CITY OF FONTANA DESCRIPTION
General Area
The subject property is located in the northeastern portion of the City of Fontana (“City”) and in southwestern San Bernardino County. The City is situated at the base of the San Gabriel Foothills, east of the cities of Rancho Cucamonga and Ontario, north of Jurupa Valley, west of the City of Rialto and the community of Bloomington, and south of the San Bernardino Mountains. The City encompasses an estimated 43 square miles with generally the northern border the San Gabriel Mountains and the southern border the Jurupa Mountains. The black star on the below map shows the approximate location of Fontana CFD No. 106 within the City limits.
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History
Fontana was founded in 1913 and is the second largest city in San Bernardino County and the 20th largest city in the State of California. The area was a rural farming community with citrus orchards, vineyards and chicken ranches that ran along U.S. Route 66 which is now known as Foothill Boulevard. The historic Route 66, which was built in 1926 to connect Los Angeles to Chicago, is a commercial corridor that runs east/west through the City. During World War II Henry J. Kaiser opened the Kaiser Steel Mill near Fontana, the only steel mill west of the Mississippi River, which brought industrial employment to the area during the war. To provide for the worker’s health needs, Kaiser constructed the Fontana Kaiser Permanente Medical Facility which now employs more than 5,000 people.

In 11064 the San Bernardino Freeway, which later became Interstate 10, was completed connecting Los Angeles to San Bernardino and making accessibility to Fontana relatively easy. This led to substantial growth as Fontana became an industrial hub for the County.

In the 1950s and 1960s Fontana was home to a drag racing strip which was a significant venue in the National Hot Rod Association (“NHRA”) circuit. In 1997, Roger Penske built the Fontana Speedway, now known as the Auto Club Speedway which became a major NASCAR sanctioned tract. In 2006, the Auto Club Speedway opened a new NHRA sanctioned drag strip on site to resurrect Fontana’s drag racing heritage. The Auto Club Speedway was purchased by NASCAR in 2019 and hosts at least one major NASCAR race each year.

Population
The January 2021 population of Fontana (per the California Department of Finance, latest information available) is 213,944, which represents an increase of 1.1 percent over the previous year. The 2000 population was 128,928, suggesting the population has increased 66 percent over the past 22 years. The City population represents 9.7 percent of the County population. The City has several new home communities currently under construction, especially in the northern portion of the City. Per the U.S. Census Bureau, the average household size in Fontana is 3.85 persons while in overall San Bernardino County the average household size is 3.3 persons. Over 75 percent of the population of 1162
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the City are high school graduates and over 28 percent of the population of the City are under 18 years old.

Housing
Per the Southern California Association of Governments (“SCAG”) 2019 Local Profiles (latest available), the City of Fontana has an estimated 52,251 housing units with a growth rate of 53.6 percent since the year 2000. This compares to the County’s housing growth rate of 21.9 percent during this time. This further illustrates Fontana’s growth spurt due to land available for development over the past 20 years. Fontana hosts 8.1 percent of the total number of households in the County. Below is a graph showing residential units permitted in Fontana between 2000 and 2021.

While the current numbers are not at pre-Great Recession numbers, they are the highest in the past 13 years. Per SCAG, 82.2 percent of the homes are single-family and 15 percent are multi-family units. Only 22 percent of the housing stock in the City was built before 1970 and 78 percent was built since that time. Per the City’s 2021 annual report, there are three residential projects in the planning stages: a 489-unit community known as Monarch Hills; a 257-unit project at Duncan Canyon and I-15 and a 189-unit project at Duncan Canyon and Citrus. This is in addition to 777 new single-family residential permits and 405 multi-family residential that were issued in 2020. Per SCAG, the median home price in the City went from $129,000 in 2000 to a peak of $450,000 in 2006, a low of $200,000 in 2009 with the March 2022 median price estimated at $644,000 per Redfin 1,427
1,908
1,545
1,025
209 306 270 261 419 498 865
1,182
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2021 Fontana Residential Building Permits
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market trends. According to Redfin, this represents a 26.3 percent increase from March of 2021.

Current new homes communities selling within Fontana include: Mountainview by D.R.

Horton (subject), Gabion Ranch by Lennar with two neighborhoods; The Arboretum by Lennar (currently sold out but future phases coming); The Retreat by Lennar; Shady Trails by Tri Pointe Homes, Richmond American and Taylor Morrison; Highland Park by Richmond American (coming soon); and Aurora Park by Tri Pointe Homes. Per Realtor.com there are currently 430 existing homes for sale within the City with the median listing price of $620,000 and the median sold home price of $640,000. Within the subject’s zip code of 92336, the median listing home price is currently $674,900 and the median sold home price is $720,000. This is in-line with current resale trends across Southern California of homes selling for higher than their list price.

Access
Fontana has good access with I-15 generally forming the northwest border of the City.

The 210 Freeway provides east-west access through the upper third of the City; Route 66 (also known as Foothill Boulevard) provides east-west access through the approximate middle of the City and the I-10 provides east-west access through the bottom third of the City. Major on/off ramps to the City from I-15 include Foothill Boulevard, Baseline Avenue, the 210 Freeway, Mountainview Avenue, Duncan Canyon Road and Sierra Avenue. On/off ramps from the 210 Freeway within the City include Cherry Avenue, Citrus Avenue and Sierra Avenue. Route 66/Foothill Boulevard has stop lights at major intersections while the major on/off ramps from I-10 in the City include Etiwanda Avenue, Cherry Avenue, Citrus Avenue and Sierra Avenue. Access to the subject is via Summit Avenue, Duncan Canyon Road, and Lytle Creek Road.

Economy
Existing commercial property within the City of Fontana is generally along the major thoroughfares including I-10, Route 66/Foothill Boulevard, Mountainview Boulevard, Sierra Avenue and the 210 Freeway. There are several large shopping centers including Sierra Lakes Marketplace and Falcon Ridge Town Center, both which serve the subject 1164
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property. The City is home to an Amazon Distribution Center, a Target Distribution Center and a FedEx transfer station. The intersection of the I-10 and I-15 is a major industrial hub which extends into the City of Fontana with generally industrial use south of I-10. The Auto Club Speedway is located along Cherry Avenue north of I-10 and the Metrolink station is located along Sierra Avenue. The top-ten employers in the City (from 2018 – latest available per City’s website) include the following:

Employer No. of Employees
Kaiser Hospital 5,430
Fontana Unified School District 5,000
City of Fontana 1,030
Target Distribution Center 621
Costco Wholesale 333
U S F Reddaway 320
Estes West 317
Sierra Aluminum Company 312
Crown Technical systems 297
Walmart Store (Foothill Blvd) 290
Summary
Fontana is located at the base of the San Gabriel Mountains and was incorporated over 100 years ago as a rural farming community. Kaiser Steel brought jobs to the area during World War II and the opening of the I-10 Freeway in the 1950s made it an easy commute to Los Angeles and Orange Counties. Almost 80 percent of the housing stock within the City was built since 1970. There are currently several new home master planned communities selling homes. The last three years have seen residential building permits growing significantly after a lull in the first 10 years since the Great Recession. The area has excellent access via three major freeways and the historic Route 66. The area’s central location, reasonable land prices and the availability of land for development combine to make the area a prime area for future growth. 1165
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IMMEDIATE SURROUNDINGS
The subject property is located along the east side of Lytle Creek Road, just southeast of I-15, in the City of Fontana. The subject has convenient freeway access to the I-15 via the Beech/Summit Avenue or Duncan Canyon Road on/off ramps.

The subject lands are surrounded by vacant lands to the north, west, and east. The vacant lands to the north and immediately to the east are Southern California Edison corridors with power lines. The land to the west of the subject is a small vacant parcel that separates the subject from I-15, which is only 500 or so feet from the Rainer Lane entrance to the Mountainview community. To the south and east (past the utility easement corridor) is existing residential lands. Southeast of the subject is Wisteria at Shady Trails, an actively selling new home community being developed by Richmond American Homes, and one of the subject’s closet comparable communities (discussed later in the Valuation Analysis section of this report).

The neighborhood adjacent to the south of the subject is part of the Shady Trails community, but was built in 2007/2008. These homes are large, featuring 3,000 to 5,000 square feet with three car garages and are situated on larger lots. Several of them have sold in the last few months for the mid-$800,000s to low $1 million price point. Southeast of the subject, the Shady Trails community continues, but with smaller homes situated on smaller lots. The newest communities of Shady Trails are much denser than the subject, and some of them are attached homes. The Shady Trail master plan features a large recreation center with a clubhouse, large pool, sports courts, and parks located off of Summit Avenue.

Just one-half mile south of the subject, at the corner of Summit Avenue and Lytle Creek Road, is a large public park facility that Mountainview residents have convenient access to. This park facility includes Fontana Park and Aquatic Center, along with a large dog park, and skate park. Immediate south of Fontana Park, at the southeast corner of Summit Avenue and Lytle Creek Road, is Summit High School. Summit High School will serve the subject property. Southwest of the subject just one-quarter mile is Falcon Ridge 1166
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Elementary School. While this is the closest elementary school to the subject, it belongs to the Etiwanda School District and will not serve the residents of Mountainview.

Mountainview is served by Sierra Lakes Elementary School, which is located one mile southeast of the subject at the southeast corner of Summit Avenue and Citrus Avenue.

Wayne Ruble is the middle school serving the subject property, and is located south of SR-210, southwest of Highland Avenue and Juniper Avenue, approximately 2.3 miles southeast of the subject.

The closest shopping to the subject is approximately one-half mile southeast, at Falcon Ridge Town Center. Falcon Ridge Town Center is located at the corner of Beech Avenue and Summit Avenue on the east side of I-15, and is anchored by a Stater Brothers market, Target, Michael’s craft store, Ross Dress for Less, CVS and 24-Hour Fitness. The center also offers a multitude of dining options. Across from Falcon Ridge Town Center on the south west corner of Beech Avenue and Summit Avenue is an additional shopping center, featuring a Kohl’s, PetSmart, Aldi grocery store, a Planet Fitness, and several smaller retail stores and restaurants. Additional shopping is available approximately one and onehalf miles southeast along the 210 Freeway at the Citrus Avenue and Sierra Avenue on/off ramps. This stretch of retail includes a Home Depot, Ralphs Grocery Store, Walgreens, Costco, Lowest Home Improvement and more.
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FONTANA CFD NO. 106 – MOUNTAINVIEW
We have reviewed the City of Fontana CFD Report for Community Facilities District No. 106 (Mountainview) dated June 29, 2021 as prepared by David Taussig & Associates, Inc. The CFD Report provides a brief description of Fontana CFD No. 106, a brief description of the facilities to be funded, a brief description of the boundaries and an estimate of the cost of financing the bonds used to pay for the facilities. Resolution No. 2021-040 was adopted June 8, 2021 and approved the intention to establish Fontana CFD No. 106.

The exterior boundaries of Fontana CFD No. 106 per the Proposed Boundaries map dated June 8, 2021 are shown below. Per the Proposed Boundaries map, the subject contains approximately 36.3 gross acres of land.

Per the CFD Report, Fontana CFD No. 106 is anticipated to build 20.8 net acres out of a total 36.3 gross acres into 156 single family detached homes ranging in size from 1,576 1168
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to 2,722 square feet. Per the CFD Report, the types of facilities to be eligible for funding are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, fire protection facilities, police facilities, public facilities, landscaping, library facilities, park and recreational facilities and land, rights-of-way and easements necessary for any of such facilities. The types of public facilities proposed to be purchased as completed facilities by CFD No. 106 are streets, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, sewers, storm drains, landscaping and land, rights-of-way and easements necessary for any of such facilities. The types of public services to be financed by Fontana CFD No. 106 are fire protection and suppression services, maintenance and lighting of parks, parkways, streets, roads and open space, flood and storm protection services and maintenance and operation of any real property or other tangible property with an estimated useful life of five or more years that is owned by the City. Incidental expenses are also included.

