Agenda packet — Fontana City Council, April 11, 2023 (part 2 of 3)

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 $
[Plus][Less][Net] Original Issue [Discount][Premium]
Less Underwriter’s Discount
Plus Funds on Hand
Total $
Uses:

Improvement Fund(1) $
Reserve Fund(2)
Interest Account of the Bond Fund(3)
Costs of Issuance Fund
Administrative Expense Fund
Total $

(1) Consists of $________ to be deposited into the Construction Account and $_______ to be deposited into the Community Benefit Facilities Account.
(2) Equal to the initial Reserve Requirement.
(3) Represents capitalized interest on the Bonds through September 1, 2023. 318

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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 September 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 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 or Additional 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:

* Preliminary, subject to change.
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Redemption Dates Redemption Price
September 1, 20__ through August 31, 20__ 103%
September 1, 20__ through August 31, 20__ 102
September 1, 20__ through August 31, 20__ 101
September 1, 20__ 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 Special Tax prepayments 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” and “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Tax 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, 20__ 103%
September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and thereafter 100

Prior to the sale of the Bonds, there were partial prepayments by Lennar Homes for 38 parcels in the Villas neighborhood within the development in order to lower the Assigned Special Tax rate consistent with the property owner disclosures included in their closing documents at conveyance. Lennar Homes has advised that it has no other plans to prepay additional Special Tax. However, no assurance can be given that additional prepayments will not occur in the future, which would result in a redemption of the Bonds prior to maturity. 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 the Special Tax.

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, 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

(Maturity)
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 320

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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 mandatorily redeemed from Special Tax prepayments, 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

(Maturity)

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 mandatorily redeemed from Special Tax prepayments, 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.

Sinking Fund
Redemption Date
(September 1)
Principal Amount
to be
Redeemed

(Maturity)

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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 mandatorily redeemed from Special Tax prepayments, 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 and Additional Bonds, the Trustee will select the Bonds and Additional Bonds to be redeemed from all Bonds and Additional Bonds not previously called for redemption (a) with respect to any optional redemption of Bonds and Additional Bonds of a Series, among maturities of the Bonds and Additional Bonds of such Series as directed in a Written Request of the District (b) with respect to any mandatory redemption of Bonds or Additional Bonds from prepayments of the Special Tax, among maturities of all Series of Bonds and any Additional Bonds on a pro rata basis as nearly as practicable, and (c) with respect to any other redemption of Additional Bonds, among maturities as provided in the Supplemental Indenture pursuant to which such Additional Bonds are issued. 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 that 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 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.

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 322

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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.

Effect of Notice of 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.

Debt Service Schedule
Year Ending
September 1 Principal (1) Interest(2) Total

(1) Includes mandatory sinking fund redemption.
(2) Interest on the Bonds due through September 1, 2023 will be paid from capitalized interest.

Source: The Underwriter.
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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 Tax 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 Tax (which shall be limited to the amount of said lien and interest and penalties thereon). The Indenture defines the term “Special Tax” as the special tax described and defined in the Rate and Method as the “Special Tax” approved by the qualified electors of the District. “Administrative Expenses” is defined in the Indenture to mean costs directly related to the administration of the District, including, but not limited to: the costs of computing the Special Tax and preparing the annual Special Tax collection schedules and the costs of collecting the Special Tax, the costs of remitting the Special Tax 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 Tax and disclosures to Owners, the costs of the District related to an appeal of the Special Tax, 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 any delinquent Special Tax.

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 2023-24 Special Tax levy, based on the development status within the District as of March 1, 2023, 189 parcels of Taxable Property will be classified as Developed Property, assuming no additional building permits are obtained prior to May 1, 2023. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Under no circumstances may the amount of Special Tax 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 OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. EXCEPT FOR THE NET SPECIAL TAX

REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS OR ADDITIONAL BONDS. THE BONDS AND ANY ADDITIONAL 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 THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. 324

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Special Tax
Pursuant to the Act, the City Council adopted a resolution on June 9, 2020 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 14, 2020 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 14, 2020, the then sole landowner of the property within the District, SC Landings, authorized the District to incur indebtedness in an amount not to exceed $5,500,000 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 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 of residential property in the District to not exceed 1.95% of the Minimum Sale 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 Special Tax and all direct and overlapping property taxes, special assessments and other special taxes, the City does not expect to amend the Assigned 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 Special Tax within the District 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 Tax that may be levied on each parcel) 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 Tax 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 2023-24, the Assigned 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 $______ escalating 2% each fiscal year beginning July 1, 2024. The Special Tax 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 Tax 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 “SPECIAL RISK FACTORS  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.
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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 Tax are to be levied, taking into account any parcel splits during the preceding and then current year. The District will levy the Special Tax 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 Tax on the next real property tax roll.

The Special Tax 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 2023-24, the Assigned 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 $______ escalating 2% each fiscal year beginning July 1, 2024, there is no assurance that the proceeds of the Special Tax 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 Tax 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 Special Tax to be collected among the Taxable Property in the District as more particularly described below.

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, 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, 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, 2020 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. “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 and Safety Department of the City, or other applicable City department, as determined by the CFD Administrator. 326

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“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. “Special Tax Requirement” 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 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 Special Tax delinquencies based on the delinquency rate for the 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 Special Tax levy beyond the first step described under the subheading “Method of Apportionment of Special Tax” below. “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 Special Tax will be levied on up to 9.4 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 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 9.4 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 Special Tax as described above will be subject to the levy of the Special Tax and will be taxed Proportionately as part of the fourth step described under the heading “Method of Apportionment of Special Tax” below at up to 100% of the applicable Maximum Special Tax for Taxable Public Property and Property Owner Association Property.

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 Special Tax, then the 327

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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 Special Tax provided for in the Rate and Method are as follows:

Special Tax.

Developed Property. The Maximum 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 Special Tax or (ii) the amount derived by application of the Backup Special Tax.

Assigned 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 Special Tax applicable to an Assessor’s Parcel classified as Residential Property within the District upon adoption of the Rate and Method ranged from $1,203 per unit for units with a Residential Floor Area less than 1,250 square feet, to $2,273 per unit for units with a Residential Floor Area greater than or equal to 2,000 square feet. The Assigned Special Tax applicable to an Assessor’s Parcel classified as Non-Residential Property is $67,080 per acre. Based on the Updated Price Point Study provided by the Price Point Consultant, the City does not expect the Assigned 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 Special Tax. The Backup Special Tax for an Assessor’s Parcel of Developed Property upon adoption of the Rate and Method equaled the lesser of (a) $67,080 per Acre, or (b) in connection with any reduction in the Assigned 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 Special Tax will be required under the Rate and Method; accordingly, no reduction of the Backup Special Tax will be required.

The Assigned Special Tax and Backup Special Tax are not subject to escalation.

Multiple Land Use Classes. In some instances, an Assessor’s Parcel of Developed Property may contain both Developed Property 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 Special Tax that can be levied on such Assessor’s Parcel will be the 328

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sum of the Maximum 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 Special Tax for each Assessor’s Parcel of Undeveloped Property, Taxable Public Property and Taxable Property Owner Association Property is $67,080 per Acre. The Maximum 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 2020-21, and for each following Fiscal Year, the CFD Administrator will determine the Special Tax Requirement and, subject to the Maximum Special Tax rates described above, will provide for the levy the Special Tax as follows:

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

Notwithstanding the above, the CFD Administrator will, in any Fiscal Year, calculate a levy Proportionately less than 100% of the Assigned Special Tax in step one above, when (i) the CFD Administrator is no longer required to provide for the levy of the Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement; 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 Special Tax. The District has 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 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 Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Special Tax.

Prepayment of the Special Tax. The 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 329

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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 the Special Tax. Pursuant to the Rate and Method, the Special Tax levy is authorized to be levied for a period not to exceed forty-five years commencing with Fiscal Year 2020-21.

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 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 Special Tax is levied. As of March 1, 2023, building permits had been issued for 189 anticipated residential parcels within the District; accordingly, assuming no additional building permits are obtained prior to May 1, 2023, 189 taxable parcels within the District will be classified as Developed Property for the Fiscal Year 2023-24 Special Tax levy. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Collection and Application of the Special Tax
The Special Tax is 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 Tax, may collect the Special Tax 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 Tax are not altered in a manner that would impair the District’s ability to collect a sufficient amount of the Special Tax 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 Tax constitutes a lien on Taxable Property within the District, it does 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 330

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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 Tax 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 Special Tax prepayments 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 the Special Tax levied thereon 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 the Special Tax 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 amount of the Special Tax 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 parcel is delinquent in excess of $5,000 in the payment of the Special Tax, then the District will diligently institute, prosecute and pursue foreclosure proceedings against such parcel.

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 Tax may be limited. See “SPECIAL RISK FACTORS — Bankruptcy and Legal Delays” and “SPECIAL RISK FACTORS — FDIC/Federal Government Interests in Properties.” Moreover, even if a judgment of foreclosure and 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.
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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 Special Tax prepayments) 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 Special Tax prepayments, 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 Special Tax prepayment to the Trustee and, in connection therewith, deliver to the Trustee a Written Certificate identifying such amounts as Special Tax prepayment, identifying the portion of such Special Tax prepayments so transferred that is to be applied to the Redemption Price of the Bonds and any Additional Bonds and identifying the portion of such Special Tax prepayment 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 Special Tax prepayment 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 Special Tax prepayment 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 Indenture. See “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 calculation, the least of (i) “10% of the proceeds of the issue,” within the meaning of Section 148 of the Code (excluding Bonds and any Additional Bonds refunded with the proceeds of subsequently issued Additional Bonds secured by the Special Tax on a parity with such Bonds and Additional 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 and any Additional 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 332

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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 and any Additional 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 and any Additional 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 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 and any Additional 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 333

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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 18.45 gross acres and is located in the northern portion of the City of Fontana (the “City”). The District is located at the northwest corner of Beech Avenue and South Highland Avenue, south of Interstate 210 and east of Interstate 15. The District is being developed into a community known as “The Retreat” by Lennar Homes, and is expected to consist of a total of 194 single family residential units in two product lines known as “Chateau at the Retreat” and “Villas at the Retreat.” Chateau is proposed for 94 single family detached residential units and Villas is proposed for 100 attached condominium units. The District is located in Tract Map No. 20228, recorded on March 30, 2021.

As of February 16, 2023, the date of value of the Appraisal, within the District, 113 single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned 8 completed model units (none of which were in escrow), 9 homes over 95% complete (7 of which were in escrow), and 19 residential units under construction and less than 95% complete (17 of which were in escrow) and Hearthstone Land Bank owned 34 residential units under construction and less than 95% complete (5 of which were in escrow) and 11 lots in a finished lot condition (none of which were in escrow). As of March 31, 2023, within the District, __ single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned __ completed model units, __ completed residential production units (__ of which were in escrow), __ residential units under construction (__ of which were in escrow) and __lots in a finished lot condition (__of which were in escrow), and Hearthstone Land Bank owned __ residential units under construction (__ of which were in escrow) and __lots in a finished lot condition (none 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. Within the District, 189 building permits had been obtained as of March 1, 2023. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” The District is zoned R-3 (or Multiple Family 12.1-42 du/acre). There is no minimum lot size.

Water service to the property within the District will be supplied by the Fontana Water Company and sewer service to the property within the District will be supplied by the Inland Empire Utilities Agency.

Electricity will be supplied by Southern California Edison Company, gas by the Southern California Gas Company and schools by the Etiwanda School District and the Chaffey Joint Union High 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 3.0 miles from the Red Hill Etiwanda Avenue Fault Zone, approximately 3.7 miles from the Sierra Madre Fault Zone and approximately 7.6 miles from the San Jacinto Fault Zone. See “SPECIAL RISK FACTORS — Geologic, Topographic and Climatic Conditions.” 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 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 — Geologic, Topographic and Climatic Conditions.”
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 334

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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. 335

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Assigned Special Tax and Development Summary
Prior to the sale of the Bonds, there were partial prepayments by Lennar Homes for 38 parcels in the Villas neighborhood within the development in order to lower the Assigned Special Tax rate consistent with the property owner disclosures included in their closing documents at conveyance. Lennar Homes has advised that it has no other plans to prepay additional Special Tax. However, no assurance can be given that additional prepayments will not occur in the future, which would result in a redemption of the Bonds prior to maturity. See “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments.”
The following table sets forth the Assigned Special Tax that is projected to be levied on the property within the District at buildout of the development.

TABLE 1

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

SPECIAL TAX AND DEVELOPMENT SUMMARY
Rate and Method Land Use Classes
Number of
Permitted
Units/Acres as
of March 1,
2023(1)
Remaining
Number of
Units/Acres(2)
Assigned
Special Tax per
Unit/Acre
Projected
Assigned
Special Taxes
at Build-Out
Before
Prepayment
Partially
Prepaid Units(3)
Projected
Assigned
Special Taxes
at Buildout
After
Prepayment
Developed Property
Detached Residential Property (2,000 sq. ft. or greater) 28 0 $ 2,273 $ 63,644 0 $ 63,644 Detached Residential Property (1,850 to less than 2,000 sq. ft.) 38 0 2,230 84,740 0 84,740 Detached Residential Property (1,700 to less than 1,850 sq. ft.) 28 0 2,187 61,236 0 61,236 Detached Residential Property (less than 1,700 sq. ft.) 0 0 2,151 0 0 0 Attached Residential Property (1,850 sq. ft. or greater) 38 2 2,204 88,160 9 85,856 Attached Residential Property (1,700 to less than 1,850 sq. ft.) 19 1 1,948 38,960 9 37,853 Attached Residential Property (1,550 to less than 1,700 sq. ft.) 0 0 1,825 0 0 0 Attached Residential Property (1,400 to less than 1,550 sq. ft.) 0 0 1,552 0 0 0 Attached Residential Property (1,250 to less than 1,400 sq. ft.) 38 2 1,349 53,960 18 51,332 Attached Residential Property (less than 1,250 sq. ft.) 0 0 1,203 0 0 0 Non-Residential Property 0.00 0.00 67,080 0 N/A 0 TOTAL 189 5 $ 390,700 36 $ 384,661

(1) Represents the classification of 189 parcels of Taxable Property as Developed Property for Fiscal Year 2023-24, comprised of approximately 5.3 acres, based upon the building permits that have been obtained for such properties as of March 1, 2023.
(2) Represents the projected Developed Property classification of 5 parcels of Taxable Property, comprised of approximately 0.1 acres that will be classified as Undeveloped Property for Fiscal Year 2023-24, assuming such properties are constructed at the home sizes identified in the development plan submitted by the Developer. (3) Represents the Assigned Special Taxes assuming full development after the partial prepayment of 36 parcels by the Developer processed prior to the issuance of Bonds.