Per the Rate and Method, the Assigned Facilities Special Tax for Developed Property for Fontana CFD No. 106 (Mountainview) is as follows:

Land Use
Class
Description Sq. Ft. Special Tax
1 Residential Property 2,700 or greater $3,618 per unit 2 Residential Property 2,550 to less than 2,700 $3,547 per unit 3 Residential Property 2,400 to less than 2,550 $3,501 per unit 4 Residential Property 2,250 to less than 2,400 $3,434 per unit 5 Residential Property 2,100 to less than 2,250 $3,367 per unit 6 Residential Property 1,950 to less than 2,100 $3,276 per unit 7 Residential Property 1,800 to less than 1,950 $3,185 per unit 8 Residential Property 1,650 to less than 1,800 $3,099 per unit 9 Residential Property 1,500 to less than 1,650 $3,013 per unit 10 Residential Property Less than 1,500 $2,984 per unit 11 Non-Residential Property N/A $25,180 per acre
The estimated cost of public facilities at time of the Fontana CFD No. 106 Report were estimated as:
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PUBLIC FACILITIES AMOUNT
Acquisition Facilities $2,038,2325
Storm Drain Improvements $683,923
Circulation and Traffic Improvements $673,097
Landscaping Improvements $478,050
Sewer Improvements $106,862
Construction Management $96,300
Other Public Facilities $2,995,2886 $2,393,7607
Park Facility Improvements $1,034,748 $1,034,748
Traffic circulation Facility Improvements $894,504 $830,149 Storm Drain Improvements $419,993 $0
Sewer Improvements $136,751 $19,571
Local Transportation Facility Improvements $123,552 $123,552 Police Facility Improvements $73,632 $73,632
Public Facility Improvements $69,420 $69,420
Local Arterial Facility Improvements $69,108 $69,108
Fire Service Protection Improvements $57,564 $57,564
Landscape Facility Improvements $43,524 $43,524
MSHCP Mitigation Improvements $35,676 $35,676
Traffic Signal Facility Improvements $21,372 $21,372
Library Facility Improvements $15,444 $15,444
Developer’s CFD Application Fees $60,000
Development Agreement Fee (Storm Drain Infrastructure $434,000 Additional Capital Facilities Infrastructure Improvements $1,231,498 TOTAL ESTIMATED COSTS $6,157,490
The maximum bonded indebtedness for CFD No. 106 is $8,500,000. Per the latest sources and uses of funds (dated May 11, 2022) for the proposed bond issuance, there will be an estimated $6,785,000 in Bond Par Amount and a Premium of $87,018 for a total bond fund deposit of $6,872,018 with $6,083,568 going to the project fund, $441,750 in a debt service reserve fund and $346,700 in underwriter’s discount, cost of issuance and administrative expense fund (all amounts subject to change). A larger copy of the Fontana CFD No. 106 boundary map is located in the Addenda for your review.
5 Estimates provided by Project Developer and subject to review and confirmation. Inclusive of a 10% contingency for civil design and plan check, 7% contingency for permit, plan check and inspection fees, and 20% construction costs contingency.
6 Estimated amount of permit fees prior to anticipated City fee credits (rounded) 7 Estimated amount of permit fees after anticipated City fee credits. 1170
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SUBJECT PROPERTY DESCRIPTIONS
The subject property consists of 156 proposed lots begin developed as Mountainview by D.R. Horton. The subject site is described below.

Location: East side of Lytle Creek Road, southeast of Interstate 15, and north of Summit Avenue, Fontana, California
Legal Property
Description: Lots 1-156 of Tract No. 20018 in the City of Fontana, County of San Bernardino, State of California.

Property Owner: Individual Owners as to Lots 1-31, 51, 53-77, 81-89, 143-150 of Tract 20018. D.R. Horton as to Lots 32-50, 52, 78-80, 90-142 and 151-156 of Tract 20018.

Assessors
Parcel Nos.: The subject covers the following APNs: 1107-511-01 through -86 and 1107-521-01 through -70.

Property Taxes: We have reviewed the property tax invoice for sample parcel 1107- 511-85-0000. The parcel has an assessed value of $172,162 as the land value only. The property taxes include $904.84 for the general levy and $66.22 in miscellaneous charges. The tax invoice (as of May 19, 2022 per the County of San Bernardino Tax Collector) was fully paid. It should be noted this parcel is now improved. The subject Fontana CFD No. 106 is not shown on this tax invoice. It should be noted the current tax invoice is based on unimproved property and does not include the subject CFD.

Three-Year
Sales History: Per the seller, D.R. Horton Los Angeles Holding Company Inc. purchased the subject lands from Fontana 37, LLC in 2021 for $27,000,000 over two take downs. The first takedown was in March 2021 and the second take down in October 2021. D.R. Horton began 1171
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closing homes within the subject to individual owners in August 2021, and has closed 75 homes between August 27, 2021 and May 1, 2022.

Size and Shape: Tract Map 20018 is rectangular in shape and contains 37.19 gross acres per the recorded map which subdivides the subject into 156 residential lots and a small park site along with open space.

Zoning: Per the current City of Fontana General Plan Land Use Map and the current Zoning Map, the site is designated as R-M (or Medium Density Residential). The subject lands do not fall within a Specific Plan.

Entitlements: The subject is entitled by Tract Map No. 20018 which was recorded on December 10, 2020. A copy of Tract Map No. 20018 is located in the Addenda for your review. Per Tract Map 20018, the subject lots have a minimum size of 5,000 square feet.

Home Owner’s
Association: The Mountainview HOA fee is estimated at $67 per month at buildout and covers maintenance of the community gate, as well as all walkways and community landscaping, and the small community park.

Topography: The subject lands are generally flat and at grade with surrounding streets. The subject has been fully graded and is generally level with the surrounding residential tracts.

Soils Condition: We have reviewed a “Geotechnical Investigation for Frome Property East of Lytle Creek Road North of Portenza Drive” dated July 15, 2015, as well as a “Geotechnical Report Update” dated January 24, 2020, both prepared by RMA Group Geotechnical Consultants out of Rancho Cucamonga and both covering the subject property. The Report presents a summary of the observation and testing services provided by RMA as well as their findings and suggestions for developing the soils into Tract 20018. The Report concludes that the proposed development is geologically and geotechnically feasible, provided that the recommendations contained in the report are implemented. The Update to the report was completed in regards to Seismic Design Parameters which were mapped in accordance with Section 1613 of the 2019 California Building Code. This was not required when RMA completed their first Geotechnical Report, but came into effect in 2019 and therefore required the update to the report.

It is an assumption of this appraisal that the soils are adequate to support the highest and best use conclusion and that all 1172
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recommendations made within any and all reports were adhered to during construction. The appraiser is not a soils expert and it is recommended that any concerns relating to soils should be addressed to the appropriate experts.

Seismic
Information: Per San Bernardino County’s Geological Hazard Overlay map, the subject property is not located within a County Designated Fault Zone or a Earthquake Fault Zone Boundary.

Environmental
Concerns: We have reviewed two Environmental reports for the subject. The first was an Environmental Checklist Form – Initial Study prepared by the City of Fontana for the subject lands, dated March 19, 2020.

The Report’s Summary Analysis concludes that the proposed residential development would have a less than significant impact on the environment.

We also reviewed a Phase I Environmental Site Assessment (“ESA”) dated June 14, 2004, prepared by LOR Geotechnical Group, Inc. of Riverside. The Phase I ESA concluded that the subject property exhibited no evidence of environmental conditions that would prohibit residential use. The appraiser refers the reader to the Environmental Checklist Form - Initial Study and the Phase I ESA for additional information.

It is an assumption of this report that there are no environmental issues which would slow or thwart development of the subject property. This is evidenced by construction of homes on the site and City inspectors on site during construction.

Flood Information: Per FEMA Map No. 06071C7915H dated August 28, 2008 the property is shown as being located in Zone X, designated as an area of minimal flood hazard.

Easements and
Encumbrances: We have reviewed a Preliminary Title Report prepared by Fidelity National Title Builder Services dated November 23, 2021 (and amended on December 2, 2021) issued on Lots 1-156 (subject property) of Tract Map No. 20018.

Item Nos. A, B and C refer to property taxes and special assessments. Item No. 1 refers to water rights. Item Nos. 2 thru 8, 11 and 13 thru 15 were intentionally omitted. Item No. 9 states the property is within the Fontana Redevelopment Agency. Item Nos. 10, 18, 19, 20, 21, 22, 27, 28 and 29 refer to public utility easements on the property. Item No. 16 refers to a deed of trust recorded in July 1173
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15, 2020 followed by a partial reconveyance (Lot Nos. 1-28, 54-89 and 142-156). We have additionally reviewed a full reconveyance (Dated October 5, 2021) on the aforementioned trust deed which was provided by D.R. Horton. Item No. 17 pertains to a development agreement recorded on the site. Item No. 23 refers to CC & Rs recorded on the property while Item No. 24 is in regards to the Declaration of Development CC & Rs recorded on the property. Item No. 25 pertains to a Deed of Trust to secure performance of an agreement for profit participation recorded March 29, 2021. It is the appraiser’s understanding that as homes are sold, they are released from this trust deed. Item No. 26 states there are no known matters which were deleted from the report. Item No. 29 pertains to the Master Dispute Resolution Declaration for Mountainview which affects lots 1-28, 54-89 and 142-156 and Lot G which was recorded July 1, 2021. Item No. 29 is in regards to a supplementary master dispute resolution declaration for Mountainview which affects Lots 29-53 and 90-141 recorded November 19, 2021. Item No. 30 pertains to a deed of trust recorded October 5, 2021 on the property.

It is an assumption of this appraisal report that the subject lands are free and clear of any liens and/or encumbrances other than CFD No. 106, and the easements noted above. The appraiser is not a title expert and it is recommended that any concerns relating to title should be addressed to the appropriate experts.

Utilities: All normal utilities are available to serve the subject site by the following companies:

Electrical: Southern California Edison Company
Natural Gas: SoCal Gas
Sewer/Water: City of Fontana
Schools: Fontana Unified School District
Streets/Access: Access to the subject property is convenient via I-15 to Exit 116 Beech Avenue/Summit Avenue, east one-half mile to Lytle Creek Road, and north one-half mile to the Rainer Lane entrance to the subject. Access is also convenient via the I-15’s Duncan Canyon Road exit, east one-half mile to Citrus Avenue, south on Citrus for one-half mile to Knox Avenue, and west on Knox Avenue to enter the subject via Walsh Lane
I-15 is a major north/south freeway, which provides access to both international borders with Mexico and Canada.

I-210 (one and one-half miles south of the subject) is an east/west freeway. It begins in Santa Clarita in Los Angeles County and ends 1174
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near downtown San Bernardino. I-210 provides additional access parallel to I-10 which gets congested at commuting times.

I-10 (six and one-half miles south of the subject) is a major east/west freeway in San Bernardino across Los Angeles and San Bernardino Counties. I-10 provides access to Los Angeles to the west and through San Bernardino County and Riverside County to Arizona to the east. I-10 is an interstate providing a southern route across the U.S. to Florida
Citrus Avenue has on/off ramps at I-10 and I-210 and provides access into central and south Fontana. Citrus Avenue’s northern terminus is at Duncan Canyon Road, just northeast of the subject.

Summit Avenue is a smaller local arterial that provides east/west access to the subject and to Falcon Ridge Town Center at the Beech Avenue/I-15 intersection.

Duncan Canyon Road has on/off ramps at I-15 and provides access into Fontana. West of I-15 Duncan Canyon provides access into Hunter’s Ridge, a developed master plan while east of I-15, current access terminates near Sierra Avenue, one of the main north/south arterials in the City.

Lytle Creek Road is an access road which travels in a north/south direction which currently terminates just north of the subject to the north and at the I-210 to the south. North of the subject Lytle Creek is a dirt road which essentially follows the offramp up to Duncan Canyon Road, however vehicle access is not currently available to this section of Lytle Creek Road.

Internal streets within the subject include: Rainer Lane, Darwin Lane, Parry Peak Drive, Walsh Lane, Kings Peak Drive, Elbert Place, Denali Court, Antero Court and Hayes Court.

Current Condition: The subject has been developed into 156 single-family detached lots. Upon our inspection, 89 of the homes were over 95 percent complete including 75 individually owned homes, three model homes, and 11 additional production homes owned by the builder (all in escrow). In addition, there were 61 homes under construction (less than 95 percent complete and all in escrow) and 6 additional finished lots.

Costs to Complete: The subject property has been developed into 156 finished lots with internal streets complete and utilities stubbed to each lot. Out of the 156 lots, 75 are completed and individually owned. Per the builder there are remaining land development costs are shown below. 1175
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Professional Services $ 215,833
Permits/Fees 412,416
Grading 174,642
Sewer 15,402
Water 13,858
Street Improvements 83,892
Fencing & Walls 441,091
Bond Exoneration 80,000
Amenities 13,300
Landscape 73,897
Total $ 1,524,331
It is the appraiser’s understanding that the above amounts do not include any facilities or fees to be financed by Fontana CFD 106.

These costs are associated with the builder-owned property only and are not obligations of the individually owned homes. Dividing the total amount of $1,524,331 by the 81 builder-owned lots equates to $18,818.90 in remaining costs per lot. The above remaining costs will be taken into consideration in the valuation section later within this report. Please note that it is an Extraordinary Assumption of this report that the costs as reported above are true and correct. While the amounts appear reasonable, we do not have expertise in cost estimating.

Improvement
Description: Mountainview is a gated community and includes six detached one and two-story floorplans ranging in size from 1,576 to 2,722 square feet. The model homes are located at the west entrance of the community off of Rainer Lane on Darwin Lane. Mountainview features three to five-bedroom floorplans featuring attached two to three car garages. Home exteriors feature dual glazed low-E windows, roll-up sectional garage doors, Therma-Tru fiberglass entry doors, and three distinct architectural elevations. The Mountainview homes offer Mohawk vinyl and carpet floor coverings, bullnose drywall corners, two-panel interior doors and prewiring for light fixtures or ceiling fans in bedrooms and dining room. Kitchens include quartz countertops, Whirlpool stainless steel appliances, and eat in islands. D.R. Horton advertises their Multi-Gen suite options for select floorplans, which feature a kitchenette, living and bedroom with bathroom. Mountainview is a solar mandatory community, and offer Vivint solar panel power purchase or system purchase, which is not included in the advertised prices. The homes also include tankless water heaters, CAT5 wiring and a conduit for an EV charger in garage. Seventy-four of the proposed 126 homes in the subject property have closed to individuals with closing dates between August 27, 2021 and April 21, 2022. Actual sales prices (including premium, upgrades, options and incentives) within the subject have 1176
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ranged from $599,315 to $815,543. Current base pricing ranges from $648,990 to $780,990. Our search of the MLS revealed no resales and no current resale listings. Our physical search noted all homes appear to be in excellent condition. The houses which are over 95 percent complete are detailed below.

*Each asterisk designates one model home per that plan. In addition to the above, there are 61 homes under construction and an additional 6 finished lots.

Mountainview by D.R. Horton
Plan Bed/Bath
Floors/
Parking Sq. Ft.

Ind.

Owned
Bldr.

Owned
1 3 / 2 1 / 2 1,576 14 0
2 4 / 3 1 / 2 1,898 15 2*
3 4 / 3 2 / 2 2,239 14 2
4 4 / 3 2 / 2 2,537 13 2*
5 4 / 3.5 2 / 2 2,617 13 5*
6 5 / 3 2 / 3 2,722 6 3
Total 75 14
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THE INLAND EMPIRE HOUSING MARKET
In analyzing the area’s housing market, population growth and economic conditions need to first be considered.

Population
The San Bernardino County population showed no growth between July 2020 and July 2021, and an average of 2.1 percent the previous 20 years. The stagnant growth during this time is thought to be due to the disruption during COVID. Prior to the COVID pandemic, predictions were for the County to grow at an average annual rate of 0.7 percent over the next nine years. This equates to an increase of approximately 20,000 residents per year suggesting the need for about 7,000 homes per year within the County.

The large scale COVID-19 influence is still unknown on the County’s population growth.

New home sales in the County are recently higher than the coastal communities due to affordability, the work from home factor and millennials finally entering the housing market which may increase County population growth.

Economic Conditions
Over the past twenty-five years the Inland Empire has seen various cycles in the housing market. The Great Recession impacted the Inland Empire significantly and resulted in a longer recovery period than in other areas of Southern California. The rise and then fall of housing prices in the Inland Empire between 2004 and 2009 was considerably steeper than almost anywhere in the State. Unfortunately, this meant that the people who bought near the peak of the market likely faced significant negative equity. After essentially remaining flat for a few years, housing prices began to increase in late 2012 through January 2020. Once the COVID pandemic hit in March 2020, the housing market seemed to slow down significantly in March but by May 2020 new homes were once again going under contract with new homes selling at above average absorption rates from May 2020 into April 2022 in the region.

Economic growth in the Inland Empire was strong between 2002 and 2007. Job losses occurred between 2007 and 2009, with a leveling out in 2010, a slight upturn in 2011, and 1178
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general increases since that time until the economic shutdown due to COVID which created a new recession. The unemployment rate for the County was 4.3 percent (per the March 2022 Employment Development Department “EDD” report), lower than the high of

15.1 percent in July 2010. The March 2022 County rate was essential the same as the California unemployment rate (4.2 percent), but was higher than the March 2022 National rate of 3.6 percent. The pre-COVID unemployment rate in February 2020 for the County was 4.1 percent. According to CNN Business, as of January 2022 the U.S. economy is operating at 91 percent of where it was in early March 2020, prior to the pandemic. While it was thought once the COVID pandemic ends, the Nation will get back to the previous highs, it is now looking like there may be some changes in the post-COVID economy.

These changes include many companies switching to work-from-home for their employees whenever possible, on-line shopping will be a larger factor in retail, people moving out of urban areas to suburban areas, on-line academia rising and many now believing that the travel and leisure industry may never get back to the old “normal” as restaurants closed, hotels are currently at less than normal percent capacity and airline revenues are down significantly. The closing of businesses appears to have had a ripple effect on trade as materials and consumer goods are hard to obtain which is creating long lead times for many orders.

The housing market has played a large role in the past two recessions. The housing market was a significant factor in strengthening the impact of the Great Recession. Due to increased interest rates and rising home prices between June 2004 and mid-2006, the market reaction was to create non-conventional financing alternatives such as sub-prime and non-conventional mortgages to artificially maintain the boom housing market of 2004 and 2005. By 2007, the housing market saw a shake-up due to the problems in the subprime and non-conventional mortgage markets. In March 2007, the Federal Government initiated efforts to stop or limit sub-prime mortgages. Unfortunately, the damage had already been done with sub-prime mortgages playing a role in the 2008 shake out of Wall Street and contributing significantly to the U.S. economic downturn. Due to stricter income verification on new loans and the lack of available credit, coupled with job losses and 1179
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declining home prices, sales of new homes slowed for the next few years and essentially remained flat until mid-2012 when home prices began a steady climb.

Thus far into the COVID recession, new home sales have been one of the brightest spots in both the local and national economies. While new home sales slowed in March and April 2020 due to the COVID pandemic, prices did not appear to change in the County.

Some builders increased concessions in March 2020, but by May concessions were back to where they were prior to COVID, and prices have increased significantly since. The Inland Empire was documented as the tightest housing market in the Nation (OC Register October 2020) based on the supply. The supply of homes in the Inland Empire is still constrained and as of the end of March 2022 was 24 percent below one year-ago levels.

This has put pressure on prices to rise. As of mid-March 2022, over 97 percent of new home builders in the Nation were stating pricing has increased from January 2022 to February 2022. Per Metrostudy’s survey of homebuilders, their largest concerns relate to (1) availability of materials; (2) cost of materials and land increasing; (3) increasing interest rates leading to affordability for buyers; (4) labor shortages; and (5) delay on government services.

The fall out of the shut-downs from the COVID pandemic are still affecting the economy.

As previously discussed, the Federal Government approved $5.6 trillion in COVID relief in order to keep the economy stable. This amount of money entering the system appears to be fueling inflation with the 2021 National inflation rate at 4.7 percent compared to a

1.2 percent average in 2020. Thus far, 2022 has experienced high rates of inflation with March showing an 8.5 percent annual rate. High inflation is one of the factors that the Federal Reserve Board watches in order to determine both bond purchases and fluctuations in the interest rate. Due to the recent inflation, the Board has tapered off their purchase of bonds and has begun to raise the Federal Reserve Rate.

Home loan mortgage rates have been and are still playing a large part in the robust housing market. The Board held mortgage rates at all-time lows after the Great Recession in an attempt to assist the housing market. Low rates appeared to help for 1180
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quite a while. However, first-time buyers are now having a hard time entering the housing market due to rising prices, despite historically low mortgage rates. The Board had kept interest rates below historical averages, dropping rates to zero in December 2008.

Subsequently, there had been eight one-quarter point increases with the December 2018 increase bringing the Federal Rate to 2.25-2.5 percent which appeared to have a negative impact on home sales. In 2019 the Board reduced the rate one-quarter percent three times in an effort to spur the economy. This appeared to help as housing sales began to increase in early 2020, prior to COVID. On March 3, 2020, due to the COVID pandemic economic disruption, the Board reduced the Federal Rate one-half percent. Then on March 16, 2020 they reduced the rate an additional one percent to the current Federal Rate of 0.00 – 0.25 percent, the lowest rate in history. The quoted average U.S. rate for a 30-year fixed mortgage per FRED (Federal Reserve Economic Data) as of April 28, 2022 was 5.01 percent, which is higher than the February and March 2022 averages, and significantly higher than the most recent low of 2.65 percent on January 7, 2021. Mortgage applications had been spiking due to these low rates, and the fear that they were going to start to slowly ticking up, which we are seeing occur in real time. In March 2022 the Federal Reserve Board increased the rate 0.25 percent followed by a 0.50 percent increase in May. The Board has stated they anticipate several additional increases this year. The Federal Reserve Rate increases are supposed to help slow the high inflation rate in our country.

Residential Land Development
While there had been little land development going on in most of the Inland Empire during the years 2008-2011, the second half of 2012 saw a resurgence in the more coveted areas such Ontario, Rancho Cucamonga, Fontana, Chino and Chino Hills in Southwest San Bernardino County. The increase in housing prices since 2012 coupled with the limited availability of supply made land development feasible once again for homebuilders. It is thought that the increase in regulations, which has significantly increased the time of processing entitlements, has limited the master developers’ further entitlement of developable land in California. While prior to the recession it was not unusual to see numerous large master-planned communities selling lots to builders, there 1181
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are few currently available in the subject area. The majority of land sales over the past few years include single tracts of land with maps ready to record (such as the subject property) or a public builder buying a larger piece of land but develops the land for its own use. Land sales slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Since then, residential land sales have eclipsed the 2017 peak as builders are trying to keep up with the demand for new homes. With new housing appearing to be one of the strongest sectors in the COVID economy, there appears to be a rebound in new-home starts. It’s possible that the rush to build by the new-home builders in the Inland Empire may create a slower 2022/2023 in residential land sales.

That is, residential land sold exceptionally well in 2021 and is continuing to sell well in early 2022, but that may be pulling future demand forward creating a softening in the land market in the future. With mortgage rates rising, there may be a cooling off in the currently hot housing market.

New Home Sales and Pricing
We have researched new single-family homes within the subject real estate market in order to reflect residential trends. It should be noted these sales numbers and prices pertain to new home sales while later in this section we discuss existing home sales. In reviewing new home sales in the Inland Empire market area, per the May 8, 2022 Ryness Report, the average year to date sales are two percent above the previous year.

Moreover, when taking into account two calendar years and reviewing December 2019 to December 2021 (prior to pandemic and since the pandemic), sales prices increased 37 percent. This increase is partially slowed due to the limited available supply which was not meeting demand, thus put pressure on pricing along with historically low interest rates.