Source: DTA, Inc.
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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.

TABLE 2

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

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
Etiwanda Elementary School District G.O. Bonds 0.11468% $104,723,080 $ 120,100 Chaffey Joint Union School District G.O. Bonds 0.02389 501,825,610 119,890 Chaffey Community College District G.O. Bonds 0.01248 302,930,000 37,810 Metropolitan Water District Mid-Valley G.O. Bonds 0.00035 20,175,000 80 Estimated Share of Overlapping Debt Allocable to District $ 277,880 Plus: The Bonds 4,640,000*
Estimated Share of Direct and Overlapping Debt Allocable to District $ 4,917,880*

* Preliminary, subject to change.
(1) Based on the District’s estimated share of the Fiscal Year 2022-23 levy for each applicable overlapping district. (2) Based on overlapping tax and assessment debt as of January 1, 2023. 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 3A, the projected average total effective tax rate for Fiscal Year 2023-24 for completed single family residential units conveyed to individual homeowners as of February 16, 2023 in the Villas at the Retreat ranges from approximately 1.771% to approximately 1.891% of the concluded value as identified in the Appraisal. As shown in Table 3B, the projected average total effective tax rate for Fiscal Year 2023-24 for completed single family residential units conveyed to individual homeowners as of February 16, 2023 in the Chateau at the Retreat ranges from approximately 1.852% to approximately 1.872% 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 3A

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

PROJECTED TOTAL EFFECTIVE TAX RATES FOR

INDIVIDUALLY OWNED RESIDENTIAL PROPERTY

VILLAS AT THE RETREAT
Plan Types within Villas at the Retreat
DESCRIPTION Plan 1 Plan 2 Plan 3 Plan 4 Plan 5
Number of Units Sold(1) 11 11 10 10 10
Unit Size(1) 1,252 1,322 1,788 1,900 2,024
Base Current Market Value (1) $ 361,150 $ 385,330 $ 438,620 $ 433,895 $ 445,325 Less: Homeowner Exemption (7,000) (7,000) (7,000) (7,000) (7,000) Equals: Assumed Taxable Value(2) $ 354,150 $ 378,330 $ 431,620 $ 426,895 $ 438,325

AD VALOREM PROPERTY TAXES (2)(3)
Property
Tax Rate
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Base Property Tax 1.0000% $ 3,542 $ 3,783 $ 4,316 $ 4,269 $ 4,383 Etiwanda Elementary School District G.O. Bonds 0.0323 114 122 139 138 142 Chaffey Joint Union High School G.O. Bonds 0.0294 104 111 127 126 129 Chaffey Community College District G.O. Bonds 0.0137 49 52 59 58 60 Metropolitan Water District G.O. Bonds 0.0035 12 13 15 15 15 Subtotal Ad Valorem Property Tax Rate/Taxes 1.0789% $ 3,821 $ 4,081 $ 4,656 $ 4,606 $ 4,729

PARCEL CHARGES, ASSESSMENTS AND SPECIAL TAXES(4)
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Projected
Amount
Metropolitan Water District Water Standby Charge $ 8 $ 8 $ 8 $ 8 $ 8 Fontana Vector Control Charge 6 6 6 6 6
Etiwanda Elementary School District CFD No. 10 1,382 1,382 1,382 1,382 1,382 Fontana CFD No. 99 (The Retreat) Special Tax(5) 1,349 1,349 1,948 2,204 2,204 Subtotal Parcel Charges, Assessments And Special Taxes $ 2,745 $ 2,745 $ 3,344 $ 3,600 $ 3,600

PROJECTED TOTAL PROPERTY TAXES $ 6,566 $ 6,826 $ 8,000 $ 8,206 $ 8,329

PROJECTED EFFECTIVE TAX RATE (% OF BASE PRICE VALUE) 1.818% 1.771% 1.824% 1.891% 1.870%

(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 2022-23 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 2022-23 charges identified on the San Bernardino County issued property tax bills. Charges subject to change in future years. (5) Based on the levy of the Assigned Special Tax.

Source: DTA, Inc., Kitty Siino & Associates, Inc., City of Fontana, County of San Bernardino. 338

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TABLE 3B

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

PROJECTED TOTAL EFFECTIVE TAX RATES FOR

INDIVIDUALLY OWNED RESIDENTIAL PROPERTY

CHATEAU AT THE RETREAT
Plan Types within Chateau at the Retreat
DESCRIPTION Plan 1 Plan 2 Plan 3 Plan 4
Number of Units Sold(1) 17 13 13 18
Unit Size(1) 1,724 1,961 1,987 2,046
Base Current Market Value (1) $ 465,480 $ 480,445 $ 492,776 $ 501,270 Less: Homeowner Exemption (7,000) (7,000) (7,000) (7,000) Equals: Assumed Taxable Value(2) $ 458,480 $ 473,445 $ 485,776 $ 494,270

AD VALOREM PROPERTY TAXES (2)(3)
Property
Tax Rate Projected Amount Projected Amount Projected Amount Projected Amount Base Property Tax 1.0000% $ 4,585 $ 4,734 $ 4,858 $ 4,943 Etiwanda Elementary School District G.O. Bonds 0.0323 148 153 157 160 Chaffey Joint Union High School G.O. Bonds 0.0294 135 139 143 145 Chaffey Community College District G.O. Bonds 0.0137 63 65 67 68 Metropolitan Water District G.O. Bonds 0.0035 16 17 17 17 Subtotal Ad Valorem Property Tax Rate/Taxes 1.0789% $ 4,947 $ 5,108 $ 5,242 $ 5,333

PARCEL CHARGES, ASSESSMENTS AND SPECIAL TAXES(4) Projected Amount Projected Amount Projected Amount Projected Amount Metropolitan Water District Water Standby Charge $ 8 $ 8 $ 8 $ 8 Fontana Vector Control Charge 6 6 6 6
Etiwanda Elementary School District CFD No. 10 1,555 1,641 1,641 1,728 Fontana CFD No. 99 (The Retreat) Special Tax(5) 2,187 2,230 2,230 2,273 Subtotal Parcel Charges, Assessments And Special Taxes $ 3,756 $ 3,885 $ 3,885 $ 4,015

PROJECTED TOTAL PROPERTY TAXES $ 8,703 $ 8,993 $ 9,127 $ 9,348

PROJECTED EFFECTIVE TAX RATE (% OF BASE PRICE VALUE) 1.870% 1.872% 1.852% 1.865%

Source: DTA, Inc., Kitty Siino & Associates, Inc., City of Fontana, County of San Bernardino. 339

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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. As of February 16, 2023, the date of value of the Appraisal, 113 single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned 8 completed model units (none of which were in escrow), 9 homes over 95% complete (7 of which were in escrow), and 19 residential units under construction and less than 95% complete (17 of which were in escrow) and Hearthstone Land Bank owned 34 residential units under construction and less than 95% complete (5 of which were in escrow) and 11 lots in a finished lot condition (none of which were in escrow). Subject to the contingencies, assumptions and limiting conditions set forth in the Appraisal, the Appraiser concluded that, as of February 16, 2023, the minimum market value of the Taxable Property within the District was not less than $68,077,029, consisting of $50,977,573 for the 113 completed units conveyed to individual homeowners, $9,096,678 for the 8 completed model units, 9 residential units over 95% complete and 19 lots in various stages of construction owned by Lennar Homes and $8,002,778 for the 34 residential units in various stages of construction and 11 finished lots owned by Hearthstone Land Bank. 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. 340

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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.

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 the Special Tax, 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 $68,077,029. The ratio of that value to the $4,640,000* total principal amount of the Bonds is approximately 14.67*-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 $4,640,000* 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 $4,917,880* is approximately 13.84*-to-1. Table 4A sets forth the minimum market value-to-lien ratios of all the taxable property within the District by development status as of February 16, 2023 based on the projected Fiscal Year 2023-24 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 2023-24 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 2023-24 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 2023-24 Special Tax levy if a building permit for such property is obtained by May 1, 2023. [Based on the development status within the District as of March 1, 2023, building permits had been issued for 189 residential parcels of Taxable Property within the District and will thus be classified as Developed Property for purposes of the Fiscal Year 2023-24 Special Tax levy.]

* Preliminary, subject to change.
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TABLE 4A

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

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

ALLOCATED BY PROPERTY OWNER/DEVELOPMENT STATUS
(Projected Fiscal Year 2023-24 Special Tax Levy)
Property Owner/
Development Status(1)
Number of
Taxable
Parcels
Projected
Fiscal Year
2023-24 Special
Tax(2)
Percent of
Projected Fiscal
Year 2023-24
Facilities
Special Tax
Pro Rata
Share of
Bonds(3)*
Minimum
Market Value(1)
Estimated
Minimum Market
Value-to-Lien
Ratios(4)*
Lennar Homes
Model units 8 $ 14,656 4.19% $ 194,491 $ 2,857,453 14.69 95%+ Completed Homes 9 16,244 4.65 215,578 2,860,274 13.27 Homes Under Construction 19 35,538 10.17 471,626 3,378,951 7.16 Subtotal 36 $ 66,438 19.01% $ 881,695 $ 9,096,678 10.32

Hearthstone Land Bank(5)
Homes Under Construction 34 $ 62,774 17.95% $ 833,060 $ 6,046,543 7.26 Finished Lots/Pads (Developed Property) 6 12,455 3.56 165,288 1,067,037 6.46 Finished Lots/Pads (Undeveloped Property)(6) 5 0 0.00 0 889,198 N/A Subtotal 45 $ 75,229 21.51% $ 998,348 $ 8,002,778 8.02

Individual Homeowners 113 $ 207,971 59.48% $ 2,759,957 $ 50,977,573 18.47 TOTAL 194 $ 349,638 100.00% $ 4,640,000 $ 68,077,029 14.67

* Preliminary, subject to change.
(1) Based on the Appraisal with a date of value as of February 16, 2023. (2) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and building permits obtained as of March 1, 2023. (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 2023-24 Special Tax levy.
(4) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column. (5) The Option Agreement obligates Lennar Homes to pay all real property taxes, including, without limitation, the Special Tax, due and payable for all of the property in the District subject to the Option Agreement, irrespective of whether Lennar Homes owned such property, during the term of the Option Agreement. In the event the Option Agreement terminates for any reason prior to Lennar Homes acquiring all of the property in the District subject to the Option Agreement, Hearthstone Land Bank would be solely responsible for the payment of such taxes for any such lots then owned by Hearthstone Land Bank. As of March 31, 2023, of the 194 single family residential units planned for the District, Lennar Homes has acquired property representing ___ residential units. See “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS.”
(6) 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.

Five parcels identified in the Appraisal as finished lots have not obtained building permits prior to March 1, 2023. If building permits are not obtained for such lots prior to May 1, 2023, such lots will be classified as Undeveloped Property for Fiscal Year 2023-24 and will not expected to be taxed.

Source: DTA, Inc.

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Table 4A is based on the ownership and development status within the District as of February 16, 2023, the date of value of the Appraisal. Lennar Homes reports that since such date, additional development and certain sales contracts for residential units have closed escrow to individual homeowners.

See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Development Plan.” The following table shows the ownership status as of March 31, 2023.

TABLE 4B

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)
FY 2023-24 PROJECTED FACILITIES SPECIAL TAX LEVY, AND PROPERTY OWNERSHIP AS OF MARCH 31, 2023
Property Owner(1)
Number of
Taxable Parcels
Projected
Fiscal Year 2023-24
Special Tax*
Percent of Projected Fiscal
Year 2023-24 Facilities
Special Tax*
Lennar Homes
Hearthstone Land Bank(1)
Individual Homeowners
194 $ 100.0%

* Preliminary, subject to change.
(1) The Option Agreement obligates Lennar Homes to pay all real property taxes, including, without limitation, the Special Tax, due and payable for all of the property in the District subject to the Option Agreement, irrespective of whether Lennar Homes owned such property, during the term of the Option Agreement. In the event the Option Agreement terminates for any reason prior to Lennar Homes acquiring all of the property in the District subject to the Option Agreement, Hearthstone Land Bank would be solely responsible for the payment of such taxes for any such lots then owned by Hearthstone Land Bank. As of March 31, 2023, of the 194 single family residential units planned for the District, Lennar Homes has acquired property representing ___ residential units. See “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS.” Source: DTA, Inc.

See “PROPERTY OWNERSHIP AND DEVELOPMENT STATUS” for a description of the ownership status as of February 16, 2023 and certain development and ownership status as of March 31, 2023. See also “SPECIAL RISK FACTORS – Concentration of Ownership.” 343

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TABLE 5

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

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

ALLOCATED BY LAND USE CLASSES
(Projected Fiscal Year 2023-24 Special Tax Levy)
Rate and Method Land Use Classes
Number of
Units/
Acres(1)
Fiscal Year
2023-24
Assigned /
Maximum
Special Tax(2)
Projected
Fiscal Year
2023-24
Special Tax(3)
Pro Rata
Share of
Bonds(4)*
Minimum
Market
Value(5)
Estimated
Minimum
Market Value-
to-Lien
Ratios(6)*
Developed Property
Detached Residential Property (2,000 sq. ft. or greater) 28 $ 63,644 $ 59,244 $ 786,216 $ 11,025,787 14.02 Detached Residential Property (1,850 to less than 2,000 sq. ft.) 38 84,740 78,881 1,046,822 15,004,165 14.33 Detached Residential Property (1,700 to less than 1,850 sq. ft.) 28 61,236 57,002 756,469 10,235,511 13.53 Detached Residential Property (less than 1,700 sq. ft.) 0 0 0 0 0 N/A Attached Residential Property (1,850 sq. ft. or greater) 38 81,448 75,817 1,006,154 12,946,539 12.87 Attached Residential Property (1,700 to less than 1,850 sq. ft.) 19 35,905 33,423 443,547 6,461,162 14.57 Attached Residential Property (1,550 to less than 1,700 sq. ft.) 0 0 0 0 0 N/A Attached Residential Property (1,400 to less than 1,550 sq. ft.) 0 0 0 0 0 N/A Attached Residential Property (1,250 to less than 1,400 sq. ft.) 38 48,634 45,271 600,792 11,514,667 19.17 Attached Residential Property (less than 1,250 sq. ft.) 0 0 0 0 0 N/A Non-Residential Property 0.0 0 0 0 0 N/A
Subtotal 189 $ 375,607 $ 349,638 $ 4,640,000 $ 67,187,831 14.48

Undeveloped Property 0.1 $ 11,085 $ 0 $ 0 $ 889,198 N/A TOTAL N/A $ 386,692 $ 349,638 $ 4,640,000 $ 68,077,029 14.67

* Preliminary, subject to change.
(1) Based on the development status as of March 1, 2023. 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 Special Tax revenues generated by residential dwelling units for which building permits have been obtained as of March 1, 2023, and the Maximum Special Tax revenues generated by 5 parcels of Taxable Property, comprised of approximately 0.1 acres that will be classified as Undeveloped Property for Fiscal Year 2023- 24, for which building permits have not been obtained as of March 1, 2023. (3) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and the development status as of March 1, 2023. (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 2023-24 Special Tax. (5) Based on the Appraisal with a date of value of February 16, 2023. (6) Calculated by dividing the Minimum Market Value column by the Pro Rata Share of Bonds column.