As rates go down, purchasing power becomes larger, which gives new-home buying a boost. However, the flip side is as rates rise, purchasing power becomes lower. In late 2021 there was a slight slowdown in sales which suggested that a peak in pricing may have been reached. However, sales numbers jumped back up for a strong end of 2021 and a very strong start to 2022, possibly from predictions of rates rising which appears to be occurring. It is still too early to tell if the rising rates will significantly affect the new home sales market. Along with home sales comes a demand for appliances, furniture, 1182
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building materials and services such as insurance, mortgage services, inspections, interior designers and landscapers, all contributing to the area economy.

The years 2018, 2019 and early 2020, saw a significant increase in new homes projects in the Inland Empire. Due to the high number of land sales in 2017, new homes projects increased 84 percent in the Inland Empire from 131 new home projects in January 2018 to 242 new home projects in February 2020. However, new home projects have decreased since that time to 188 new home projects per the May 8, 2022 Ryness Report.

While this is a significant increase in number of new home projects since 2018, the number of new home sales is still running over 50 percent below the average of 2002 through 2006. New home sales in overall San Bernardino County for the 3rd quarter of 2021 were 1,228 (for the quarter) while new home sales for the 3rd quarter of 2020 were 1,051, representing an increase of 16.8 percent (latest data per Husing). The 1,228 new home sales for the quarter would equate to 4,912 new home sales for the year, which relate to the aforementioned needed homes based on estimated population growth of about 7,000 per year. This suggests new home supply is not keeping up with the demand due to population growth.

New single-family home prices (combines both attached and detached) in the Inland Empire has also seen changes. The median new home price in the Inland Empire changed from the peak value of $437,200 in the third quarter of 2006 to $268,155 in early 2009 (decrease of 39 percent) while the current new home median price is a record high of $535,419 per John Husing’s Third Quarter 2021 (latest available) information. This reflects an increase of over 99 percent from the bottom of the cycle and an increase of

22.5 percent over its previous peak. New home sale prices fluctuate based on the land value more than the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis do not fluctuate as much as land values. However, there have been inflationary increases in construction costs adding to the increased cost of building a home.
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Within our search for the most comparable actively selling new home communities, we searched the subject’s city of Fontana along with the neighboring cities of Jurupa Valley, Rialto, and San Bernardino. Our search for comparable new home projects as compared to the subject communities within the competitive market area resulted in thirteen new home projects (including the subject) with base pricing ranging from $560,100 to $1,003,655, but the majority of the communities pricing ranging from $595,000 to $790,000. The subject’s current base pricing ranges from $648,990 to $780,990.

Existing Homes Sales and Pricing
While the previous section looked at new home sales and pricing, this section refers to existing homes in the Inland Empire. According to the California Association of Realtors’ most recent data, within overall Southern California, the median price paid for an existing single-family home in March 2022 ($802,500) reflects an increase of 5.6 percent from the previous month and up 13.8 percent year-over-year from $705,000 in March 2021.

Existing home sales in Southern California overall were down 7.5 percent year-over-year as of March 2022. The decrease in sales combined with the increase in median price reflects the low inventory effecting the entire Southern California market. The overall Southern California numbers compare to San Bernardino County with $475,000 as the median price paid for an existing home in the County in March 2022, up 5.6 percent from the previous month and up 15.3 percent year over year ($412,000). Sales of existing homes in the County were down 5.7 percent year-over-year. The decrease in sales is mainly due to a lack of supply of new homes as builders can’t keep up with demand and due to less inventory of existing homes. Below is a table showing the sales and prices for the Southern California area by County per the California Association of Realtors.

Southern California Existing Home Sales
County Mar. 2022 Feb. 2022 Mar. 2021
Price MTM
% Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $781,050 $773,440 $689,440 1.0% 13.3% -5.8% Orange $1,305,000 $1,264,000 $1,025,000 3.6% 27.3% -19.4% Riverside $620,000 $605,000 $535,000 2.5% 15.9% -9.5%
San Bernardino $475,000 $450,000 $412,000 5.6% 15.3% -5.7% San Diego $950,000 $888,000 $800,000 7.0% 18.8% -2.2%
Ventura $914,000 $887,500 $770,700 3.0% 18.6% 6.2%
Southern Calif. $802,000 $760,000 $705,000 5.6% 13.8% -7.5% Source: California Association of Realtors
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Based on March 2022 median existing homes prices, in comparison to the majority of the surrounding counties, San Bernardino County has a definite price advantage. The “San Bernardino County Advantage” (price difference between San Bernardino and surrounding counties) is $145,000 as compared to Riverside County, $306,050 as compared to Los Angeles County, $439,000 as compared to Ventura County, $475,000 as compared to San Diego County and $830,000 as compared to Orange County. That is, in March 2022, the median priced home in San Bernardino County was $830,000 less than the median priced home in Orange County ($1,305,000). Typically, as the price advantage widens, homebuyers are more open to commuting to further out areas. With the current work-from-home concept, the suburban areas are seeing more growth which is putting pressure on home prices in the Inland Empire.

In a separate attempt to capture the amount of increase in home prices, the resale activity of existing homes in the subject’s immediate area (per Redfin.com) has been reviewed.

The number of sales and sale prices of existing homes within market areas surrounding the subject are shown in the table below.

Community
Name
Location
To
Subject
No. of
Sales
April 2022
Price
Median
Price %
Change
from Apr.
2022
North Fontana Subject 69 $689,000 17.2%
Coyote Canyon West 10 $872,000 32.6%
Lytle Creek Northwest 3 $600,000 42.9%
Citrus Heights South South 9 $805,000 26.8%
Rialto Southeast 64 $550,000 20.9%
Summit Heights Southwest 12 $784,000 22.4%
Sierra Lakes Southeast 14 $697,000 18.9%
Source: Redfin Housing Market Trends April 2022
The median home price of a detached resale home in North Fontana in April 2022 was $689,000, which is within the range of the resale detached home prices in the subject area. The low-end of the range relates to the Rialto which has older homes while the highend of the range relates to Coyote Canyon, which is a small neighborhood on the west side of I-15. The above price fluctuations from year-to-year relate to the California Department of Real Estate’s overall San Bernardino County detached home resale price increase of 15.3 percent year over year from March 2021 to March 2022. 1185
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According to the Ryness Report dated May 8, 2022, there are currently 17 new home projects in the subject’s Central-East San Bernardino submarket with the City of Fontana housing 11 of them (including the subject).

Mountainview - Sales and Pricing
Mountainview is comprised of 156 single family detached homes sized from 1,576 to 2,722 square feet situated on 5,000 square foot minimum lots. Mountainview had a grand opening on June 12, 2021, however began pre-selling on May 17, 2021 with opening base pricing ranging from $589,990 to $704,990. Current base pricing at Mountainview ranges from $648,990 to $780,990 which is 10 to 12 percent higher than opening base prices. Actual closed prices, including options, upgrades and premiums, have ranged from $599,315 to $815,543. Within the subject, D.R. Horton has sold and closed 75 homes to individuals, with an additional 30 homes which are in escrow and due to close at completion. The total of 105 sales equates to an absorption rate of 8.75 sales per month. This is considered to be a very strong absorption rate for the subject marketplace.

Per the Ryness Report, a new home tracking service, as of May 8, 2022 the year-to-date average sales per project per month in the Inland Empire is 5.4 homes.

Summary
The Inland Empire as a whole as well as San Bernardino County specifically have seen a substantial increase in pricing since 2012 with most areas, including the subject, in the past year showing astronomical increases over the past two years. While existing home sales were originally down when COVID began in spring/early summer 2020, new home sales subsequently shot up due to the existing home market supply being constrained and interest rates hitting all-time lows. In the past two years, the Inland Empire market has seen new home sales rates much stronger than the previous several years. The subject community is performing above the Inland Empire average, resulting in strong sales rates. This is due to limited new homes offered in the subject area along with the subject’s pricing and average absorptions being in-line with the actively selling projects and the comparable communities.
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The year 2020 began poised for huge growth, but the COVID pandemic temporarily shook the existing home market. The COVID pandemic actually had a positive impact on the new home market, which became a preferred option with new home sales growing over the past two years. Sales rates in the immediate vicinity of the subject are generally above the overall average in the subject market area. Prices of new homes in the area have had significant increases of well over ten percent per year in some communities. Despite uncertainty hitting the market at the beginning of the COVID outbreak, most observers agree that the Inland Empire housing market is positive and healthy population growth is occurring in the County. It is believed that as the population continues to increase, housing growth will also continue.
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HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact that it represents the underlying premise (i.e., land use) upon which the estimate of value is based. In this report, the highest and best use is defined as:
"the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value”8
Proper application of this analysis requires the subject properties to first be considered “As If Vacant” in order to identify the “ideal” improvements in terms of use, size and timing of development. The existing improvements (if any) are then compared to the “ideal” improvements to determine if the use should be continued, altered or demolished preparatory to redevelopment of the site with a more productive or ideal use. “As If Vacant”
In the following analysis, we have considered the sites probable uses, or those uses which are physically possible; the legality of use, or those uses which are allowed by zoning or deed restrictions; the financially feasible uses, or those uses which generate a positive return on investment; and the maximally productive uses, or those probable permissible uses which combine to give the owner of the land the highest net return on value in the foreseeable future.

Physically Possible Uses
The subject property is rectangular in shape, consists of 37.19 gross acres per recorded Tract Map No. 20018 and is located in the northern portion of the City of Fontana, on the east side of Lytle Creek Road, north of Summit Avenue and immediately east of I-15. The lands are generally at street grade of surrounding streets, with vacant lands to the north, a Southern California Edison easement to the east, existing homes to the south, and vacant lands up to the I-15 to the west.
8 The Appraisal of Real Estate, 11th Edition
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The subject site has been graded into 156 single-family lots with a minimum of 5,000 square feet. We have reviewed the final Environmental Impact Report along with a Soils Report on the subject site. All reports reviewed concluded that the development of the site into single-family residential use is feasible; however, all mitigation measures recommended within the reports should be adhered to during construction. The site is being developed with conventional single-family detached homes. It is an assumption of this report that the soils are adequate to support the highest and best use, and that there are no environmental issues which would slow or thwart development of the property.

This is evidenced by existing homes on the site which were recently built with City inspectors on site during construction.

An engineered drainage system appears to have been designed into a street drainage system for the entire tract. All standard utilities are available to serve the subject property.

The site has good access via I-15, exit Beech/Summit Avenue to Lytle Creek Road or Duncan Canyon Road to Citrus Avenue to Knox Avenue. There is a regional shopping within one mile of the subject at Summit Avenue.

Based on the physical analysis, the size and access make the subject property physically suited for numerous types of development; however, the grading that has occurred on the site suggests residential development.

Legality of Use
The subject property is located within the City of Fontana in the County of San Bernardino.

Per the City’s General Plan, the subject site is shown as M-R, or Medium Density Residential. There is no Specific Plan on the subject lands. In addition to the General Plan zoning, the subject is covered by recorded Tract Map 20018 which subdivides the subject property into 156 single-family detached lots along with open space, setback areas and internal streets.

Based on the legality of use analysis, the type of development for which the subject properties can be utilized is narrowed to residential use. This is consistent with the findings of the physically possible uses.
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Feasibility of Development
The third and fourth considerations in the highest and best use analysis are economic in nature, i.e., the use that can be expected to be most profitable. As discussed under the Inland Empire Housing Market section earlier within this report, the market has shown strong increases in both sales and pricing in the past year, even with the COVID pandemic ongoing. Within Fontana CFD No. 106, out of 156 proposed houses, there have been 105 home sales to date including 75 home closings. All structures appear to be in excellent condition with no physical depreciation apparent. Within the new home market in the greater Fontana area, we found thirteen projects to be comparable to the subject Mountainview community. Homebuilding has not been able to keep up with the demand in the past two years due to several factors including historically low interest rates, millennials joining the home buying market and the work from home factor all adding to the demand. The San Bernardino County housing market has seen exceptional absorption over the past two years. Our search for land sales found ten land sales in the market area that we consider to be comparable. Population growth is still occurring in the area and will continue to create the need for housing.

Based on the above analysis, the highest and best use for the subject property appears to be for single-family detached residential development at the right price points.

Maximum Productivity
Based on the market activity of residential lands in the immediate area, we have concluded there is a need/demand for residential lands.

Highest and Best Use Conclusion – “As If Vacant”
The final determinant of highest and best use, as if vacant, is the interaction of the previously discussed factors (i.e., physical, legal, financial feasibility and maximum productivity considerations). Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject property is for residential land use. 1190
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Highest and Best Use – “As Improved”
The subject property consists of Mountainview with 156 proposed homes which is currently being marketed by D.R. Horton. Mountainview began selling in May 2021 and has sold 105 homes, reflecting a sales rate of approximately 8.75 sales per month. Base prices at Mountainview have increased since grand opening from 10 to 12 percent per floorplan, with current base pricing ranging from $648,990 to $780,990. The sales absorption rate within Mountainview is considered to be very good to excellent. As discussed under the Inland Empire Housing Market section, within the Inland Empire, the year-to-date average sales per project is 5.4 homes per month. All of the homes are of good design and appear to be of good quality workmanship. It appears that Mountainview is being well received and the neighborhood is selling at the correct price points for the area. Based on the above information, it is concluded that the highest and best use for the subject property, is for the continued use, as improved. 1191
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VALUATION ANALYSIS AND CONCLUSIONS
The Sales Comparison Approach will be used to value the subject property. This approach compares similar properties that have recently sold or are in escrow. In determining the value for the property, a unit of comparison needs to be addressed. For attached residential lands, they are typically sold on the basis of a finished pad for a townhome unit. That is, the sales price is determined by a finished pad value and then the remaining costs to develop the property to a finished condition are taken into account in the sales price. Therefore, in determining a current market value for the lands, the current condition of the lots will be considered. In the case of the existing home valuations, a single new-home sale is the unit of comparison. Our search will include all new home projects within the subject’s immediate and surrounding market area to find comparable new homes for sale. In determining the value for each house, a base value will be concluded for each plan which will be considered a minimum market value as most buyers typically purchase some premiums, upgrades or options which increase the price of the home.

In the case of the completed (over 95 percent complete) builder-owned models and production houses, the homes will be valued using the Sales Comparison Approach to conclude on a retail value for each plan, followed by a Discounted Cash Flow (“DCF”) Analysis due to the single ownership. The DCF will take into account the fair market value of the completed homes (utilizing the Sales Comparison Approach), remaining development costs (if any), the marketing and carrying costs associated with selling off the homes, a profit due to the developer of the homes, and a discount rate reflecting both the risk associated with selling off the homes along with the time value of money during the estimated absorption period. A home under construction (under 95 percent complete) will be valued as a finished lot rather than attribute value to a partially complete improvement. In the case of the individually owned homes, the concluded base value will be used for each plan and a mass appraisal technique will be addressed. In determining the concluded base value, new home sales in the area will be reviewed and compared with sales of the subject completed homes using standard methodology and statistical 1192
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testing. All of the value conclusions will take into consideration improvements and/or benefits to be funded by the Fontana CFD No. 106 Special Tax Bonds and their lien. A summary of the final value conclusions will be reported at the end of this valuation section.

Market Data Discussion – Residential Lots
Within Mountainview, there are 156 lots in a generally physically finished condition, with 75 completed homes individually owned, 14 builder-owned homes that are complete or nearly complete (including three model homes), 61 builder-owned homes that are under construction, and 6 additional finished lots owned by the builder. As we are valuing a home under construction (under 95 percent complete) on the basis of a finished lot, we will be valuing 67 lots in our analysis.

We have searched the area and found the eight transactions summarized in the Addenda to be most comparable to the subject property. The sales are reported both on a purchase price basis and on a finished lot basis. The actual purchase price is typically less, depending on the condition of the land (lots or pads) at the time the property was acquired.

Although some sales refer to “finished lots/pads,” they are typically physically finished lots/pads with some fees remaining to be paid to be considered true finished lots/pads.

Below are the details of each of the comparable land sales along with a discussion of each transaction in relationship to the subject property.

Land Sale No. 1 refers to the sale of 526 lots which are to be known as the Gardens at Arboretum. Lennar purchased the acreage which is located one-half mile northeast, from Lewis Group of Companies (North Fontana Investment Company) in December 2021 for $91,935,500 per public record. The purchase included 69 triplex units, 99 cluster lots with a minimum size of 2,200, 109 cluster lots with a minimum size of 2,600, 97 lots with a minimum lot size of 4,000 square feet, 88 lots with a minimum lot size of 4,100 square feet and 64 lots with a minimum lot size of 6,000 square feet. We were unable to obtain finished lot/pad estimates on each product however brokers familiar with the transaction reported the blended finished lot price is estimated at $274,000. In comparison to the subject property, this transaction is considered to be inferior in lot size as it includes a 1193
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blended price for triplex units along with a majority of smaller lots than the subject’s 5,000 square foot lots. It should be noted that this transaction is considered a bulk sale due to the number of lots/pads which would have commanded a discount, making this transaction considered to be inferior to the subject when looking at number of pads/lots.

Land Sale No. 2 pertains to the purchase of 107 lots located at the northeast corner of San Savaine Road and South Highland Avenue in Fontana, just south of the 210 Freeway about 1.5 miles south of the subject property. Richmond American purchased the lands which had approvals for 46 alley loaded lots and 61 motorcourt cluster lots from the Stratham Group in December 2021 for $18,691,821 based on a reported blended finished lot price of $285,000. The site is adjacent to the 210 Freeway. The overall density of this transaction is 10 dwelling units per acre while the subject’s area of Mountainview about

4.2 dwelling units per gross acre. The subject refers to 5,000 square foot minimum lots while this transaction has all detached small lots which is considered to be inferior in density and lot size to the subject. In addition, the freeway location is considered to be inferior.

Land Sale No. 3 refers to the purchase by Landsea Homes of 489 units located just northwest of the subject northwest of Duncan Canyon Road and Interstate 15. Landsea purchased the site in September 2021 from Richland Communities who had entitled and processed engineering on the site. The site is raw land with mapping for 129 townhomes, 127 motorcourt cluster lots, 79 lots with a minimum size of 5,000 square feet and 154 lots with a minimum lot size of 10,000 square feet. The property was reportedly purchased for $42,736,000 or a blended per unit price of $87,394 based on a blended finished lot/pad price of $285,000. The significant cost to develop the lots/pads (almost $200,000 per unit) is due to the hillside condition of a portion of the site. In comparison to the subject property, this transaction is considered to be inferior due to the townhomes (attached) units and the motorcourt cluster units when compared to the subject’s minimum 5,000 square foot lots. In addition, this transaction is considered to be inferior due to the number of lots (considered a bulk purchase) and due to the amount of grading needed on the property. While the actual costs of land development are taken into consideration, there 1194
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is risk associated with the development (both time of development and grading risk) while the subject lots are all graded and finished.

Land Sale No. 4 pertains to the purchase of a community known as The Retreat, located adjacent to the east to Data No. 2, at the northeast corner of Beech Avenue and South Highland Avenue in Fontana, just south of the 210 Freeway. Lennar purchased the lands from the Stratham Group in May 2021 for $16,500,000 or for $85,052 per unit. The site is entitled for 100 attached units and 92 detached cluster units with an overall density of 14 dwelling units per acre, which is similar to the subject’s density. In comparison to the subject, this transaction is considered to be significantly inferior due to it being adjacent to the 210 Freeway, the higher density and date of sale. The date of sale of May, 2021 is considered to be inferior due to the appreciation which has occurred in the marketplace since that time. When pairing Sale No. 2 and this transaction which are adjacent to each other, Sale No. 2 occurred in September 2021which is after appreciation occurred in the marketplace suggesting significant appreciation. However, Sale No. 2 had all detached units with an overall density of 10 dwelling units per acre while this transaction has a density of 14 dwelling units per acre and included over one-half attached units.

Land Sale No. 5 pertains to the sale of 81 lots located in Rialto, about 7.5 miles southeast of the subject. This area of Rialto is considered to be an inferior location when compared to the subject area’s location in Fontana. The infill parcel closed in February 2021 for $3,564,000 or $44,000 per lot based on a finished lot estimate of $140,000. Richmond American Homes purchased the site and is now selling their Seasons at Acacia on the site with home sizes from 2,080 to 2,640 square feet and pricing from $593,000 to $649,490. When reviewing Redfin Market Trends, Rialto has a median home price of $550,000 while the subject zip code has a median home price of $688,000 or 25 percent higher. In comparison to the subject property, this transaction is considered inferior due to lot size (3,600 versus the subject’s 5,000 square foot minimum), inferior due to the date of sale (over one year ago), and significantly inferior in location. 1195
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Land Sale Nos. 6, 7 & 8 refer to three land sales which closed in 2021 within Fontana in a community known as Shady Trails, about one-half mile southwest of the subject property. These three sales are for higher density product; however, we have included them due to their proximity to the subject property. Land Sale No. 6 refers to the purchase by PLC Communities for 91 detached triplex units. PLC is selling their community known as Juniper on the site with home sizes from 1,218 to 1,828 square feet and base pricing from $517,900 to $634,900. The property has a density of 14 dwelling units per acre and sold for $7,977,000 based on a reported finished lot price of $133,000. Land Sale No. 7 refers to TRI Pointe Homes purchasing the lands for 139 two-story townhomes at Shady Trails from the Lewis Group of Companies in February 2021. The density is approximately 15 dwelling units per acre for this project. The land is located south of the subject property near the Summit Avenue and Citrus Avenue intersection. The land was purchased in a finished condition with an approved final map for $9,277,000 or $66,741 per unit. This was based upon a reported finished lot price of $100,000 by the buyer and a reported finished lot price of $114,000 by the seller when factoring in the anticipated profit participation. This community is now selling as Birch Bend with base pricing from $487,000 to $595,000. Land Sale No. 8 refers to Taylor Morrison purchasing 60 lots from the Lewis Group of Companies in January 2021. This community consists of two-story detached courtyard cluster units; the lot sizes will vary due to the cluster layout, but the overall density is approximately 12 dwelling units per acre. The land was purchased in a finished condition with an approved final map for $5,022,000 or $83,700 per lot, and based on a reported estimated finished lot price of $132,000. The transaction included a seller carryback loan for $2,510,940. This community which marketed as Aspen Court has sold out. Shady Trails includes a 15,000-square-foot recreation center, including a fitness center, theater, library, business center, game rooms, and “cybercafé.” It also includes a second recreational club with a pool, spa, fitness center, half-basketball court, tot lot and barbecue area. There are a number of other amenities placed throughout the master-planned community. In comparison to the subject property, all three transactions have significantly inferior lot sizes/density; however, Shady Trails has superior amenities due to the master plan. Finally, while these transactions closed in 2021, the escrows opened in 2019, prior to a significant amount of appreciation in the subject marketplace. 1196
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While home prices have increased from 35-50 percent during this time, the land residual typically increases at a higher rate. When pairing Data Nos. 2 and 7 with similar densities, the significant appreciation is apparent (i.e., $132,000 versus $285,000 per finished lot).

Land Sale No. 9 refers to TRI Pointe Homes purchasing 193 detached small lot homesites from The Stratham Group in December 2020. The 193 lots include 82 detached alley-load units and 111 detached cluster units with an overall density of 11 dwelling units per acre. The land is located about three miles southwest of the subject property near the Interstate 15 and Victoria Street intersection in the City of Fontana. The land was purchased in an unimproved condition with final engineering in process for $25,315,500 or $131,168 per lot, based on a reported blended finished lot price of $215,000. This community is now known as Aurora Park with two products known as Goldenrod and Sienna currently selling. Home sizes range from 1,829 to 2,743 square feet with base pricing from $662,420 to $796,565. In comparison to the subject property, the site is significantly inferior due to lot size, along with being inferior due to the date of sale, over one year ago, prior to a significant amount of appreciation in the subject marketplace.