Source: DTA, Inc.
344

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TABLE 6

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

ESTIMATED MINIMUM MARKET VALUE-TO-LIEN STRATIFICATION

DEVELOPED PROPERTY ONLY
(Projected Fiscal Year 2023-24 Special Tax Levy)
Estimated
Minimum Market
Value-to-Lien Ratio
Category
Number
of
Parcels
Subject
to
Special
Tax(1)
Projected
Fiscal Year
2023-24
Special Tax(2)
Percent of
Projected
Fiscal Year
2023-24
Special Tax
Pro Rata
Share of
Bonds(3)*
Minimum
Market
Value(4)
Estimated
Minimum
Market
Value-to-Lien
Ratios(5)*
17:00:1 and above 106 $ 190,290 54.43% $ 2,525,317 $ 47,259,741 18.71

14.00:1 to 16.99:1 14 28,573 8.17 379,186 6,041,372 15.93

11.00:1 to 13.99:1 10 20,008 5.72 265,523 3,394,187 12.78

8.00:1 to 10.99:1 12 15,069 4.31 199,976 2,134,074 10.67

5.00:1 to 7.99:1 47 95,698 27.37 1,269,998 8,358,457 6.58 Less than 5:00:1(6) 0 0 0.00 0 0 0.00 TOTAL 189 $ 349,638 100.00% $ 4,640,000 $ 67,187,831 14.48

* Preliminary, subject to change.
(1) The Special Tax levied against 189 parcels of Taxable Property as Developed Property for Fiscal Year 2023-24 is sufficient to fund Administrative Expenses and debt service on the Bonds. Therefore, no Special Tax is anticipated to be levied against the remaining 5 parcels of Taxable Property should such parcels remain classified as Undeveloped Property for Fiscal Year 2023-24.
(2) Based on the levy to fund Administrative Expenses and debt service on the Bonds, and the development status as March 1, 2023.
(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 2023-24 Special Tax. (4) Based on the Appraisal. Developed Property only, as the five parcels currently classified as Undeveloped Property for the Fiscal Year 2023-24 Special Tax levy are not expected to be taxed. (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 2023-24 will be the first year of the Special Tax levy. As a result, no delinquency history with respect to the Special Tax exists.

PROPERTY OWNERSHIP AND THE DEVELOPMENT
Representatives of Lennar Homes have provided the information in this section regarding Lennar Homes and its development in the District. Representatives of Hearthstone Land Bank have also provided information in this section regarding Hearthstone Land Bank and the Option Agreement. 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 Bonds. The inclusion in this Official Statement of information related to Lennar Homes and Hearthstone Land Bank should not be construed to suggest that the Bonds, or the Special Tax that will be used to pay the Bonds, are recourse 345

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obligations of Lennar Homes, Hearthstone Land Bank, 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 Tax are not personal obligations of Lennar Homes, Hearthstone Land Bank, or any other current or subsequent property owners and, in the event that Lennar Homes, Hearthstone Land Bank, or any other current or subsequent property owner defaults in the payment of the Special Tax, the City may proceed with judicial foreclosure but has no direct recourse to the assets of Lennar Homes, Hearthstone Land Bank, 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 Lennar Homes, Hearthstone Land Bank, 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 located in Tract Map No. 20228, recorded on March 30, 2021. Lennar Homes of California, LLC, a California limited liability company (previously defined herein as “Lennar Homes” or the “Developer”), acquired the land within the District from SC Landings for $16,500,000 on May 4, 2021. As described herein, Lennar Homes entered into the Option Agreement (as defined herein) with R-Hearthstone Lot Option Pool 02 LP, a Delaware limited partnership (the “Hearthstone Land Bank”), whereby Lennar Homes conveyed the property in the District (the “District Property”) to Hearthstone Land Bank. Pursuant to the Option Agreement, Lennar Homes was provided an exclusive option, but is not obligated, to acquire the District Property over several takedowns pursuant to an agreed takedown schedule. In the event that Lennar Homes does not exercise its option to purchase the property, Hearthstone Land Bank, being an investor only and not a homebuilder, would likely attempt to sell such property to another merchant builder. As of February 16, 2023, the date of value of the Appraisal, Lennar Homes had taken down property representing 149 of the planned 194 single family residential units in the District. Since that date, and as of March 31, 2023, Lennar Homes has taken down property representing an additional __ residential units for a total take down property representing __ of the planned 194 residential units in the District. Lennar Homes is scheduled to take down all of the remaining property to be developed as ___ residential units in the District by August 2023.

As of March 31, 2023, within the District,__ single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned __ completed model units, __ completed residential production units(__ of which were in escrow), __ residential units under construction (__ of which were in escrow), and __ finished lots (__ of which were in escrow), and Hearthstone Land Bank owned ___ units under construction and finished property to be developed as __ units (none of which were in escrow). Sales contracts are subject to cancellation and, therefore, homes currently in escrow may not result in closed escrows with the prospective homebuyers. As of April 1, 2023, building permits had been obtained for ___ of the 194 single family residential units planned to be constructed within the District. Building permits for the remaining __ 346

35 4884-6669-4465v3/022777-0039
parcels are anticipated to be received on _____, 202_. While the information set forth in this Official Statement reflects Lennar Homes’ 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.

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

Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly Lennar Corporation’s annual report on Form 10-K and its most recent quarterly report on Form 10-Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such filings can also be accessed over the internet at the SEC’s website at www.sec.gov. This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on the internet site.

Copies of Lennar Corporation’s annual report and related financial statements are available from Lennar Corporation’s website at www.Lennar Homes.com. This internet address is included for reference only and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement.

Hearthstone
R-Hearthstone Lot Option Pool 02 LP, a Delaware limited partnership (previously defined herein as “Hearthstone Land Bank”), is ultimately controlled by Hearthstone, Inc., a Delaware corporation (“Hearthstone”). Hearthstone is devoted exclusively to managing institutional capital for residential housing developments. Hearthstone’s investments include single-family subdivisions, condominium and townhouse developments, master planned communities, land development projects and mixed-use communities.

Hearthstone was the first, and today is the largest, institutional investment manager in the country that is dedicated to the residential building industry. At the time Hearthstone was organized in 1992, homebuilders across the United States were suffering from a shortage of capital resulting from changes in federal laws affecting the banking industry and from a loss of investor confidence in real estate. Hearthstone was organized in response to this capital shortage and in recognition of the long-term investment opportunity that single-family homebuilding presents for institutional investors. Hearthstone manages funds for numerous public and private pension plans, university endowments, Fortune 100 companies, and large private trusts. Hearthstone invests these funds on behalf of its investors in homebuilding and residential lot development projects with public and private homebuilders in select target markets throughout the United States. Hearthstone has funded and 347

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managed over $16.5 billion in investments to construct over 140,000 homes and lots in 22 states since its inception. Hearthstone’s principal office is located in Calabasas, California.

Development Plan
General. Lennar Homes plans to construct a total of 194 single family residential units in the District in a community known as The Retreat. The Retreat consists of two product lines known as “Villas at the Retreat” which is planned to be comprised of 100 attached condominium units, and “Chateau at the Retreat” which is planned to be comprised of 94 single family detached units. The following table describes the development and ownership status as of February 16, 2023 by floor plan within the development.

TABLE 7

THE RETREAT

DEVELOPMENT AND OWNERSHIP STATUS
(AS OF FEBRUARY 16, 2023)
Floor Plan
Total
Units
Planned
Estimated
Home
Square
Footage
Closings
as of
February 16,
2023
Complete
d Homes/
Models
(Lennar)
Homes
Under
Construction
(Lennar)
Homes Under
Construction
(Hearthstone)
Finished Lots
(Hearthstone)
Homes
in
Escrow
Base Home
Prices(1)
Villas
Plan 1C 20 1,165 11 2 2 4 1 3 $ 435,450
Plan 2C 20 1,243 11 2 2 4 1 4 443,300
Plan 3 20 1,687 10 3 2 4 1 3 504,300
Plan 4 20 1,771 10 3 2 4 1 4 515,150
Plan 5 20 1,895 10 3 2 4 1 3 527,750
Total Villas 100 52 13 10 20 5 17

Chateau
Plan 1 28 1,724 17 2 3 4 2 3 $ 540,490
Plan 2 18 1,961 13 0 1 3 1 1 562,365
Plan 3 20 1,987 13 1 2 3 1 3 561,645
Plan 4 28 2,046 18 1 3 4 2 5 562,680
Total Chateau 94 61 4 9 14 6 12

Total 194 113 17 19 34 11 29

(1) Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions, mortgage rate buydowns or price reductions currently being offered.

Source: The Developer.

Villas at the Retreat. Villas at the Retreat includes 5 floor plans ranging in size from approximately 1,165 square feet to approximately 1,895 square feet. As of February 16, 2023, base sales prices within Villas at the Retreat ranged from approximately $435,450 to approximately $527,750. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions, mortgage rate buydowns or price reductions currently being offered.

As of February 16, 2023, within Villas at the Retreat, 52 completed attached condominium units had been conveyed to individual homeowners, Lennar Homes owned 5 completed model units (none of which were in escrow), 8 completed residential units (6 of which were in escrow), and 10 residential units under construction (9 of which were in escrow) and Hearthstone Land Bank owned 20 residential units under construction (2 of which were in escrow) and finished property to be developed as 5 units (none of which were in escrow). Between February 17, 2023 and March 31, 2023, an additional __ attached condominium units had been completed and conveyed to individual homeowners, for a total of __ attached condominium units owned by individual homeowners as of March 31, 2023. Sales of residential units within Villas at the Retreat began in November 2021 and Lennar Homes expects that construction will be complete within Villas at the Retreat by November 2023.
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Chateau at the Retreat. Chateau at the Retreat includes 4 floor plans ranging in size from approximately 1,724 square feet to approximately 2,046 square feet. As of February 16, 2023, base sales prices within The Retreat ranged from approximately $540,490 to approximately $562,680. Base sales prices are subject to change and exclude any lot premiums, options, upgrades, incentives, and any selling concessions, mortgage rate buydowns or price reductions currently being offered.

As of February 16, 2023, within Chateau at the Retreat, 61 completed single family detached homes had been conveyed to individual homeowners, and Lennar Homes owned 3 completed model units (none of which were in escrow), 1 completed single family detached unit (which unit was in escrow) and 9 single family detached units under construction (8 of which were in escrow) and Hearthstone Land Bank owned 14 single family detached units under construction (3 of which were in escrow) and 6 finished lots without any vertical home construction thereon (none of which were in escrow). Between February 17, 2023 and March 31, 2023, an additional __ single family detached units had been completed and conveyed to individual homeowners, for a total of __ single family detached units owned by individual homeowners as of March 31, 2023. Sales of residential units within Chateau at the Retreat began in November 2021 and Lennar Homes expects that construction will be complete within Chateau at the Retreat by November 2023.

Option Agreement. On May 25, 2021, Hearthstone Land Bank, and L-H Housing, LLC, a Delaware limited liability company and an affiliate of Lennar Homes (“L-H Housing”), entered into an Option and Development Agreement (the “Master Option Agreement”) regarding the terms and conditions of a land banking relationship. On May 25, 2021, Lennar Homes, L-H Housing, and Hearthstone Land Bank entered into Addendum 01 to Option and Development Agreement (the “Addendum” and together with the Master Option Agreement, collectively, the “Option Agreement”) whereby the parties agreed that the property within the District (previously defined as the “District Property”) would be sold to Hearthstone Land Bank and Lennar Homes would hold an option (but not an obligation) to acquire portions of the District Property in numerous takedowns over time. Additional addendums were executed by Lennar Homes and Hearthstone Land Bank for property located outside of the District (the “Non-District Property”).

In addition, as part of the Option Agreement, Hearthstone Land Bank and Lennar Homes agreed to use Lennar Communities, Inc. (previously defined herein as the “Contractor”), a general contractor and affiliate of Lennar Homes, to construct improvements required by the conditions of approval to the District Property in the District so as to allow the vertical construction on the District Property, including on District Property prior to acquisition by Lennar Homes under the Option Agreement.

Under the terms of the Option Agreement, Hearthstone Land Bank agreed to provide Lennar Homes the exclusive right and option to purchase the District Property (and the Non-District Property) in consideration for (a) an initial deposit, which payment has been made to Hearthstone Land Bank; (b) the covenants of Lennar Homes to timely pay the option payments under the Option Agreement on a monthly basis in arrears; and (c) upon exercise of the option, the payment of the purchase price for each portion of the District Property acquired.

The District Property and the Non-District Property must be purchased in certain groups and in a specified order, although Lennar Homes may acquire more property than scheduled and at earlier times upon providing notice. The failure to acquire the District Property and the Non-District Property in the specified number and order may result in a default under the Option Agreement. The failure to acquire the scheduled portion of the District Property or the Non-District Property may result in a default for the Option Agreement as a whole (i.e., the failure to acquire property for one project is a default for all projects).