Land Sale No. 10 is located in Rialto, similar in location to Land Sale No. 5; however, in a slightly superior location within the City. Lennar purchased 776 lots known as River Ranch in December 2020 from Lytle Development. The lots range from small detached lots up to 6,000 square foot detached lots. Lennar purchased the site for $90,000,000 in December, 2020 or for $115,979 per lot based on a blended finished lot price of $190,000.

The lands were in an unimproved condition at time of sale. Lennar is planning on opening four communities; Stonecreek, Ridgewater, Summerbrooke and Blueridge beginning in late May 2022. Pricing has not yet been announced. In comparison to the subject property, this transaction is considered to be inferior in location, date of sale, lot size, condition and due to the number of lots in the transaction which is considered to be a bulk sale.
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The chart below summarizes the considerations used in adjusting the market data to the subject property.

Data
No. Location Date ofSale Lot Size FinishedLot Price Comparison to Subject 1 Arboretum,
Fontana 12 / 21
4 du/ac
Triplex –
6,000 sf
$274,000 Inferior – Lot Size/Density,
Number of Lots
2 Fontana 12 / 21
10 du/ac
Sm. Det
Lots
$285,000 Inferior – Amenities, Fwy
Location and Lot Size
3 Fontana 9 / 21
4 du/ac
Att to
10,000 sf
$285,000 Inferior – Lot Size/Density,
Condition & Number of Lots
4 Fontana 5 / 21
14 du/ac
Att & Sm
Det Lots
$155,000 Inferior – Lot Size/Density, Fwy
Location and Date of Sale
5 Rialto 2 / 21 3,600 sf $140,000 Inferior – Location, Lot size, Date of Sale 6 Shady Trails
Fontana 2 / 21 14 du/ac
Triplex $133,000
Superior – Amenities
Inferior – Date of Sale, Lot
Size/Density
7 Shady Trails
Fontana 2 / 21 15 du/ac
Attached $114,000
Superior – Amenities
Inferior – Lot Size/Density, Date
of Sale
8 Shady Trails
Fontana 1 / 21 12 du/acSm. Det. $132,000 Superior – AmenitiesInferior – Lot Size, Date of Sale 9 Fontana 12 / 20 11 du/ac
Sm. Det. $215,000 Inferior – Lot Size, Date of Sale
10 Rialto 12/20 Sm. Lot –
6,000 sf $190,000 Inferior – Location, Lot size, Condition, No. of Lots The market data depicts a wide range of overall finished lot price range from $114,000 to $285,000. Land Sale No. 1, 3 and 10 refer to the most similar in comparison to the subject in lot size/density, however these three transactions all refer to a blended price which includes some smaller or attached lots and all are considered to be “bulk sales” as they refer to 526, 489 and 776 lots/units respectively. Typically, a builder purchases a single tract or receives a discount due to the “bulk” purchase. While Land Sale No. 10 closed on the basis of a blended finished lot at $190,000, this transaction was completed in December 2020, prior to a significant amount of appreciation in the marketplace. Land Sale No. 2 refers to all detached lots, however they are smaller in size when compared to the subject property. Sale Nos. 6, 7 and 8 are all located within Shady Trails with superior amenities, however all were negotiated well over two years ago, prior to a significant amount of appreciation in the subject marketplace. Most of the market data 1198
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relates to blended prices of either attached and small cluster lots, or small to medium sized conventional lots.

In addition to the above comparables, we have knowledge of a current negotiation on a property in near proximity to the subject. The details of this transaction have been retained in our files for confidentiality purposes. The property consists of lands for a duplex product which is in negotiation based on a $264,000 finished lot/pad. This is not an escrow at this time but does show activity in the subject marketplace.

Based on the market data, we have concluded that the subject Mountainview lots, with a minimum lot size of 5,000 square feet, have a finished lot value of $290,000. Based on the above and considering the remaining costs as discussed in the Property Description section, the land value is calculated as follows:
67 Lots x $290,000 $19,430,000
Less: Remaining Costs ($18,818.90 x 67) ( 1,260,866)
Current Value of 67 Lots $18,169,134
Retail House Valuation – Mountainview
Within Mountainview, there are 75 individually owned homes and 14 homes over 95 percent complete owned by the builder. The builder-owned homes over 95 percent complete include 11 production homes and three model homes.

Due to the single ownership of multiple houses (14 homes) by the builder within the subject property, a Discounted Cash Flow (“DCF”) analysis is needed in order to arrive at a bulk value for the homes within each neighborhood. First, a retail value for each plan within Rancho Palma will be concluded followed by a DCF for the builder owned homes which will take into account the absorption time to sell off the homes, the costs associated with selling off the homes and any remaining costs owed by the builder, if any. The resulting revenue will be discounted using an appropriate rate to determine the builderowned bulk value for the builder-owned homes. The DCF builder-owned final value will be followed by a reporting of the concluded values for the individually owned homes within 1199
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each neighborhood using the concluded base retail value for each plan with a separate check of the analysis utilizing a mass appraisal technique based on actual sales prices of the homes.

Below is a summary of the floor plans within Mountainview. A listing of the improved residential comparable properties is located in the Addenda of this report. All new home comparables are located within Fontana and the neighboring areas of Jurupa Valley, Rialto, and San Bernardino. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no re-sales or current resale listings within Mountainview. are detailed below.

*Each asterisk designates one model home per that plan. In addition to the above, there are 61 homes under construction and an additional 6 finished lots.

The most appropriate new home comparable data for Mountainview Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 2 1 / 2 1,576 --
1 2 4 / 3 1 / 2 1,898 $366.17
2 1 3 / 2.5 2 / 2 1,642 $385.64
7 1 3 / 2.5 1 / 2 2,280 $321.93
8 1 4 / 3 1 / 2 2,140 $344.13
9 1 3 / 2 1 / 2 1,547 $391.67
10 1 3 / 2 1 / 2 1,792 $358.55
The majority of the comparable communities are located in Fontana; however, our search Mountainview by D.R. Horton
Plan Bed/Bath
Floors/
Parking Sq. Ft.

Ind.

Owned
Bldr.

Owned
1 3 / 2 1 / 2 1,576 14 0
2 4 / 3 1 / 2 1,898 15 2*
3 4 / 3 2 / 2 2,239 14 2
4 4 / 3 2 / 2 2,537 13 2*
5 4 / 3.5 2 / 2 2,617 13 5*
6 5 / 3 2 / 3 2,722 6 3
Total 75 14
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was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $321.93 to $391.67. Mountainview Plan 1 has a current base asking price of $411.80 per square foot. There have been 14 closings of Plan 1 with sales prices ranging from $380.28 to $428.21 per square foot. There are two current escrows of Plan 1 with a sales price range of $435.99 to $454.99 per square foot. The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. It has been concluded that Plan 1 has a base current market value of $390.00 per square foot. This calculates as follows:
1,576 sf x $390.00 = $614,640
The most appropriate new home comparable data for Mountainview Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 4 / 3 1 / 2 1,898 --
1 1 3 / 2 1 / 2 1,526 $411.80
2 2 4 / 2.5 2 / 2 1,872 $360.21
3 2 3 / 2.5 2 / 2 1,961 $322.31
7 1 3 / 2.5 1 / 2 2,280 $321.93
8 1 4 / 3 1 / 2 2,140 $344.13
9 1 3 / 2 1 / 2 1,547 $391.67
10 1 3 / 2 1 / 2 1,792 $358.55
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square 1201
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footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $321.93 to $411.80, with generally the larger homes having the lower per square foot price. This is typical due to the economies of scale obtained during construction. Mountainview Plan 2 has a current base asking price of $366.17 per square foot. There have been 15 closings of Plan 2 with sales prices ranging from $336.14 to $375.16 per square foot. There are four current escrows of Plan 2 with a sales price range of $381.82 to $404.34 per square foot. The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. It has been concluded that Plan 2 has a base current market value of $360.00 per square foot. This calculates as follows:
1,898 sf x $360.00 = $683,280
The most appropriate new home comparable data for Mountainview Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 4 / 3 2 / 2 2,239 --
1 4 4 / 3 2 / 2 2,537 $292.66
4 Lambert 3 / 2.5 2 / 2 2,210 $308.59
5 2 4 / 3 2 / 2 2,292 $323.50
6 3 4 / 3 2 / 3 2,264 $336.74
10 2 4 / 3 2 / 2 2,203 $310.15
11 Lapis 3 / 2.5 2 / 2 2,180 $272.47
13 N2 4 / 2.5 2 / 2 2,274 $253.30
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $253.30 to $336.74 with the low-end of the range 1202
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in an inferior location. Mountainview Plan 3 has a current base asking price of $321.79 per square foot. There have been 14 closings of Plan 3 with sales prices ranging from $300.13 to $348.43 per square foot. There are four current escrows of Plan 3 with a sales price range of $328.04 to $343.76 per square foot. The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. It has been concluded that Plan 3 has a base current market value of $310.00 per square foot.

This calculates as follows:
2,239 sf x $310.00 = $694,090
The most appropriate new home comparable data for Mountainview Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 4 / 3 2 / 2 2,537 --
1 3 4 / 3 2 / 2 2,239 $366.17
1 5 4 / 3.5 2 / 2 2,617 $298.43
4 Livingston 3 / 2.5 2 / 2 2,440 $293.64
5 2 4 / 3 2 / 2 2,292 $323.50
10 3 4 / 3 2 / 2 2,590 $282.29
11 Moonstone 4 / 2.5 2 / 2 2,640 $246.02
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $246.02 to $366.17 with generally the larger homes at the low end of the range and smaller homes at the high end of the range. This is due to the economies of scale typically obtained during construction. Mountainview Plan 4 has a current base asking price of $292.66 per square foot. There have been 13 closings of Plan 4 with sales prices ranging from $267.61 to $302.04 per square foot. There are five 1203
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current escrows of Plan 4 with a sales price range of $304.04 to $324.74 per square foot.

The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. It has been concluded that Plan 4 has a base current market value of $280.00 per square foot. This calculates as follows:
2,537 sf x $280.00 = $710,360
The most appropriate new home comparable data for Mountainview Plan 5 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 5 4 / 3.5 2 / 2 2,617 --
1 4 4 / 3 2 / 2 2,537 $292.66
1 6 5 / 3 2 / 3 2,722 $282.88
4 Livingston 3 / 2.5 2 / 2 2,440 $293.64
5 3 5 / 4 2 / 3 2,743 $290.40
8 2 4 / 2.5 2 / 3 2,809 $278.03
10 3 4 / 3 2 / 2 2,590 $282.29
11 Moonstone 4 / 2.5 2 / 2 2,640 $246.02
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $246.02 to $293.64. Mountainview Plan 5 has a current base asking price of $298.43 per square foot. There have been 13 closings of Plan 5 with sales prices ranging from $275.25 to $311.63 per square foot. There are 9 current escrows of Plan 5 with a sales price range of $303.14 to $328.99 per square foot. The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded 1204
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City of Fontana CFD No. 106 (Mountainview by D.R. Horton) Kitty Siino & Associates, Inc. Page 63
value relates to a base price for the plan. It has been concluded that Plan 5 has a base current market value of $275.00 per square foot. This calculates as follows:
2,617 sf x $275.00 = $719,675
The most appropriate new home comparable data for Mountainview Plan 6 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 6 5 / 3 2 / 3 2,722 --
1 5 4 / 3.5 2 / 2 2,617 $298.43
4 Livingston 3 / 2.5 2 / 2 2,440 $293.64
5 3 5 / 4 2 / 3 2,743 $290.40
8 2 4 / 2.5 2 / 3 2,809 $278.03
10 3 4 / 3 2 / 2 2,590 $282.29
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley, Rialto and San Bernardino in order to include comparables with lots sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, lot size, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage space and other amenities. The new home comparables have a base price less concessions range from $278.03 to $298.43, with generally the larger homes having the lower per square foot price. This is typical due to the economies of scale obtained during construction. Mountainview Plan 6 has a current base asking price of $282.88 per square foot. There have been five closings of Plan 6 with sales prices ranging from $262.50 to $282.64 per square foot. There are six current escrows of Plan 6 with a sales price range of $287.67 to $300.71 per square foot. The escrow sales prices versus the closed sales prices shows the recent appreciation in the subject marketplace. It should be noted that the reported sales prices include upgrades, premiums and options along with any concessions given by the builder, while the concluded value relates to a base price for the plan. It has been concluded that Plan 6 has a base current market value of $270.00 per square foot. This calculates as follows:
2,722 sf x $270.00 = $734,940
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City of Fontana CFD No. 106 (Mountainview by D.R. Horton) Kitty Siino & Associates, Inc. Page 64
Builder Owned Retail Value – Mountainview
Within the subject property, there are 14 builder-owned houses over 95 percent complete, three of which are models. Per interviews with builders, upgrades and landscape/hardscape of up to $100,000 are installed in the model homes, however, the builders generally consider this a marketing cost and do not anticipate recovering this investment on a dollar-for-dollar basis. Based on historical information, home sizes and fixtures, actual model home sales within the subject area and the current real estate market, a consideration of a $50,000 premium has been included with each of the model homes. As concluded above, the retail base value conclusions for the builder-owned homes within Mountainview are calculated as follows:

Plan 1 (0 x $614,640) $ 0
Plan 2 (2 x $683,280) 1,366,560
Plan 3 (2 x $694,090) 1,388,180
Plan 4 (2 x $710,360) 1,420,720
Plan 5 (5 x $719,675) 3,598,375
Plan 6 (3 x $734,940) 2,204,820
Model Upgrades (3 x $50,000) 150,000
Total Retail Value $10,128,655
Absorption Period
In order to arrive at an absorption period for the 14 builder-owned homes, the absorption rate for the subject neighborhood along with the surrounding developments has been reviewed. Mountainview grand opened in June 2021 (but started presales in May 2021) and consists of 156 homes. There have been 105 sales since May 2021 suggesting an average absorption of 8.75 homes per month which is considered to be very good for the subject area with the subject’s price points. Taking into consideration the product, concluded sales prices and current escrows, along with the current unstable interest rates, it has been concluded that the 14 builder-owned homes will be absorbed within a four-month period at the concluded values.
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Remaining Costs
As discussed under the remaining costs section earlier within this report, there are $18,818.90 per lot in no remaining land development costs associated with the builderowned homes which equates to a total of $263,465 for the subject 14 homes. It is an assumption of this analysis that the remaining costs will be spread evenly over the fourmonth absorption time period.

Expenses
In determining an expense rate, several builders in the subject area have been interviewed as to their expenses on selling existing inventory. Expenses include marketing and general administrative costs. These costs typically range from six to ten percent depending on varying factors such as absorption period, intensity of marketing, etc. Six percent has been estimated for marketing expenses and two percent for general and administrative costs for a total of eight percent in expenses for this analysis.

Profit
Several interviews with merchant builders in the area were conducted in order to determine an appropriate profit percentage for the subject properties. In the early 2000s, developers typically attempted to achieve a 10 to 12 percent profit based on gross sales proceeds. During the early 1990s recession, this range was lowered considerably to six to 10 percent with some builders drastically lowering their profit potential in order to maintain their work force. As the market improved, so did the profits. This appears to be occurring once again as prices have been increasing. A ten percent profit is considered appropriate in the analysis for this project.

Discount Rate
In selecting a discount rate, the following was completed:

1. Interviews with merchant builders in the San Bernardino area

2. Review of current market conditions including current market rates as well as yields reflected in other markets (i.e., municipal bonds, corporate bonds, etc.)

3. The quality, construction, historical sales and product on the subject property 1207
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City of Fontana CFD No. 106 (Mountainview by D.R. Horton) Kitty Siino & Associates, Inc. Page 66
The homes within Mountainview began selling in May 2021 with the product being well received in the marketplace with a 8.75 sales per month average. Based on the sales rate within the subject project, the competition, the product and location, and current market conditions, a 10 percent discount rate is considered appropriate for this analysis.

Discounted Cash Flow Summary
The discounted revenue (see DCF Analyses in addenda) for the builder-owned homes within Mountainview is $7,893,449.

Mountainview – Builder Ownership
67 Lots owned by Builder $18,169,134
14 Houses (including 3 models) builder-owned 7,893,449
Total Builder Ownership $26,062,583
Individual Owners Value Conclusion – Mountainview
There are 74 individually owned homes within the subject property. Based on the concluded value for each plan, the individually owned homes within the subject property have a minimum market value of:

Plan 1 (14 x $614,640) $ 8,604,960
Plan 2 (15 x $683,280) 10,249,200
Plan 3 (14 x $694,090) 9,717,260
Plan 4 (13 x $710,360) 9,234,680
Plan 5 (13 x $719,675) 9,355,775
Plan 6 (6 x $734,940) 4,409,640
Total Individual Owned $51,571,515
In an additional review, we have reviewed the original builder sales prices for the homes within the subject property. Closings for the 75 homes occurred between August 27, 2021 and April 27, 2022. The reported closing prices by the builder for the 75 individually owned homes total $52,994,749 which is 2.7 percent higher than the concluded value. The builder’s reported prices include premiums, upgrades and purchased options as well as took into consideration the concessions given by the builder which would typically be substantially more than the base pricing. When reviewing actual options, premiums and upgrades on the closed sales, the homebuyer paid an average of $28,600 for these items. 1208
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However; this amount has been offset by the significant appreciation in the subject marketplace. Opening base prices ranged from $648,990 to $780,990, and base prices have increased $59,000 to $76,500 (representing 10 to 12 percent) across all plans from opening to the current base prices. The above valuation is for the minimum market value as it takes into consideration the base plan price only and does not take into account any options, premiums or upgrades which were purchased by the buyers It is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes.
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City of Fontana CFD No. 106 (Mountainview by D.R. Horton) Kitty Siino & Associates, Inc. Page 68

APPRAISAL REPORT SUMMARY
The appraisal assignment was to value the subject property within Fontana CFD No. 106 which consists of 156 proposed residential lots. The 156 lots are known as Mountainview, being marketed and sold by D.R. Horton, and are located in the northern portion of the City of Fontana. As of May 1, 2022, individuals have purchased and closed on 75 of the total 156 proposed houses with an additional 30 homes in escrow which are due to close upon completion. The community has enjoyed good to excellent sales rates. All structures appear to be in excellent condition with no visible depreciation. We have reviewed builder sales and reviewed the local MLS for current listings or resales.

The subject properties were valued utilizing the Sales Comparison Approach to value, a Discounted Cash Flow Analysis, and a Mass Appraisal Technique for the individually owned homes. A minimum value was determined by concluding at a base value for the individually owned homes. The valuation took into account the improvements/benefits to be funded by the special tax Fontana CFD No. 106 bond proceeds along with the Fontana CFD No. 106 special tax lien. The concluded aggregate value for the subject properties, subject to their respective special tax lien, is:

Mountain View:

D.R. Horton Ownership (67 lots & 14 houses) $ 26,062,583 Individual Owners (75 houses) $ 51,571,515
Total Aggregate Value CFD No. 106 $ 77,634,098
The above values are stated as of said date of value and subject to the attached Assumptions and Limiting Conditions and Appraiser’s Certification. 1210
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City of Fontana CFD No. 106 (Mountainview by D.R. Horton) Kitty Siino & Associates, Inc. Page 69
APPRAISER’S CERTIFICATION
The appraiser certifies that to the best of his knowledge and belief:

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

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

3. The appraiser has no present or prospective interest in the property that is the subject of this report, and no personal interest or bias with respect to the parties involved.

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

5. This appraisal was not based on a requested minimum valuation, a specific valuation or the approval of a loan.

6. The analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

7. Kitty Siino has made a personal inspection of the property that is the subject of this report.

8. Kitty Siino has not performed any appraisal services on the subject property in the past three years.

9. No other appraisers have provided significant professional assistance to the persons signing this report.

10. The reported analyses, opinions and conclusions were developed, and this report was prepared, in conformity with the requirements of the Appraisal Institute’s Code of Professional Ethics and Standards of Professional Appraisal Practice, which include the Uniform Standards of Professional Appraisal Practice.

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

12. As of the date of this report, Kitty Siino has completed the requirements of the continuing education program of the Appraisal Institute.

Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)
1211

ADDENDA
1212
FONTANA CFD NO. 106 BOUNDARY MAP
1213
1214
TRACT MAP No. 20018
1215
1216

1217

DISCOUNTED CASH FLOW ANALYSIS
1218
Mountainview Builder-Owned Houses Disc. Cash Flow Analysis MONTH Months MONTH 1 MONTH 2 MONTH 3 MONTH 4 TOTAL
4 INCOME:

Retail Sales 10,128,655 $2,532,164 $2,532,164 $2,532,164 $2,532,164 $10,128,655 TOTAL INCOME $2,532,164 $2,532,164 $2,532,164 $2,532,164 $10,128,655 EXPENSES:

Remaining Costs ($65,866) ($65,866) ($65,866) ($65,867) ($263,465) Marketing & Carrying Expenses 8% ($202,573) ($202,573) ($202,573) ($202,573) ($810,292) Profit 10% ($253,216) ($253,216) ($253,216) ($253,216) ($1,012,866) TOTAL EXPENSES ($521,655) ($521,655) ($521,655) ($521,656) ($2,086,623) NET CASH FLOW $2,010,508 $2,010,508 $2,010,508 $2,010,507 $8,042,032 Discount Factor 10% 0.9917 0.9835 0.9754 0.9754
DISCOUNTED CASH FLOW $1,993,893 $1,977,414 $1,961,072 $1,961,071 $7,893,449 CUMULATIVE DISCOUNTED $1,993,893 $3,971,307 $5,932,378 $7,893,449 $7,893,449

CASH FLOW
1219

FINISHED LOT LAND SALES MAP
& SUMMARY CHART
1220
1221

FINISHED LOT LAND SALES SUMMARY CHART
Data
No.

Location / APN / Buyer / Seller Sales
Date
# Units Density /
Lot Size
Sales Price /
Price per Lot
Est. Finished
Lot Price
Comments
1 Gardens at Arboretum, NWC of
Sierra Avenue & Casa Grande
Avenue, Fontana / 0239-131-45 /
Lennar / Lewis Group of Companies
12 / 21 526 4 du/ac
(blended)
Triplex up
to 6,000 sf
$91,935,447 /
$174,782
$274,000
(blended)
Gardens at Arboretum was closed in
unimproved condition with an approved
tentative tract map. It consists of six (6)
product lines:
• Triplex, 69 Units
• SFD (2,200 sf), 99 Lots
• SFD (2,600 sf), 109 Lots
• SFD (4,000 sf), 97 Lots
• SFD (4,1060 sf), 88 Lots
• SFD (6,000 sf), 64 Lots
2 Highland, NW of Beech Avenue &
South Highland Avenue, Fontana /
0228-021-09 / Richmond American
Homes / Stratham Group
12 / 21 107 10 du/ac
(blended)
Small
Detached
$18,691,821 /
$174,690
$285,000
(blended)
Highland was closed in unimproved
condition with final engineering in
process. It consists of two (2) product
lines:
• Alley-Load, 46 Lots
• Motorcourt Cluster, 61 Lots
3 Monarch Hills, NW of Duncan
Canyon Road & Interstate 15,
Fontana / 0226-075-18 / Landsea
Homes / Richland Communities
09 / 21 489 4 du/ac
(blended)
Attach. up
to 10,000 sf
$42,736,000 /
$87,394
$285,000
(blended)
Monarch Hills was closed in
unimproved condition with final
engineering in process. It consists of
four (4) product lines:
• Townhomes, 129 Units
• Motorcourt Cluster, 127 Lots
• SFD (5,000 sf), 79 Lots
• SFD (10,000 sf), 154 Lots
4 The Retreat, NWC of Beech Avenue
& South Highland Avenue, Fontana
/ 0228-254-49 / Lennar / Stratham
Group
05 / 21 194 14 du/ac
(blended)
Attached
and Small
Detached
$16,500,000 /
$85,052
$155,000
(blended)
The Retreat was closed in unimproved
condition with final engineering in
process. It consists of two (2) product
lines:
• Villas, Att. Cluster, 100 Units
• Chateau, Det. Cluster, 94 Units
5 Seasons at Acacia, SE of East
Merrill Avenue & South Sycamore
Avenue, Rialto / 0131-111-05 /
Richmond American Homes / Asian
Pacific Inc
02 / 21 81 3,600 sf $3,564,000 /
$44,000
$140,000
Closed in unimproved condition with an
approved tentative tract map.
1222
Data
No.