Lennar Homes has exercised two one month extensions of the takedowns (as described further below), effectively revising the schedule. Under the takedown schedule in the Option Agreement, as revised, the District Property must be acquired pursuant to the following schedule:
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TABLE 8

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99 (THE RETREAT)

TAKEDOWN SCHEDULE
Acquisition Date
(20th Day of the Month) Retreat Takedown Schedule(1)
Retreat Actual Takedown
as of _____, 2023
May 2021 to February 16, 2023(2) 149 149
February 2023(3) 6 6
March 2023 10 --
April 2023 18 --
June 2023 6 --
August 2023 5 --
Total 194 155

(1) The property acquired is referenced in terms of the number of units that will be constructed on the property. (2) February 16, 2023 is the date of value of the Appraisal. (3) The property that will be developed as 6 units was taken down after February 16, 2023.

Source: The Developer
Lennar Homes and Hearthstone Land Bank may, at any time, mutually agree to modify the takedown schedule.

Lennar Homes has the right under the Option Agreement to extend the closing date on the takedown schedule for any takedown group for up to four (4) one month periods. Lennar Homes may, under specified conditions, accelerate the purchase of property, or purchase all property in a bulk sale.

The option under the Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule and the expiration of any applicable cure period, or (ii) the date Lennar Homes has acquired all of the District Property and Non-District Property in accordance with the Option Agreement. The failure to timely acquire property could result in the termination of the option and Lennar Homes will no longer have a right to purchase any of the remaining property under the Option Agreement.

The Option Agreement covers the District Property and the Non-District Property, and the failure by Lennar Homes to acquire the required portion of the Non-District Property in a timely manner could result in a termination of the entirety of the Option Agreement. Likewise, the failure to pay the option payments or purchase prices or any other default regarding Non-District Property will be considered a default with respect to the District Property and could result in a termination of the entirety of the Option Agreement.

In the event of a default, the Option Agreement does provide Lennar Homes with a right to acquire all of the District Property and Non-District Property that has not yet been acquired in a bulk-sale transaction.

In the event of any termination or the failure of Lennar Homes to exercise its option, Hearthstone Land Bank, being an investor only and not a homebuilder, would likely attempt to sell such property to another merchant builder.

Under the Option Agreement, the Contractor has agreed to use commercially reasonable efforts to construct all of the on-site and off-site improvements and obtain the requisite governmental permits and approvals necessary to allow the District Property and the Non-District Property to support vertical construction.

Hearthstone Land Bank has agreed to reimburse the Contractor for some, but not necessarily all, of the improvements that the Contractor has agreed to construct. The obligation to construct these improvements is independent of the option to acquire the property, and in the event that the Option Agreement is terminated, Lennar Homes and the Contractor are required to complete the improvements. Other than its reimbursement obligations to the Contractor, Hearthstone Land Bank has no legal obligation of any kind to expend funds for the development of the property owned by it in the District. Nor does Hearthstone Land Bank have any legal 350

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obligation to Bond Owners to make any funds available for construction or development within the District, or the payment of ad valorem property taxes or the Special Tax.

Under the Option Agreement, Lennar Homes and the Contractor have been provided a license to enter upon the property owned by Hearthstone Land Bank for the purposes of constructing improvements and constructing vertical improvements. If vertical improvements are started for property, then Lennar Homes and its Contractor are obligated to complete the vertical improvements on such property even if the property is never acquired by Lennar Homes.

During the term of the Option Agreement and the Construction Agreement, Lennar Homes is obligated to pay all taxes on the District Property (and the Non-District Property). In the event the Option Agreement terminates for any reason prior to Lennar Homes acquiring all of the District Property, Hearthstone Land Bank would be solely responsible for the payment of such taxes for any such lots then owned by Hearthstone Land Bank.

As of March 31, 2023, Lennar Homes is in good-standing under the Option Agreement with respect to the purchase of the District Property and the Non-District Property.

No assurance can be given that Lennar will acquire the property within the District from Hearthstone Land Bank or that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation. See “SPECIAL RISK FACTORS — Failure to Develop Properties.” Moreover, rising interest rates may affect prospective buyers’ willingness or ability to close escrow or enter into future sales contracts. See “SPECIAL RISK FACTORS — Increasing Mortgage Interest Rates.” COVID-19 Impact. Lennar Homes has not experienced any material increases in costs, or any development or home sale delays resulting from decisions to reduce financing for the projects in the District, inability to obtain financing, work stoppages, reduced attendance of workers, lack of or delays in the delivery of building materials or the ability to obtain necessary inspections and approvals, which Lennar Homes attributes to the COVID-19 pandemic; however, Lennar Homes, like all homebuilders has experienced significant increases in material costs as well as supply chain issues. To date, Lennar Homes has continued to fund and implement its projects as described in this Official Statement and intends to do so to complete such projects.

However, the development of Lennar Homes’ projects within the District is subject to delays caused by the COVID-19 pandemic. As the impacts caused by the outbreak evolve, there could be an adverse impact on the timing and costs of Lennar Homes’ development within the District. Lennar Homes cannot predict the ultimate effects of the COVID-19 outbreak or whether any such effects would have a material adverse effect on the ability to develop its projects as planned.

See the caption “SPECIAL RISK FACTORS – Impact of Economic Conditions on the Development in the District” for certain risks associated with the outbreak of the COVID-19 Pandemic.

Increasing Mortgage Interest Rates. Most of the purchasers of Lennar Homes’ homes finance their acquisitions with mortgage financing. As such, rising interest rates, decreased availability of mortgage financing or of certain mortgage programs, higher down payment requirements or increased monthly mortgage costs could have a negative impact on the estimated absorption rates of Lennar Homes’ planned for-sale homes in the District. Further, a combination of higher mortgage rates, delays in construction stemming from delays in the supply chain, homebuyers’ inability to sell their existing homes and adverse changes in local, regional or national economic conditions, among other factors, could contribute to an increase in Lennar Homes’ rate of home order cancellations. An increase in the level of such cancellations could similarly have a negative impact on the estimated absorption rates of Lennar Homes’ planned for-sale homes in the District. 351

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Impact of Economic Conditions on the Development in the District. Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which Lennar Homes is able to complete and sell homes and demand by and the ability of individuals to purchase homes within the District. Such events and factors could include rising inflation and interest rates, persistent supply chain issues, further impacts of the COVID-19 pandemic and global market instability caused by the war in Ukraine. Any adverse impact of the foregoing and other economic factors on the projects in the District and the real estate market in general cannot be predicted.

Amid an unexpected run on deposits, the Federal Deposit Insurance Corporation (the “FDIC”) announced on March 10, 2023 that it had been appointed as receiver for Silicon Valley Bank (“SVB”), a large California bank and the 16th largest bank in the United States, and was liquidating SVB as a going concern.

Additionally, on March 12, 2023, the FDIC announced that it had been appointed as receiver for Signature Bank, another large regional bank. However, the United States Treasury Department, the Federal Reserve and the FDIC issued a joint statement that all deposits at both institutions would be honored, regardless of dollar amount.

Since such actions, there has been uncertainty and concern in the financial markets that there may be additional bank liquidity issues.

Required Infrastructure. All backbone infrastructure required to build-out all 194 single family units 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, Lennar Homes 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
To date, Lennar Homes has financed its land acquisition and various site development and home construction costs related to its property in the District through internally generated funds and homes sales revenues, as well as payments for improvements from Hearthstone Land Bank pursuant to the Option Agreement. As of March 31, 2023, Lennar Homes had expended approximately $_______ on land acquisition, land development, homebuilding, marketing and sales costs. As of such date, Lennar Homes expected to incur approximately $________ on remaining land development costs and approximately $_______ on remaining homebuilding, marketing, and sales costs for its property in the District.

Lennar Homes expects to use home sales revenues and internal funding to complete its development in the District. Lennar Homes believes that it will have sufficient funds available to complete its planned development in the District in accordance with the development schedule described in this Official Statement. 352

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Notwithstanding the belief of Lennar Homes that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to Lennar Homes will be sufficient to complete the property development and home construction as currently anticipated. While Lennar Homes has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Lennar Homes nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Lennar Homes to provide internal financing in the past, Lennar Homes has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete Lennar Homes’ planned development in the District and other financing by Lennar Homes is not put into place, there could be a shortfall in the funds required to complete the proposed development by Lennar Homes and portions of the project may not be developed.

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 Tax,” 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 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.” 353

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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. See the caption “— Increasing Mortgage Interest Rates” below.

No assurance can be given that the individual property owners within the District will pay the Special Tax in the future or that they will be able to pay the Special Tax 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 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.

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. 354

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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 of the Special Tax. 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.

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 Lennar Homes, or any other property owner to pay the Special Tax 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 February 16, 2023, 113 single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned 8 completed model units (none of which were in escrow), 9 homes over 95% complete (7 of which were in escrow), and 19 residential units under construction and less than 95% complete (17 of which were in escrow) and Hearthstone Land Bank owned 34 residential units under construction and less than 95% complete (5 of which were in escrow) and 11 lots in a finished lot condition (none of which were in escrow). As of February 16, 2023, 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 194 lots within the District. As of March 31, 2023, within the District, __ single family residential units had been completed and conveyed to individual homeowners, Lennar Homes owned __ completed model units, __ residential units 355

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over 95% complete (__ of which were in escrow), __ residential units under construction and less than 95% complete (__ of which were in escrow) and __ lots in a finished lot condition (__ of which were in escrow) and Hearthstone Land Bank owned__ residential units under construction (__ of which were in escrow) and __ lots in a finished lot condition (__ of which were in escrow). As of March 1, 2023, building permits for 189 of 194 single family residential units proposed to be constructed within the District had been issued. 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 the Special Tax. 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 the Special Tax 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 Tax 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 Tax. 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 Tax prior to delinquency.

Concentration of Property Ownership
Based on the development and ownership status as of February 16, 2023, Lennar Homes and Hearthstone Land Bank are expected to be responsible for approximately 19.01% and 21.51%, respectively, of the projected Fiscal Year 2023-24 Special Tax levied within the District. Lennar Homes reports that since such date, additional development and certain sales contracts for residential units have closed escrow to individual homeowners. Based on the development and ownership status as of March 31, 2023, Lennar Homes and Hearthstone Land Bank are expected to be responsible for approximately __% and __%, respectively, of the projected Fiscal Year 2023-24 Special Tax levied within the District.

As described under “PROPERTY OWNERSHIP AND THE DEVELOPMENT,” Lennar Homes has entered into an Option Agreement with Hearthstone Land Bank to acquire lots within the District in phased takedowns. As of March 31, 2023, Hearthstone Land Bank owned __ lots within the District. During the term of the Option Agreement, Lennar Homes is contractually obligated to pay the Special Tax levied on the property subject to such agreement. However, in the event the Option Agreement is terminated prior to Lennar Homes having acquired all of the lots thereunder, the Special Tax would continue to be levied on the property in the District owned by Hearthstone Land Bank. No assurances can be made of the willingness and the ability of Hearthstone Land Bank, or its affiliates, to pay such Special Tax.

While the District includes ___ completed residential units owned by individual homeowners as of March 31, 2023, the inability or refusal of Lennar Homes or Hearthstone Land Bank 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 356

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interest on the Bonds as the same became due. Additionally, pursuant to the Act, the Special Tax 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 Tax pursuant to the Rate and Method may be higher, the Maximum Special Tax 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 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, 357

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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.

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.
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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 Tax. 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.

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 Tax 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 Tax that are pledged as security for payment of the Bonds. 359

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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 July 14, 2020. 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 Tax 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 “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Tax.” 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 360

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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.

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 361

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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 Tax may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.

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

The District’s remedies may also be limited in the case of delinquent Special Tax 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 in a County Designated Fault Zone or an Earthquake Fault Zone Boundary.

However, the District is located approximately 1.7 miles from the Sierra Madre Fault Zone and approximately

6.2 miles from the San Jacinto Fault 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 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 2020. The property within the District is not 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 the Special Tax.
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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 Tax 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 Tax.

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. Lennar Homes 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.

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 or any Additional 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 the Special Tax 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 364

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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 Tax 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 Tax 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 have been implemented.

No data was lost and no damage to any systems, financial or otherwise, occurred. There were no costs associated with remediation.

Impact of Economic Conditions on the Development in the District Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which Lennar Homes is able to complete and sell homes and demand by and the ability of individuals to purchase homes within the District. Such events and factors could include rising inflation and interest rates, persistent supply chain issues, further impacts of the COVID-19 pandemic and global market instability caused by the war in Ukraine. Any adverse impact of the foregoing and other economic factors on the projects in the District and the real estate market in general cannot be predicted. 365

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Amid an unexpected run on deposits, the Federal Deposit Insurance Corporation (the “FDIC”) announced on March 10, 2023 that it had been appointed as receiver for Silicon Valley Bank (“SVB”), a large California bank and the 16th largest bank in the United States, and was liquidating SVB as a going concern.

Since such actions, there has been uncertainty and concern in the financial markets that there may be additional bank liquidity issues.

Lennar Homes expects to use internally generated funds (which may include home sales proceeds and funding from its parent company, U.S. Homes) to complete its development in the District. However, the uncertainty in the financial markets may affect homebuyers’ willingness or ability to obtain financing for the purchase of new homes within the District, which, in turn, could impact Lennar Homes’ ability or determination to complete its development in the District in the budget and timeframe described herein. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
Increasing Mortgage Interest Rates
30-year fixed mortgage interest rates have increased substantially within the past year and 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 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 Fontana Public Facilities Financing Authority (the “Facilities 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 complied in all material respects with its undertakings under the Rule, except that the City failed to file its audited financial statements for Fiscal Year 2020 on or before the deadline therefor in its undertakings for two series of bonds, and the City, the Successor Agency, the Facilities Authority and several CFDs failed to timely file the Fiscal Year 2021 unaudited financial statements, and certain required information typically contained therein, when the audited financial statements were not available as of 366

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the respective dues dates of the Fiscal Year 2021 reports. The Fiscal Year 2021 audited financial statement have subsequently been filed. Additionally, with respect to undertakings of several CFDs, the Fiscal Year 2020 audited financial statements of the City was filed after the required due dates. Further, 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 City, the Authority, the Successor Agency and certain 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 Lennar Homes is not an obligated person under Rule 15c2- 12, pursuant to the Developer Continuing Disclosure Certificate, Lennar Homes has agreed to provide, or cause to be provided, to EMMA, on a semi-annual basis certain information concerning Lennar Homes and the property it owns or has under option with Hearthstone Land Bank within the District. Lennar Homes has further agreed to provide notice to EMMA of certain listed events, including certain events relating to Hearthstone Land Bank that are known to Lennar Homes. Lennar Homes’ 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 Lennar Homes owns or has under option no more than 46 of the residential lots in the District subject to the Special Tax levy. 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 Lennar Homes 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 Lennar Homes and notices of listed events to be provided by Lennar Homes.