Location / APN / Buyer / Seller Sales
Date
# Units Density /
Lot Size
Sales Price /
Price per Lot
Est. Finished
Lot Price
Comments
6 Juniper at Shady Trails, NW of
Summit Avenue& Citrus Avenue,
Fontana / 1107-501-03 / PLC
Communities / Lewis Group of
Companies
02 / 21 91 14 du/ac
Triplex
$7,977,000 /
$87,659
$133,000
Juniper was closed in finished condition
with an approved final map. It consists
of detached triplexes. The transaction
includes a profit participation.
7 Birch Bend of Shady Trails, NW of
Summit Avenue& Citrus Avenue,
Fontana / 1107-262-50 / TRI Pointe
Homes / Lewis Group of Companies
02 / 21 139 15 du/ac
Attached
$9,277,000 /
$66,741
$100,000
Birch Bend was closed in finished
condition with an approved final map. It
consists of attached townhomes. The
transaction includes a profit
participation. Per the seller, the
estimated finished lot value is closer to
$114,000 –– after factoring in the
anticipated profit participation.
8 Aspen Court of Shady Trails, NW of
Summit Avenue& Citrus Avenue,
Fontana / 1107-501-02 / Taylor
Morrison / Lewis Group of
Companies
01 / 21 60 12 du/ac
Small
Detached
$5,022,000 /
$83,700
$132,000
Aspen Court was closed in finished
condition with an approved final map. It
consists of two-story detached cluster
units. The transaction included a seller
carryback loan for $2,510,940.
9 Aurora, SEC of Interstate 15 &
Victoria Street, Fontana / 0228-091-
41 / TRI Pointe Homes / The
Stratham Group
12 / 20 193 11 du/ac
(blended)
Small
Detached
$25,315,500 /
$131,168
$215,000
(blended)
Closed in unimproved condition with
final engineering in process. Aurora
consists of two product lines: 82
detached alley-load units and 111
detached cluster units with an overall
density of 11 dwelling units per acre.
10 River Ranch (El Rancho Verde), NE
of Foothill Freeway (I/SR-210) &
North Riverside Avenue, Rialto /
0264-421-12 / Lennar / Lytle
Development
12 / 20 776 Varies
Small
Detached
up to
6,000 sf
$90,000,000 /
$115,979
$190,000
(blended)
Closed in unimproved condition with
final engineering in process. River
Ranch six (6) product lines:
• PA 1, 130 lots, 3,800 sf
• PA 2, 146 lots, 5,000 sf
• PA 3, 87 lots, 6,000 sf
• PA 4, 77 lots, 5,000 sf
• PA 5, 205 lots, 8 du/ac
PA 6, 131 lots, 3,800 sf
1223

IMPROVED RESIDENTIAL SALES MAP
& SUMMARY CHART
1224
1225

IMPROVED RESIDENTIAL SALES SUMMARY CHART
Data
No. Project Name Room Floors/ Lot Size or Density / Base Location/Developer Plan Count Parking Size (SF) Absorption Sales Price Price/SF
Mountainview, Lytle Creek Road and I215, Fontana / D.R. Horton 1 3 / 2 1 / 2 1,576 $648,990 $411.80
1 2 4 / 3 1 / 2 1,898 $694,990 $366.17
Subj. 3 4 / 3 2 / 2 2,239 5,000 / 10.4 $720,490 $321.79 4 4 / 3 2 / 2 2,537 Detached $742,490 $292.66
5 4 / 3.5 2 / 2 2,617 $780,990 $298.43
6 5 / 3 2 / 3 2,722 $769,990 $282.88
2 Encore, Citrus Avenue and Baseline
Avenue, Fontana / D.R. Horton
1 3 / 2.5 2 / 2 1,642
2,600 / 7.1
Sm Lot Det
$633,229 $385.64
2 4 / 2.5 2 / 2 1,872 $674,305 $360.21
3 4 / 3 2 / 2 2,043 $711,708 $348.36
3 Chateau at The Retreat, South
Highland Avenue and Beech Avenue,
Fontana / Lennar
1 3 / 3 2 / 2 1,724 $592,740 $343.82
2 3 / 2.5 2 / 2 1,961 10 du/ac / 5.0 $632,050 $322.31
3 3 / 2.5 2 / 2 1,987 Sm Lot Det $628,005 $316.06
4 3 / 3.5 2 / 2 2,046 $634,320 $310.03
4 Wisteria at Shady Trails, Citrus
Avenue and Knox Avenue, Fontana /
Richmond American Homes
Lambert 3 / 2.5 2 / 2 2,210
2,800 / 5.3
Sm. Lot Det
$681,990 $308.59
Lewis 3 / 2.5 2 / 2 2,350 $690,990 $294.04
Livingston 3 / 2.5 2 / 2 2,440 $716,490 $293.64
5 Goldenrod at Aurora Park, Victoria
Street and Kestral Drive, Fontana / TRI
Pointe Homes
1 3 / 3 2 / 2 2,006 12 du/ac / 5.3 $710,730 $354.30
2 4 / 3 2 / 2 2,292 Cluster $741,470 $323.50
3 5 / 4 2 / 3 2,743 $796,565 $290.40
6 Sienna at Aurora Park, Victoria Street
and Kestral Drive, Fontana / TRI
Pointe Homes
1 3 / 2.5 2 / 2 1,879 10 du/ac / 2.8
Sm Lot Det.
$662,240 $352.44
2 3 / 2.5 2 / 3 1,997 $683,265 $342.15
3 4 / 3 2 / 3 2,264 $762,380 $336.74
7 Bridle Path @ Paradise Knolls,
Limonite and Beach Street, Jurupa
Valley / Richmond American
1 3 / 2.5 1 / 2 2,280
5,000 / 7.6
$733,990 $321.93
2 4 / 2.5 1 / 2 2,490 $759,990 $305.22
3 4 / 3 1 / 3 2,610 $771,990 $295.78
1226
8 Exploration at Shadow Rock, Kings
Canyon Drive, Jurupa Valley / Lennar
1 4 / 3 1 / 2 2,140
6,000 / 5.4
$736,435 $344.13
2 4 / 2.5 2 / 3 2,809 $780,990 $278.03
3 5 / 3.5 2 / 3 3,325 $900,410 $270.80
4 6 / 4.5 2 / 3 4,122 $1,003,655 $243.49
9 Discovery at Shadow Rock, Kings
Canyon Drive, Jurupa Valley / Lennar
1 3 / 2 1 / 2 1,547

4.700 / 5.0
$605,910 $391.67
2 3 / 2.5 2 / 2 1,705 $627,280 $367.91
3 3 / 2.5 2 / 2 1,843 $641,190 $347.91
4 4 / 3 2 / 2 2,064 $651,960 $315.87
10 Adventure at Shadow Rock, Kings
Canyon Drive, Jurupa Valley / Lennar
1 3 / 2 1 / 2 1,792
5,000 / 5.0
$642,520 $358.55
2 4 / 3 2 / 2 2,203 $683,270 $310.15
3 4 / 3 2 / 2 2,590 $731,120 $282.29
Seasons at Acacia, SE of East Merrill
Avenue and South Sycamore Avenue,
Rialto / Richmond American Homes
Agate 3 / 2 1 / 2 2,080 $599,990 $288.46
11 Lapis 3 / 2.5 2 / 2 2,180 3,650 / 7.0 $593,990 $272.47 Pearl 3 / 2.5 2 / 2 2,380 $604,490 $253.99
Moonstone 4 / 2.5 2 / 2 2,640 $649,490 $246.02
Verdemont Ranch / NWC of West
Meyers Street and North Little League
Drive, San Bernardino / GFR Homes
1 3 / 2.5 1 / 2 2,224 $680,900 $306.16
12 2 4 / 2.5 1 / 2 2,595 10,800 / 19.0 $695,900 $268.17 3 4 / 2.5 1 / 2 2,679 (Just opened) $711,900 $265.73
4 4 / 3 2 / 2 3,063 $744,900 $243.19
Navarra and Rioja at Rancho Palma /
NW of Palm Avenue and Interstate
215, San Bernardino / Trumark Homes
N1 3 / 2 1 / 2 2,000 $560,100 $280.05
N2 4 / 2.5 2 / 2 2,274 $576,000 $253.30
13 N3 4 / 2.5 2 / 3 2,506 5,000
(Navarra), $596,100 $237.87
R4 4 / 3 1 / 3 2,522 7,000 (Rioja) / $615,155 $243.92
R5 4 / 3 2 / 3 2,824 7.5 $623,155 $220.66
R6 5 / 4 2 / 3 3,179 $667,355 $209.93
1227
APPRAISER’S QUALIFICATIONS
1228
QUALIFICATIONS OF KITTY S. SIINO, MAI
Education
Bachelor of Arts in Business Administration, Financial Investments, California State University, Long Beach, California (1980)
Post-Graduate Study, Real Estate Development, University of California, Irvine, California Appraisal Institute Classes: Uniform Standards of Professional Appraisal Practice, A & B; Appraisal Principles; Appraisal Procedures; Basic Income Capitalization; Advanced Income Capitalization; Narrative Report Writing; Advanced Applications, Case Studies.

Successfully completed all classes in addition to successfully completing the writing of a Demonstration Report and taking the Comprehensive Exam. Became a Member of the Appraisal Institute in December 1996. Have completed over 100 hours of continuing education through the Appraisal Institute every five years.

Employment
1988 - Present:

Self-Employed Real Estate Appraiser. Duties include the appraisal of various types of properties such as commercial, retail, industrial and vacant land. More complex assignments include easements, right-of-ways and special assessment districts. From 1996 to present, specialized in special assessment districts and community facilities districts appraisals for public entities, including Jurupa Community Services District, Corona Norco Unified School District, City of Corona, City of Chula Vista, City of San Marcos and City of Moreno Valley.
1986-1988:

Project Manager of Development for Ferguson Partners, Irvine, California. Duties included land acquisitions; review of fee appraisals and valuations; analysis of proposed development; planning and design; and management of development, construction and lease-up. The types of properties developed were commercial and industrial. Duties ranged from raw, vacant site development through property management of recently developed projects.
1981 - 1986
Manager of Finance, Construction for Community Development Division, The Irvine Company, Irvine, California. Duties included originating and managing a newly formed division of finance to bridge between the accounting functions and project management functions. Worked with analysis and budgets for Community Development Division. Coordinated with cities in forming new Assessment Districts and Community Facilities Districts to finance major infrastructure improvements.

Types of properties were apartments and single-family residential lots on a for sale basis to apartment and homebuilders.
1980 - 1981
Investment Counselor, Newport Equity Funds, Newport Beach, California. Duties included obtaining private financing for residential properties, working with appraisals of properties and analyzing the investments.
1229
Licenses
Real Estate Sales Person, State of California, 1980
Certified General Appraiser, State of California (#AG004793) Organizations
MAI #11145 - The Appraisal Institute
Public Financing
CASTOFF Meetings, 2006, 2007, 2008, 2009, 2010, 2011, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2022
Speaker, Mello-Roos & Special Assessment Financing, UCLA Extension Public Policy Program, February 2009 and March 2011
1230

Fontana City CouncilJuly 12, 2022

Fontana City Council
July 12, 2022