Neither the District nor the City has considered, or reached any conclusion as to, whether or not Lennar Homes 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. The District and the City take no responsibility for such form or content or for the adequacy of the Developer Continuing Disclosure Certificate for its intended purpose.

None of the District, the City or the Trustee is a party to the Developer Continuing Disclosure Certificate, and none of the District, the City or the Trustee has any obligation or responsibility to monitor, nor any right or obligation to enforce, compliance by Lennar Homes with its undertaking pursuant to the Developer Continuing Disclosure Certificate, and none of the District, the City or the Trustee will be so monitoring or enforcing such compliance.

Lennar Homes Continuing Disclosure Compliance. To the actual knowledge of Lennar Homes, other than as disclosed in this Official Statement, in the last five years, Lennar Homes has not failed to comply in any material respects with its previous continuing disclosure undertakings, specifically regarding its requirement to provide developer periodic reports or to provide notice of occurrence of enumerated events. However, (i) in connection with a continuing disclosure obligation entered into with respect to the $12,850,000 County of El Dorado District No. 2014-1 (Carson Creek) Special Tax Bonds Series 2016, Lennar Homes was late in filing the 367

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periodic reports due on April 1, 2017 and October 1, 2017; the oversight was discovered in late January, 2018, and Lennar Homes promptly filed a curative report on February 1, 2018; (ii) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, Lennar Homes inadvertently failed to file the initial semi-annual report by the due date of May 1, 2021, but filed a curative report on May 21, 2021; and (iii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 2018-1 Special Tax Bonds, Series 2021B, Lennar Homes inadvertently failed to file the initial annual report by the due date of April 1, 2022, but filed a curative report on September 21, 2022.

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 individual alternative minimum tax. Bond Counsel observes that, for tax years beginning after December 31, 2022, interest on the Bonds included in adjusted financial statement income of certain corporations is not excluded from the federal corporate 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 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 368

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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 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 369

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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 Tax, or in any way contest or affect the validity of the Bonds, the Indenture, the Special Tax, 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. 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, less net original issue discount 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. 99 (THE RETREAT)
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. 99
(THE RETREAT)
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. 99 (The Retreat) (“CFD No. 99”) 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. 99, 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. 99, 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. 99 or any designee thereof of complying with arbitrage rebate requirements with respect to the Special Tax and CFD No. 99 Bonds; the costs to the City, CFD No. 99 or any designee thereof of complying with disclosure requirements of the City, CFD No. 99 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. 99, or any designee thereof related to the reduction of the Assigned Special Tax and Backup Special Tax in accordance with Section C herein; the costs of the City, CFD No. 99 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. 99 Bonds. Administrative Expenses shall also include amounts estimated or advanced by the City or CFD No. 99 for any other administrative purposes of CFD No. 99, 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. “Assessor’s Parcel Map” means an official map of the Assessor designating parcels by Assessor’s Parcel number.
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“Assigned Special Tax” means the Special Tax for each Land Use Class of Developed Property, as determined in accordance with Section C.1.(b) below.
“Attached Residential Property” means Assessor’s Parcels of Developed Property for which building permits have been issued for a residential dwelling unit that shares, or will share, an inside wall with another residential dwelling unit.
“Authorized Facilities” means those facilities eligible to be funded by CFD No. 99. “Backup Special Tax” means the Special Tax applicable to each Assessor’s Parcel of Developed Property, as determined in accordance with Section C.1.(c) below.
“Buildout” means, for CFD No. 99, that all expected building permits for residential dwelling units and/or non- residential development to be constructed within CFD No. 99 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, providing for the levy and collection of the Special Taxes, and performing other duties as set forth herein.
“CFD No. 99” means City of Fontana Community Facilities District No. 99 (The Retreat). “CFD No. 99 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. 99 and secured by the Special Tax levy on property within the boundaries of CFD No. 99 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. 99. “County” means the County of San Bernardino.
“Detached Residential Property” means Assessor’s Parcels of Developed Property for which building permits have been issued for a residential dwelling unit that is or is expected to be surrounded by freestanding walls and that does not share an inside wall with any other residential dwelling unit. “Developed Property” means, for each Fiscal Year, 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, 2020 and on or before May 1 of the Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. “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. 373

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“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. 99 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 herein. “Lower Income Households Welfare Exemption Property” means, for each Fiscal Year, an Assessor’s Parcel within the boundaries of CFD No. 99 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 Special Tax” means the maximum Special Tax, determined in accordance with Section C herein, that can be levied in any Fiscal Year on any Assessor’s Parcel of Taxable 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. “Outstanding Bonds” means all CFD No. 99 Bonds which are outstanding under the Indenture. “Price Point Consultant” means any consultant or firm of such consultants selected by CFD No. 99 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. 99 or the City, (d) does not have any substantial interest, direct or indirect, with or in (i) CFD No. 99, (ii) the City, (iii) any owner of real property in CFD No. 99, or (iv) any real property in CFD No. 99, and (e) is not connected with CFD No. 99 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 99 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. 99 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 sub- 374

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association, 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 Special Tax levy to the Assigned Special Tax is equal for all Assessor’s Parcels of Developed Property. For Undeveloped Property, “Proportionately” means that the ratio of the actual Special Tax levy per Acre to the Maximum 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. 99 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. 99. “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. “Special Tax” means the special tax to be levied in each Fiscal Year on each Assessor’s Parcel of Taxable Property within CFD No. 99 to fund the Special Tax Requirement. “Special Tax Requirement” 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. 99 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 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 Special Tax delinquencies based on the delinquency rate for the 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 Special Tax levy beyond the first step in Section D herein. “State” means the State of California.
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of CFD No. 99 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. 375

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“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 Special Tax for such Fiscal Year, plus (b) 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 Special Tax.

B. ASSIGNMENT TO LAND USE CATEGORIES
Each Fiscal Year, commencing with Fiscal Year 2020-2021, all Taxable Property within CFD No. 99 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
At least 30 days prior to the issuance of the first series of CFD No. 99 Bonds, the Assigned 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. 99 shall exceed 1.95% of the Minimum Sale Price of such residential property constructed or to be constructed within CFD No. 99, the CFD Administrator shall reduce the Assigned 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 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 Special Tax, the CFD Administrator shall also reduce the Backup Special Tax in accordance with Section C.1.(c) herein. Upon determining the reductions, if any, in the Assigned Special Tax and Backup Special Tax required pursuant to this Section C, the CFD Administrator shall complete the Certificate to Amend 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. 99. Upon receipt thereof, if in satisfactory form, CFD No. 99 shall execute such Certificate to Amend. The reduced Assigned Special Tax and Backup Special Tax specified in such Certificate to Amend shall become effective upon the execution of such Certificate to Amend by CFD No. 99. The Assigned Special Tax and Backup Special Tax reductions permitted pursuant to this Section C shall be reflected in an amended notice of Special Tax lien which CFD No. 99 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. 99.

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. 99 does not exceed

1.95% of the Minimum Sale Price of each such Land Use Class of residential property constructed or to be 376

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constructed within CFD No. 99, then there shall be no reduction in the Assigned Special Tax, nor shall there be a reduction in the Backup Special Tax.

1. Developed Property
(a). Maximum Special Tax
The Maximum 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 Special Tax or (ii) the amount derived by application of the Backup Special Tax.
(b). Assigned Special Tax
Residential Property shall be assigned to Land Use Classes 1 through 10 as listed in Table 1 below based on the type of use and the Residential Floor Area for each residential dwelling unit. Non-Residential Property shall be assigned to Land Use Class 11. The Assigned Special Tax that shall be levied in any Fiscal Year for each Land Use Class is shown below in Table 1.

Table 1
Assigned Special Tax for Developed Property
City of Fontana CFD No. 99 (The Retreat)
Land
Use
Class Description
Residential Floor Area
(square feet)
Assigned
Special Tax
1 Detached Residential Property 2,000 or greater $2,273 per unit 2 Detached Residential Property 1,850 to less than 2,000 $2,230 per unit 3 Detached Residential Property 1,700 to less than 1,850 $2,187 per unit 4 Detached Residential Property Less than 1,700 $2,151 per unit 5 Attached Residential Property 1,850 or greater $2,204 per unit 6 Attached Residential Property 1,700 to less than 1,850 $1,948 per unit 7 Attached Residential Property 1,550 to less than 1,700 $1,825 per unit 8 Attached Residential Property 1,400 to less than 1,550 $1,552 per unit 9 Attached Residential Property 1,250 to less than 1,400 $1,349 per unit 10 Attached Residential Property Less than 1,250 $1,203 per unit 11 Non-Residential Property NA $67,080 per Acre

(c). Backup Special Tax
The Backup Special Tax for an Assessor’s Parcel of Developed Property shall equal the lesser of (a) $78,920 per Acre, or (b) in connection with any reduction in the Assigned Special Tax as set forth in Section C herein, the amount per Acre calculated pursuant to the formula below:

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

BFST = the reduced Backup Special Tax
AFST = The total estimated Assigned Special Tax levy for CFD No. 99 based on the reduced Assigned Special Taxes for Developed Property permitted pursuant to Section C herein which could be levied on all expected development assuming Buildout of CFD No. 99.
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ATP = The sum of the Acreage of all Taxable Property within a Final Subdivision (assuming Buildout) within CFD No. 99 (after excluding Public Property and Property Owner Association Property as set forth in Section E herein) multiplied by 90%.

Furthermore, all Assessors’ Parcels within CFD No. 99 shall be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Special Tax if the CFD Administrator calculates that (i) the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Tax that shall be levied against all Assessors’ Parcels of Developed Property in CFD No. 99 results in 110% debt service coverage (i.e., the Assigned Special Tax that shall be levied against all Developed Property in CFD No. 99 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. 99 Bonds have already been issued or the Council has covenanted that it shall not issue any additional CFD No. 99 Bonds (except refunding bonds) to be supported by the Special Tax in CFD No. 99.
(d). 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 Special Tax that can be levied on such Assessor’s Parcel shall be the sum of the Maximum 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.

2. Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property
The Maximum Special Tax for each Assessor’s Parcel of Undeveloped Property, Taxable Public Property, and Taxable Property Owner Association Property shall be $78,920 per Acre, and shall not be subject to change and shall therefore remain the same in every Fiscal Year.

D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX
Commencing with Fiscal Year 2020-2021, and for each following Fiscal Year, the CFD Administrator shall determine the Special Tax Requirement and shall provide for the levy of the Special Tax each Fiscal Year as follows:

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

Notwithstanding the above, the CFD Administrator shall, in any Fiscal Year, calculate a levy Proportionately less than 100% of the Assigned Special Tax in step one (above), when (i) the CFD Administrator is no longer required to provide for the levy of the Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement; and (ii) all authorized CFD No. 99 Bonds have already been issued or the Council has covenanted that it shall not issue any additional CFD No. 99 Bonds (except refunding bonds) to be supported by the Special Tax.

Further notwithstanding the above, under no circumstances shall the 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. 99 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 Special Tax on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax on each Assessor’s Parcel of Non-Residential Property shall continue in equal percentages up to 100% of the applicable Maximum Special Tax.

E. EXEMPTIONS
No Special Tax shall be levied on up to 9.4 Acres of Public Property and/or Property Owner Association Property in CFD No. 99. Tax-exempt status shall be assigned by the CFD Administrator in the chronological order in which property in CFD No. 99 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 Special Tax.

Notwithstanding the above, an Assessor’s Parcel in CFD No. 99 that is transferred to a public agency or property owner’s association prior to the issuance of the first series of CFD No. 99 Bonds that causes the Acreage of Public Property and Property Owner Association Property to exceed the 9.4 Acreage limit that can be designated by the CFD Administrator under this Section E shall also be exempted from paying the Special Tax.

Public Property or Property Owner Association Property that is not exempt from the Special Tax under this Section E shall be subject to the levy of the 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 Special Tax for Taxable Public Property and Property Owner Association Property.

In addition, no 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 Special Tax, then the 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. 379

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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. 99 may directly bill the Special Tax, and/or may collect Special Taxes at a different time or in a different manner if necessary to meet financial obligations, and 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 SPECIAL TAX
Under this Rate and Method of Apportionment, an Assessor’s Parcel within CFD No. 99 is permitted to prepay the Special Tax. The obligation of the Assessor’s Parcel to pay the 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, 2020, 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 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. 99 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 Special Tax Prepayment Amount (defined below).

The following additional definitions apply to this Section H:
“CFD Public Facilities Costs” means either $4,340,000 in 2020 dollars, which shall increase by the Construction Inflation Index on July 1, 2021, 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. 99, or (ii) shall be determined by the Council concurrently with a covenant that it shall not issue any more CFD No. 99 Bonds (except refunding bonds) to be supported by the 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 380

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in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the 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. 99 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 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 Special Tax Prepayment Amount
As of the proposed date of prepayment, the 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 Special Tax and Backup 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, 2020, compute the Assigned Special Tax and Backup 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 Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Tax levy for CFD No. 99 based on the Assigned Special Taxes for Developed Property which could be levied on all expected development assuming Buildout of CFD No. 99, excluding any Assessor’s Parcels which have been prepaid, and
(b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Taxes at Buildout for the entire CFD No. 99, excluding any Assessor’s Parcels which have been prepaid.

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”). 381

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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 Special Tax Prepayment Amount.

9. Determine the 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 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. 99 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. 99 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”).

15. The 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 “Special Tax Prepayment Amount”).
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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 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 Special Tax.

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

3. General Provisions Applicable to the Prepayment of Special Tax (a). Use of the Special Tax Prepayment Amount
The Special Tax Prepayment Amount, less the Administrative Fees and Expenses calculated according to Section H.1 which shall be retained by CFD No. 99, 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 Special Tax
Upon confirmation of the payment of the current Fiscal Year’s entire Special Tax obligation, the CFD Administrator shall remove the current Fiscal Year’s 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 Special Tax and the release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay the Special Tax shall cease. (c). Partial Prepayment of 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. 99 that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor’s parcel, equal to the outstanding percentage (1.00 – F) of the remaining Maximum 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 Special Tax shall be allowed unless the amount of Special Tax that may be levied on Taxable Property (assuming Buildout) within CFD No. 99 in each future Fiscal Year (after excluding Public Property and Property Owner Association Property as set forth in Section E 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.
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I. TERM OF SPECIAL TAX
The Special Tax shall be levied for a period not to exceed forty-five years commencing with Fiscal Year 2020- 2021.

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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 or any Additional 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 site’s 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 unincorporated San Bernardino County 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-to- day 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 seaports, 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. In 2021, approximately 4.5 million passengers used the airport and cargo shipments decreased approximately 3.7% from the previous year. In 2020, approximately 2.5 million passengers used the airport and cargo shipments rose more than 18% from the previous 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 96,800 92,200 4,600 4.8%
San Bernardino County 942,000 895,300 46,800 5.0
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 98,400 94,500 3,800 3.9%
San Bernardino County 955,000 915,500 39,500 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 99,500 95,900 3,600 3.6%
San Bernardino County 966,800 929,000 37,700 3.9
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 100,300 90,800 9,500 9.5%
San Bernardino County 971,400 877,000 94,400 9.7
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 – 2021
Employer Number of Employees
Kaiser Hospital & Med. Group 6,180
Fontana Unified School District 4,803
Amazon.com Services LLC 3,718
Target Stores T 553 1,807
Walmart D C #6060 973
City of Fontana (includes part-time employees) 931
Costco Wholesale #627 387
Estes West 370
Communications Test Design, Inc. 338
Saia Motor Freight Line LLC 313

Source: City of Fontana Fiscal Year Ending June 30, 2021 Annual Comprehensive Financial Report.

Listed below are the major employers in the County.

PRINCIPAL EMPLOYERS
San Bernardino County
2022
Rank Name of Business
Approximate No.
of San Bernardino
County
Employees(1) Type of Business
1 County of San Bernardino 5,000-9,999 Public Administration 2 Amazon 5,000-9,999 Electronic Commerce
3 Loma Linda University Medical Center 5,000-9,999 Medical Center 4 Stater Brothers 1,000-5,000 Grocery Store
5 Burlington Distribution Corp. 1,000-5,000 Retail
6 Environmental Systems Research 1,000-5,000 Software
7 FedEx Ground 1,000-5,000 Package Delivery
8 Inland Empire Health Plan 1,000-5,000 Insurance
9 San Antonio Community Hospital 1,000-5,000 Medical Center 10 San Manuel Resort & Casino 1,000-5,000 Casino

(1) Due to confidentiality of reporting number of employees, ranges have been provided.

Source: San Bernardino County Annual Comprehensive Financial Report for the year ending June 30, 2022. 392

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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. 393

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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 2012 through 2021.

Fiscal Year
Percent of Levy
Collected
Total Tax Collections
to Tax Levy to Date
2012 103.78% $ 91,081,550
2013 103.19 95,130,535
2014 107.57 100,966,890
2015 99.48 115,888,404
2016 104.24 116,422,050
2017 101.77 125,264,871
2018 99.51 135,747,922
2019 101.55 154,079,402
2020 98.37 160,025,650
2021 95.39 172,050,509

Note: The amounts presented include City property taxes and the Former Redevelopment Agency of the City of Fontana (the “Redevelopment Agency”) tax increment. This schedule also includes amounts collected by the City and Redevelopment Agency that were passed-through to other agencies.

Source: City of Fontana Fiscal Year Ending June 30, 2021 Annual Comprehensive Financial Report.

Largest Taxpayers
The principal property taxpayers in the City for 2021 are as follows:

Taxpayer
2021 Assessed
Valuation
% of Total
Assessed
Valuation
Duke Realty LP $ 161,920,495 0.72%
San Gabriel Valley Water Company 151,459,125 0.67
Vintage Park East LLC 134,048,863 0.60
Target Corporation 121,669,158 0.54
GLC Fontana LLC 116,197,522 0.52
Sierra Lakes Commerce LLC 111,204,222 0.49
Northwestern Mutual Life Insurance Co. 109,206,897 0.49 Fairfield Potomac Club LLC 108,563,124 0.48
10825 Production Owner LLC 104,550,000 0.46
Citrus Avenue LLC 98,253,732 0.44
TOTAL: $ 1,217,083,138 5.41%

Source: City of Fontana Fiscal Year Ending June 30, 2021 Annual Comprehensive Financial Report. 394

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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. 395

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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 2021.

PERSONAL INCOME
City of Fontana, County of San Bernardino, State of California, and United States 2015-2021
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 5,061,439 98,143,792 2,814,011,000 19,679,715,000
2021 n/a 108,623,799 3,006,184,000 21,288,709,000

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, 2021.

PER CAPITA PERSONAL INCOME(1)
City of Fontana, County of San Bernardino, State of California, and United States 2015-2021
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 23,763 44,831 71,480 59,729
2021 n/a 49,493 76,614 64,143

(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 2017 2018 2019 2020 2021
Valuation ($000’s)
Residential: $ 157,429 $ 145,610 $ 241,481 $ 311,547 $ 216,978 Non-Residential: 131,572 197,379 290,767 149,761 126,814 Total Valuation: $ 289,001 $ 342,989 $ 532,248 $ 461,308 $ 343,792

New Housing Units:

Single Family 600 413 642 848 670
Multi Family 69 85 202 234 382
Total Units: 669 498 844 1,082 1,052

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

FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE

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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 fully- registered 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 book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates.

Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned 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 401

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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. 402

APPRAISAL REPORT

CITY OF FONTANA
COMMUNITY FACILITIES DISTRICT NO. 99
(The Retreat)

City of Fontana, San Bernardino County, California
(Appraisers’ File No. 2023-1277)

Prepared For
City of Fontana
8353 Sierra Avenue
Fontana, California 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

March 6, 2023

Jessica Brown, Chief Financial Officer
City of Fontana
8353 Sierra Avenue
Fontana, CA 92335

Reference: Appraisal Report
City of Fontana
Community Facilities District No. 99
The Retreat by Lennar
Northwest Corner of Beech Avenue and South Highland Avenue, South of Interstate 210, Fontana, California

Dear Ms. Brown:

At the request and authorization of the City of Fontana, we have completed an Updated Appraisal Report for The City of Fontana Community Facilities District No. 99 (“Fontana CFD No. 99”) which consists of a residential neighborhood known as The Retreat, in the City of Fontana. An appraisal was completed with a January 3, 2023 date of value; however, due to a time delay, the client requested an updated appraisal report. The Retreat includes a total of 194 residential units split between two product lines , The Villas at the Retreat (“Villas”) and Chateau at the Retreat (“Chateau”). Villas is proposed for 100 attached condominium units and Chateau is proposed for 94 single family detached cluster units. On May 25, 2021, Lennar Homes of California, LLC ("Lennar") and R -Hearthstone Lot Option Pool 02, L.P., a Delaware limited partnership (“Hearthstone”), entered into an agreement whereby Lennar conveyed the property to Hearthstone and Lennar was provided an exclusive option (but not an obligation) to acquire the property in several takedowns over time pursuant to an agreed-upon takedown schedule. Lennar is developing and marketing the property and the majority of these takedowns have occurred .

The Retreat offers two-story floorplans ranging in size from 1, 165 to 1,895 square feet as marketed for the Villas ( attached product ), and 1,724 to 2,046 square feet for the Chateau (detached cluster product).

Out of the 194 proposed units within the Retreat, 113 have closed to individual homeowners to date with an additional 29 in escrow which are due to close upon completion. The Lennar-owned property ranges from completed model homes to houses under construction while the Hearthstone owned property ranges from houses under construction to finished lots/pads.

The valuation method s 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. 99 special tax lien. This report is written with the hypothetical condition that the subject propert y is enhanced by the improvements and/or fee credits to be funded by the Special Tax Bonds of Fontana CFD No. 99. As a result of our investigation, the concluded minimum market value for the subject property is shown below.

Hearthstone Ownership (45 pads) $ 8,002,778
Lennar Ownership (19 pads & 17 houses) $ 9,096,678
Individual Owners (113 houses) $ 50,977,573
Total Aggregate Value CFD No. 99 $ 68,077,029

115 East Second Street, Suite 100, Tustin, California 92780 (714) 544-9978 - Phone, (714) 544-9985 – Fax, E-Mail: [email protected] 404
Jessica Brown
City of Fontana
March 6, 2023
Page Two

The values are stated subject to the Assumptions and Limiting Conditions of this report, the Appraiser’s Certification and as of February 16, 2023.

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. 99 (The Retreat)......................................................... iv Purpose of the Appraisal ................................................................................................ 1 The Subject Property ...................................................................................................... 1 Intended Use of the Report ............................................................................................. 3 Definitions ...................................................................................................................... 3 Property Rights Appraised ............................................................................................. 5 Effective Date of Value ................................................................................................... 5 Date of Report ................................................................................................................ 6 Scope of Appraisal ........................................................................................................ 6 Regional Area Map.......................................................................................................... 8 County of San Bernardino Area Description ................................................................... 9 City of Fontana Area Map & Description ....................................................................... 18 Immediate Surroundings ............................................................................................... 23 Community Facilities District No. 99 ............................................................................. 25 Subject Property Description ......................................................................................... 28 Inland Empire Housing Market ...................................................................................... 36 Highest and Best Use Analysis ..................................................................................... 46 Valuation Analysis and Conclusions ............................................................................. 51 Appraisal Report Summary ........................................................................................... 76 Appraiser’s Certification ............................................................................................... 77

ADDENDA
Fontana CFD No. 99 Boundary Map
Tract Map No. 20228 and Condominium Maps
Discounted Cash Flow Analysis
Finished Lot Land Sales Map and Summary Chart
Improved Attached Residential Sales Map and Summary Chart Improved Detached 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. 99.

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 407
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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 co mments 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 a ny, 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 S tatement or similar document for the Fontana CFD No. 99 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 194 subject residential units. This is the case per Lennar; however, we were unable to verify via the various conditions of approval.

20. For purposes of this report the square footage of the houses within The Villas are assumed to be the same as marketed and reported by Lennar.

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. 99 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. Regarding sales, we have reviewed closed sales against public record when available. Dif ferences occur between the builder’s sales information and public record. It is the appraiser’s understanding that the differences equate to flooring and solar costs along with concessions which are given by the builder on a case- by-case basis. Regarding costs; while we have reviewed the remaining land development costs and fees and they appear reasonable; we are not experts in the field of construction estimation and are relying on the costs received in the valuation analysis.

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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. 99 Special Tax Bonds.

THE SUBJECT PROPERTY

The subject property consists of 194 proposed single-family homes being developed into a community known as The Retreat in the City of Fontana (“City”). The Retreat is located at the northwest corner of Beech Avenue and South Highland Avenue, adjacent south to Interstate 210 (“I-210”), and east of Interstate 15 (“I-15”). The Retreat is being built and sold by Lennar , and features two product lines: the Villas which includes 100 attached condominiums sized 1,165 to 1,895 square feet, and the Chateau which includes 94 detached cluster homes sized from 1,724 to 2,046 square feet. The subject community is encompassed by Tract Map 20228 and subsequent condominium maps , which subdivides the subject lands into 20 pads for 5-plex condominiums, and 94 detached lots arranged in motorcourts. Lennar has an agreement with Hearthstone owning the property and Lennar acquiring certain lots/pads as needed for development. Of the total 194 pads/lots, Lennar has taken down 149 of the lots/pads and has sold and closed on 113 of the completed houses to individuals. The remaining lots vary in status from completed models, to under homes construction to finished lots. The description, ownership and condition of the lands are detailed in the chart on the following page.

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Description No.

Lots Owner Product / Condition / Status
Villas at The Retreat (Attached Townhomes) Lot 1 of Tract 20228: Modules 1 -10 Units 0301, 0305 & 0405 of
Module 6; 0501-0505 & 0601-
0605 of Module 5; 0701- 0705 &
0801-0805 of Module 4; 0901-
0904 & 1001-1005 of Module 3;
1101-1105 & 1201-1205 of
Module 2; 1301-1305 & 1401-
1405 of Module1
52 Individuals Completed Homes
Units 6501-6505 of Module 10 5 Lennar Model Homes (0 in Escrow) Units 0302-0304 & 0401-0404 of
Module 6; 0905 of Module 3 8 Lennar Over 95% Complete (6 in Escrow) Units 0101-0105 & 0201-0205 of
Module 7 10 Lennar Under Construction (9 in Escrow)
Units 1501-1505 & 1601-1605 of
Module 9; 1701-1705 & 1801-
1805 of Module 8
20 Hearthstone
Land Bank Under Construction (2 in Escrow)
Units 6601-6605 of Module 10 5 Hearthstone
Land Bank Finished Lots (0 in Escrow)
Villas Subtotal: 100
Chateau at The Retreat (Small Lot Detached) Lot 1 of Tract 20228: Modules 11-19 Units 0019-0026 and 0100 &
0102-0105 of Module 15; Units
0027-0034 and 94-99 of Module
14; Units 0035-0042 and 88-93
of Module 13; Units 0043-0049
and 82-87 of Module 12; Units
0050-0056 of Module 11
61 Individuals Completed Homes
Units 0067-0069 of Module 19 3 Lennar Model Homes (0 in Escrow) Unit 0101 of Module 15 1 Lennar Over 95% Complete (1 in Escrow) Units 0106-0114 of Module 16 9 Lennar Under Construction (8 in Escrow) Units 0057-0064 of Module 18;
Units 0076-0081 of Module 17 14 Hearthstone
Land Bank Under Construction (3 in Escrow)
Units 0070-0075 of Module 19 6 Hearthstone
Land Bank Finished Lots (0 in Escrow)
Chateau Subtotal: 94
TOTAL CFD No. 99 194

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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. 99 Special Tax Bonds. This report may be included in the Official Statement or similar document to be 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 Lennar or Hearthstone owned properties,each in a bulk sale, is less than one year.

1 The Appraisal of Real Estate, 13th Edition
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Finished Lot/Pad
The term “Finished Lot/Pad” is defined as:
“A parcel which has legal entitlements created by a recorded subdivision or condominium map, whose physical characteristics are a fine graded level pad per lot /pad with infrastructure contiguous to each individual lot /pad, asphalt paved roads and the neces sary utilities. This term assumes the payment of all applicable development fees with the exception of building permit and plan check fees.”

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”

2 USPAP 2018-2019 Edition
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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. 99.

Extraordinary Assumptions
The term “Extraordinary Assumption” is defined by USPAP as:
“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.

Regarding the sales information, differences occur between the builder’s sales information and public record which, it is the appraiser’s understanding, equates to flooring and solar costs, along with concessions which are given to the buyers on a case- by-case basis. Regarding costs, we have reviewed the remaining land development costs and fees 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 costs differ, it may change the value conclusion.

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. 99. 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 February 16, 2023.

3 The Appraisal of Real Estate, 13th Edition
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DATE OF REPORT

The date of this report is March 6, 2023.

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 propert y, Fontana CFD No. 99, which is known as the community of The Retreat. Lennar Homes of California LLC (“Lennar”) is the builder and is actively marketing the homes. The Retreat offers two- story floorplans ranging in size from 1,165 to 1,895 square feet as marketed for the Villas (attached product), and 1,724 to 2,046 square feet for the Chateau (detached cluster product) .

There are a total of 194 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. 99
• 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 propert y, 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 4 Dictionary of Real Estate Appraisal, Fourth Edition, 2002 416
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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:

1. Compiled demographic information and related that data to the subject propert y 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 December 20, 2022 and February 20, 2023.

4. Had the site flown by an aerial photographer on January 2, 2023.

5. Interviewed r epresentatives from Lennar and/or their representatives i n order to obtain project information.

6. Reviewed a preliminary title report on 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 each neighborhood in the community along with reviewing public record on sample lots in each 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, The Retreat is located adjacent south of Interstate 210 (“I-210”), 1.4 miles east of Interstate 15 (“I-15”), at the northwest corner of Beech Avenue and South Highland Avenue.

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 south of I-210, about one- and one-half miles east of I-15, and approximately 4.8 miles north of Interstate 10 (“I-10”). The I-210 is the nearest interstate providing access to the subject via Cherry Avenue or Citrus Avenue. There’s also access directly from t he I -15 to the subject via the Beech/Summit Avenue. 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 near the City of San Bernardino. The subject is located two miles north of the historical Route 66, the original Los Angeles to Chicago cross country route.
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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 eight 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 January 1, 2022 (latest available) County population was 2.188 million. This represents a one-year increase of 0. 2 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 i s anticipated to reach approximately 2.32 million by 2030, indicating an average annual increase of approximately 0.75 percent over the next eight years. The current near zero growth rate is lower than the previous 20- year annual average of 2.1 percent, li kely due to the disruption of the COVID pandemic. The future growth of 0.75 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
The U.S. economy experienced what is now known as the COVID recession beginning in late February 2020 as the COVID pandemic began. The Federal, State, County and City Governments (“Governments”) originally shut down non-essential businesses and areas where social gatherings occur 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.

The Governments attempted to curtail the job losses and hardships with the approval of 420
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legislation while the Federal Reserve Board (“Board”) reduced interest rates and started quantitative easing by buying bonds.

Between March 2020 and the end of 2021, the Governments approved legislation providing for over $5.6 trillion in COVID relief to our nation including the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, Federal Reserve COVID loans and the American Rescue Plan Act. This legislation helped shore up the U.S. economy; however, due to the significant amount of new money introduced into the economy, inflation began occurring at a rate not seen for 40 years. As of January 2023, the national inflation r ate was 6.4 percent, down from the peak in June 2022 of 9.1 percent and compared to a 4.7 percent annual inflation rate for 2021, 1.24 annual percent rate for 2020 and an average of 1.74 percent annual rate for the previous ten years. Whether it is a resul t of the Russian/Ukraine war, supply chain issues due to COVID or from the additional money entering the economy, inflation is hitting Americans hard. The Russian invasion of Ukraine created significant volatility in gas prices which affected the economy. In an effort to curb inflation the Federal Reserve Board began raising interest rates. Since March 2022, there have been eight interest rate increases rising the Federal Funds Rate from 0.25 – 0.50 percent to 4.5 – 4.75 percent. The increases have begun to slow inflation which has made the last two rate hikes lower than most of the past 12 months . T he December 2022 increase was slightly lower than the previous four 0.75 percent increases at 0.50 percent while the January 2023 increase was 0.25 percent . The increases over the past 12 months have increased a typical 30- year fixed mortgage rate from 2.98 percent as of November 10, 2021, to 7.08 percent as of November 10, 2022; however, the rate has dropped to 6.32 percent as of February 16, 2023 (per Federal Reserve Economic Data - St. Louis). This steep increase has significantly affected the real estate market.

In addition to increasing the Federal Reserve Rate (“FRR”), the Board began tapering off buying Treasury Bonds and Mortgage- Backed Securities (“MBS”). Along with dropping the interest rate at the beginning of the pandemic, the Board began quantitative easi ng by buying $80 billion Treasury Bonds and $40 billion MBS each month which put more new money into the economy. Towards the end of 2021, the Board began tapering off the 421
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purchases and in June 2022, began quantitative tightening which allows investments t o mature and be removed from the marketplace. This reduced the size of the Board’s balance sheet and further restrict ed credit activity in an effort to slow inflation. In September 2022, the monthly amount of quantitative tightening doubled, which is estimated to be equivalent to additional interest rate increases on the economy.

The COVID disruption to the economy also caused extreme volatility in the stock market with the Dow Jones Industrial Average (“DJIA”) dropping from 29,398 in February 2020 to 19,174 in March, 2020, a drop of 37 percent. The Government interventions resulted in a bounce back in the DJIA to 27,111 by June 2020 with the stock market then climbing up to an all-time high of 36,799 in January 2022. In February 2022 Russia began invading Ukraine which caused volatility in world economics and, more recently, U.S. inflation has hit historical highs, resulting in the Board raising interest rates. Both factors have caused a drop in the DJIA of over eight percent over the past 12 months (to 33,696.85 as of February 16, 2023).

The significant increase in mortgage rates over the past year is just one part of the puzzle demonstrating the impact of housing on the broader economy. Additional risks include both existing and new supply chain challenges, companies trying to find balanced inventory levels, both wage and price spirals, and persistent inflation. 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 housing market seeing an improvement beginning in mid-2012. 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 and continued extremely strong throughout 2021. This exceptional activity in new home sales was the one bright spot in the COVID recession and is thought to be due to several factors including: a tight supply of re -sale homes; historically low interest rates; millennials finally buying homes; and, the work from home 422
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factor which began during the pandemic and allowed residents to live in more suburban areas without long commutes. However, the past year has seen a significant slowdown in sales and softening of prices with the Inland Empire showing a year over year decrease in sales as of January 2023 of 49 percent.

While most jobs have come back, job losses were significant during the COVID recession with the Nation’s unemployment rate going from 3.5 percent in Febr uary 2020 to 14.4 percent in April 2020 with the December 2022 National unemployment rate (latest available) at 3.3 percent ( Employment Development Department ). The Congressional Budget Office (“CBO”) Forecast for the U.S. Economy (published February 2023) stated that the federal budget deficit will be $1.4 trillion in 2023, then will average $2.0 trillion per year for the following nine years. They forecast that Real GDP growth will come to a halt in 2023 then will average 2.4 percent from 2024 to 2027 and then 1.8 percent between 2028 to 2033. The CBO states they expect unemployment rates to rise through early 2024 reflecting the slowdown in economic growth. They are concerned by the debt ceiling which was reached in January of 2023; however, the Treasury is taking extraordinary measures which will be exhausted this summer. If the ceiling is not raised or suspended before the extraordinary measures are exhausted, the government would have to delay making payments for some activities or default on i ts debt obligations. In summation for 2023 the CBO projects stagnant output, rising unemployment, gradually slowing inflation and interest rates to remain at or above their current levels. They believe that in 2023 noninterest spending substantially exceeds revenues with rising interest rates driving up the cost of borrowing which results in the government debt steadily increasing. Over the long term, they suggest changes in fiscal policy to address the rising costs of interest and mitigate other adverse consequences of high and rising debt.

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. 423
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The unemployment rate for the MSA was estimated at 3.6 percent (as of December 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 COVID of 14.9 percent. As of December 2022, San Bernardino County’s unemployment rate was 3.6 and Riverside County had a 3.7 percent unemployment rate. The current unemployment rate for the MSA of 3.6 percent is simil ar to the California rate at 3.7 percent and slightly higher than the December 2022 National rate of 3.3 percent. Below is a table comparing San Bernardino County’s unemployment rate to the unemployment rates of the surrounding counties as of December 2022.

Jurisdiction As of Unemployment Rate*
Los Angeles County 12/22 4.4%
Riverside County 12/22 3.7%
San Bernardino County 12/22 3.6%
Orange County 12/22 2.5%
San Diego County 12/22 2.9%
Source: State of California E.D.D.; *Not Seasonally Adjusted

The latest UCLA Anderson Forecast (“Forecast”) was issued December 7 , 2022 and stated that the potential action by the Federal Reserve will determine whether the nation continues to grow or experiences a mild, short-lived recession in 2023. They believe the economy is at a recession- related fork in the road with one path leading to continued economic growth (although slower than the recent 2.4 percent growth rate) and the other would lead to a mil d short-lived recession. Whether the economy slips into recession or not will depend largely on inflation stickiness and the additional actions the Federal Reserve takes to bring down inflation. The Forecast states that if the Federal Reserve moderates its aggressive tightening, economic growth is expected to slow in first quarter 2023 and be virtually nonexistent in the second quarter, followed by an increase in GDP in the last six months of 2023. If the Federal Reserve keeps aggressively tightening, a mild recession will occur with the economy contracting at an annual rate of 2 to 3 percent in both the second and third quarters then be flat in the last three months of 2023, followed by a slight rebound in 2024. The Forecast states under both scenarios, consumer resilience is the key factor with consumption staying flat the first two quarters, contracting modestly during the next two quarters, and beginning to grow again in 2024. They believe 424
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both outcomes will include declining home prices with slightly larger declines in the recession scenario. In both cases, inflation is anticipated to ease at about the same rate through mid-2023.

The UCLA Forecast for California is more positive than the overall Nation due to the rapid job creation that has occurred in logistics , technology and health care. A t time of the Forecast, the state’s non-farm payroll jobs exceeded its February 2020 (pre- pandemic) levels by 31,000 jobs although many of the new jobs are in different sectors. About 170,000 payroll jobs in leisure and hospitality and other service sectors have not returned but logistics, technology and healthcare have had rapid job creation with those jobs being higher-income sectors making California’s GDP growth higher than that of the Nation.

The increase in interest rates have led to a downturn in California’s housing markets with the median price of single- family homes in the state declining 8.4 percent below its previous peak. However, the California housing market is not overbuilt which will offset the decrease in the housing market. Overall, the Forecast believes that California will have a more moderate slowing or, in the case of a recession, a milder downturn than the U.S. overall.

As a final indicator of overall economic activity for the region, we have reviewed the rise and 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 in the Inland Empire linked to supply -chain nodes in the Pacific Rim. The chart below shows TEU activity at the Port of 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. The 2022 calendar year saw a decrease of 2.6 percent from the previous year.

January 2023 is running 28 percent below January of 2022 (573,772 versus 800,943 total TEUs). It should be noted that January 2022 was a time when the back -up at the ports was still occurring due to supply chain issues. Per the Orange County Register (Lack of product demand hurts drivers, October 31, 2022) consumer demand has cooled recently leaving fewer TEUs needing to be driven from the ports. They are stating shipments have 425
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slowed due to American demand finally waning after the pandemic coupled with some major retailers bypassing the California ports for East Coast ports to avoid a possible upheaval by West Coast dockworkers as they negotiate a new contract. It appears that the slowdown in work for the dray operators (drivers who ship containers in and out of the ports) may be resulting from a slowdown in overall TEU demand.

Education
The subject area is served by the Etiwanda School District (“ESD”) and the Chaffey Joint Union High School District (“CJUHSD”) . ESD serves children elementary and middle school age while CJUHSD serves high school and beyond. The subject is assigned to Cecilia Lucero Solorio (“Solorio”) Elementary School (K-5), Heritage Intermediate School (6-8), and Etiwanda High School. ESD and CJUHSD are highly r ated and are seen as stronger districts than neighboring Fontana Unified School District. Community Colleges are available near the subject at Chaffey College in Rancho Cucamonga (six miles northwest), at Chaffey College’s Fontana campus (3.6 miles southeast of the subject in Fontana), and San Bernardino Community College ( 12 miles southeast). Higher education is available approximately nine miles northwest of the subj ect at California State University San Bernardino, about 14 miles southeast is University of California at Riverside, 1 3 miles southwest in the private Claremont Colleges ( which include

4.0 5.0

6.0 7.0

8.0 9.0

10.0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 TEU's (millions)
Year
Port of Long Beach TEUs
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Claremont McKenna College, Pitzer College, Harvey Mudd College, Pomona College and Scripps College) and 20 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 COVID Recession in March 2020 with housing the one bright spot in the economy during the pandemic. The region’s relative affordability, coupled with the rising prices in the coastal market and the need for new housing, set up a boom in the Inland Empire. Beginning the second half of 2020 through the first three months of 2022, Inland Empire new home sales skyrocketed, in par t due to residents leaving urban areas for more suburban areas due to COVID factors coupled with historically low interest rates. The government interventions, while helping to shore up the economy, introduced a significant amount of new money into the system contributing to severe inflation, which is at the highest it has been in four decades leading to the Federal Reserve Board increasing interest rates. The FRR has gone from zero to 4.75 percent in the past nine months. Current concerns for the Inland Em pire economy include inflation, the high prices of homes, rising interest rates, supply chain issues, and the Russian invasion of Ukraine, which are all creating volatility in both local and global 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. However, due to inflation, rising interest rates, falling consumer confidence and other factors, there are some bumpy roads anticipated ahead.

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CITY OF FONTANA DESCRIPTION

General Area
The subject property is located in the northern 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. 99 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 employm ent 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 1994 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 the area of Fontana was home to a drag racing strip which served as 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. It was recently announced the existing raceway will close due to the redevelopment of the lands; however, a smaller short -track will be developed on a portion of the lands keeping car racing in the area of Fontana.

Population
The January 2022 population of Fontana (per the California Department of Finance, latest information available) is 212,809, which represents an increase of 1.4 percent over the previous year. The 2000 population was 128,928, suggesting the population has increased 65 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, 429
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the average household size in Fontana is 3. 75 persons while in overall San Bernardino County the average household size is 3.26 persons. Over 78 percent of the population of the City are high school graduates and over 28 percent of the population of the City are under 18 years old.

Housing
According to the Southern California Association of Governments (“SCAG”), the City of Fontana has an estimated 52,592 housing units as of 2020 (latest data available), with a growth rate of 54.6 percent since the year 2000. This compares to the County’s housing growth rate of 22.2 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 nu mber 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 15 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. There are three residential projects in final planning or under construction: a 489-unit community known as Nara Hills, northwest of I-15 and Duncan Canyon; a 257-unit project at Duncan Canyon and I-15 and a 189-unit project at Duncan Canyon and Citrus. These are in addition to 777 new single- family residential permits and 405 multi-family residential that were issued in 2021. Per the City’s 2022 annual report, there are four projects in the planning stage: Courtplace which includes 106 affordable units; Sobrato which includes 143 attached an detached 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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units and Citrus E ast (75 cluster units) and Citrus West (85 cluster units). It is our understanding the Citrus East and Citrus West buyer has cancelled both escrows, however entitlements are ongoing on these two sites. Per the 2022 annual report, there were 629 new single- family residential permits and 400 multi -family residential permits issued. Per SCAG, the median home price in the City went from $129,000 in 2000 to a peak of $450,000 in 2006 and a low of $200,000 in 2009. According to Redfin Market Trends, the January 2023 (latest available) median home price in Fontana was $590,000, which represents a 5.6 percent decrease year-over-year from January 2022. It should be noted that per Redfin, the median home price in Fontana was over $600,000 between December 2021 through August 2022.

Current new homes communities selling within Fontana include: The Retreat by Lennar (subject), Aurora Park by Tri Pointe with two neighborhoods, Highland Park by Richmond American with two neighborhoods, Shady Trails with two neighbor hoods by Richmond American and Tri Pointe, Gabion Ranch by Lennar with one actively selling neighborhood, The Arboretum by Lennar (currently sold out but future phases coming), and Monterado with two neighborhoods by Lennar. Per Realtor.com there are currently 427 existing homes for sale within the City with the median listing price of $589 ,000 and the median sold home price of $587,500 (February 22, 2023). Within the subject’s zip code of 92336, the median listing home price is currently $6 50,000 and the median sold home price is $640,000. This is in-line with the recent shift of current resale trends in the Inland Empire of homes selling for lower 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, The Retreat 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 431
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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 Cherry Avenue or Citrus Avenue, to South Highland Avenue.

Economy
Existing commercial property within the City of Fontana is generally along the major thoroughfares including I -10, Route 66/Foothill 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 property. The City is home to an Amazon Distribution Ce nter, 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. In 2020, 2021 and the first few months of 2022 residential building permits gr ew significantly after a lull in the first 10 years since the Great Recession. In the past year permits have slowed due to slowing sales. The area has 432
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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.

IMMEDIATE SURROUNDINGS

The subject property is located along the south side of I-210, at the northwest corner of Beech Avenue and South Highland Avenue, about one and one-half miles east of I-15, in the City of Fontana. The subject has convenient freeway access to the I -210 via the Cherry Avenue or Citrus Avenue on/off ramps or I-15 via Beech/Summit exits.

The subject lands are generally surrounded by residential lands on all sides. To the north, directly past I-210 is a Park and Ride parking lot and an existing residential neighborhood, previously known as CalAtlantic at Stonehaven. Stonehaven was built in 2018 and features lots sized roughly 5,000 square feet. To the east is another existing residential neighborhood, this one a bit older, with homes built in the late 1990s on lots sized 5,000 to 6,000 square feet. The residential neighborhood adjacent south to the subject was also built in the late 1990s on slightly larger lots. To the west of the subject lands across Hemlock Avenue (which creates the subject’s western boundary) is the Inland Valley Islamic Society, a small building and parking lot, beyond which is Richmond American’s new Highland Park community, a new home community currently under construction and actively selling. Highla nd Park includes two neighborhoods: Cascade and Talise.

Cascade grand opened in December of 2022 while Talise just grand opened in mid- February 2023. Both Cascade and Talise feature detached two story homes, similar to the subject’s Chateau product line. Highland Park is the nearest comparable in proximity to the subject property (discussed later in the Valuation Analysis section of this report).

Less than one-half mile south of the subject at the northeast corner of Hemlock Avenue and Walnut Street is Cec ilia Lucero Solorio (“Solorio”) Elementary School, which is part of the Etiwanda School District and serves the subject. The Etiwanda School District also serves the subject for middle school, and the subject is assigned to Heritage Intermediate 433
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school, located less than two miles southwest of the subject at Baseline Avenue and South Heritage Circle in Fontana. For high school, the subject falls in the boundar ies of the Chaffey Joint Union High School District, and the highly ranked Etiwanda High School.

Etiwanda High School is located in Rancho Cucamonga, just two miles southwest of the subject, southwest of the I-210 and I-15 intersection.

There are several parks within close proximity to the subject. One block south of the subject at the northeast corner of Beech Avenue and Walnut Street is Koehler Park, a public recreational park with large fields, basketball courts, tennis courts, play structures, covered tables and restrooms. Just 1.25 miles northeast of the subject, at the corner of Summit Avenue and Lytle Creek Road, is a large public park facility that serves the City and surrounding neighborhoods. This park facility includes the Fontana Park and Aquatic Center, along with a large dog park, and skat e park. Th is park facility is adjacent to Summit High School, which does not serve the subject’s residents.

There are several shopping centers within one mile of the subject, the closest being about one mile east of the subject at Sierra Lakes Parkway and Citrus Avenue, just north of I - 210. This stretch of retail starts at Citrus Avenue and continues along Sierra Lakes Parkway through the Sierra Avenue on/offramp, and includes a Home Depot, Ralphs Grocery Store, Walgreens, Costco, LA Fitness, Lowes Home I mprovement and more.

Located just over one mile northwest of the subject on the southwest corner of Beech Avenue and Summit Avenue is an additional shopping center, known as Summit Heights Gateway, which includes a Kohl’s, PetSmart, Aldi grocery store, a P lanet Fitness, and several smaller retail stores and restaurants. Directly across from Summit Heights Gateway is the larger 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.

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FONTANA CFD NO. 99 – THE RETREAT

We have reviewed the City of Fontana CFD Report for Community Facilities District No. 99 (The Retreat) dated June 30, 2020 as prepared by David Taussig & Associates, Inc .

The CFD Report provides a brief description of Fontana CFD No. 99, a brief description of the facilities to be funded, a description of the boundaries and an estimate of the cost of financing the bonds used to pay for the facilities. Resolution No. 2020-043 was adopted on June 9, 2020 and approved the intention to establish Fontana CFD No. 99.

The exterior boundaries of Fontana CFD No. 99 per the Proposed Boundar y map are shown below.

Per the CFD Report, at time of formation, Fontana CFD No. 99 encompassed approximately 14.83 gross acres and consist ed of 194 proposed residential units, comprised of 100 single family attached units ranging in size from 1,300 to 1,800 square feet and 94 detached units ranging in size from 1,649 to 1,973 square feet. Per the C FD Report, the types of facilities to be eligible for funding are streets, including grading, 435
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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 recreat ional 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. 99 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. Incidental expenses also included are the cost of planning and designing public facilities to be financed, including the cost of environmental evaluations of those facilities; the costs associated with the creation of CFD No. 99, issuance of bonds, determination of the amount of taxes, collection of taxes, payment of taxes, or costs otherwise incurred in order to carry out the authorized purposes of CFD No. 99; and, any other expenses incidental to the construction, completion, and inspection of the authorized work.

Per the Rate and Method, the Assigned Facilities Special Tax for Developed Property for Fontana CFD No. 99 (The Retreat) is as follows:

Land Use
Class

Description

Sq. Ft.

Special Tax
1 Detached Residential Property 2,000 or greater $2,273 per unit 2 Detached Residential Property 1,850 to less than 2,000 $2,230 per unit 3 Detached Residential Property 1,700 to less than 1,850 $2,187 per unit 4 Detached Residential Property Less than 1,700 $2,151 per unit 5 Attached Residential Property 1,850 or greater $2,204 per unit 6 Attached Residential Property 1,700 to less than 1,850 $1,948 per unit 7 Attached Residential Property 1,550 to less than 1,700 $1,825 per unit 8 Attached Residential Property 1,400 to less than 1,550 $1,552 per unit 9 Attached Residential Property 1,250 to less than 1,400 $1,349 per unit 10 Attached Residential Property Less than 1,250 $1,203 per unit 11 Non-Residential Property N/A $67,080 per acre

The estimated cost of public facilities at the time the Fontana CFD No. 99 Report was created were estimated as:

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PUBLIC FACILITIES AMOUNT
Park and Recreational Facility $1,273,522
Circulation Facility Improvements $889,896
Storm Drain Facility Improvements $298,073
Inclusionary Housing Improvements $192,700
Sewer Facility Improvements $170,062
Local Transportation Facility Improvements $152,048
Police Facility Improvements $90,608
Public Facility Improvements $85,450
Local Arterial Facility Improvements $85,062
Fire Facility Improvements $70,826
Flood Control Facility Improvements $64,401
Landscape Facility Improvements $53,566
Traffic Signal Facility Improvements $26,338
Library Facility Improvements $19,006
Additional Capital Facilities Infrastructure Improvements $867,890 TOTAL ESTIMATED COSTS $4,339,448

The maximum bonded indebtedness for CFD No. 99 is $ 5,500,000. Per the latest sources and uses of funds (dated March 1, 2023) for the proposed bond issuance, there will be an estimated $4,640,000 in Bond Par Amount and a Net Original Issue Discount of $(15,287) for a total bond fund deposit of $4,624,713 with $3,927,134 going to the project fund, $381,555 in debt service reserve fund and capitalized interest and $316,025 in underwriter’s discount and cost of issuance (all amounts subject to change). A larger copy of the Fontana CFD No. 99 boundary map is located in the Addenda for your review.

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SUBJECT PROPERTY DESCRIPTION

The subject propert y consists of 194 proposed units being developed as Villas at t he Retreat and Chateau at the Retreat, both being built and marketed by Lennar. The subject site is described below.

Location: Northwest corner of South Highland Avenue and Beech Avenue, south of I-210, Fontana, California
Legal Property
Description: Lot 1 of Tract No. 20228 in the City of Fontana, County of San Bernardino, State of California.

Property Owner: Villas: Individual Owners as Units 0301, 0305 & 0405 of Module 6; 0501-0505 & 0601- 0605 of Module 5; 0701- 0705 & 0801- 0805 of Module 4; 0901-0904 & 1001-1005 of Module 3; 1101-1105 & 1201- 1205 of Module 2; 1301 -1305 & 1401- 1405 of Module1 of Lot 1 of Tract 20228.

Lennar Homes of California, LLC as to Units 0101- 0105 and 0201- 0205 of Module 7; Units 0302-0304 and 0401-0404 of Module 6; Unit 0905 of Module 3; Units 6501-6505 of Module 10 of Lot 1 of Tract 20228.

R-Hearthstone Lot Option Pool 02, L.P. as to Units 1501- 1505 and 1601-1605 of Module 9; Units 1701-1705 and 1801-1805 of Module 8; Units 6601-6605 of Module 10 of Lot 1 of Tract 20228.

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Chateau: Individual Owners as to Units 0019-0026 and Units 0100 & 0102-0105 of Module 15; Units 0027- 0034 and Units 0094-0099 of Module 14; Units 0035- 0042 and Units 0088- 0093 of Module 13; Units 0043- 0049 and Units 0082- 0087 of Module 12; Units 0050- 0056 of Module 11 of Lot 1 of Tract 20228.

Lennar Homes of California LLC as to Units 0067-0069 of Module 19; Units 0101 of Module 15; Units 0106-0114 of Module 16 of Lot 1 of Tract 20228.

R-Hearthstone Lot Option Pool 02, L.P. as to Units 0057- 0064 of Module 18; 0070-0075 of Module 19; 0076-0081 of Module 17 of Lot 1 of Tract 20228.

Assessors
Parcel Nos.: The subject covers the following APNs: 0228-252-06 through - 85; 0228-253-01 through -66; and 0228-253-01 through -48.

Property Taxes: We have reviewed the property tax invoice for sample parcel 0228- 252-51-0000. The parcel has an assessed value of $86,753 as the land value only. The property taxes include $ 867.53 for the general levy, $1,382.00 for the Etiwanda School District CFD 10, and $77.32 in miscellaneous charges. The tax invoice (as of February 27, 2023 per the County of San Bernardino Tax Collector) shows the first installment paid. It should be noted this parcel is now improved. The subject Fontana CFD No. 99 is not shown on this tax invoice and the current tax invoice is based on an unimproved property.

Three-Year
Sales History: Per Lennar, they purchased the subject property for $16,500,000 on May 4, 2021, based on an estimated finished lot value of $160,000.

On May 25, 2021, Lennar Homes of California, LLC ("Lennar") and R-Hearthstone Lot Option Pool 02, L.P., a Delaware limited partnership (“Hearthstone”) and Owner, entered into an agreement whereby Lennar conveyed the property to Hearthstone and Lennar was provided an exclusive option (but not an obligation) to acquire the property in several takedowns over time pursuant to an agreed- upon takedown schedule. To date Lennar has taken down 149 of the lots/pads with the next take -down anticipated for Lots 76- 81 on February 17, 2023. Lennar began closing homes within the subject to individual owners in May 2022, and has closed 113 houses between May 16, 2022 and February 15, 2023.

Size and Shape: Tract Map 20228 is generally rectangular in shape and contains

18.453 gross acres and 14.387 net acres per the recorded map which subdivides the subject into one numbered lot and four lettered lots. While the CFD Report states the net acreage at 14.83 acres, we will use the engineered acreage of 14.387 acres in our analysis. Per the condominium plan the lot was subdivided into 19 numbered 439
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modules and four lettered modules.

Zoning: Per the current City of Fontana General Plan Land Use Map and the current Zoning Map, the site is designated as R-3 (or Multiple Family

12.1-24 du/acre) . The subject lands fall within the California Landings Specific Plan, which denotes the subject as “Detached & Attached Cluster Residential” with no listed minimum lot size.

Entitlements: The subject is entitled by Tract Map No. 20228 which was recorded on March 30, 2021 and divides the subject into one numbered lot .

Two subsequent condominium maps further divide the subject: the Villas at the Retreat Condominium Map was recorded September 14, 2021, and the Chateau at the Retreat Condominium Plan was recorded September 20, 2021. A copy of Tract Map No. 20228 and subsequent condominiums maps are located in the Addenda for your review.

Home Owner’s
Association: The Retreat HOA fee is estimated by Lennar representatives as $333 per month for the worst -case scenario. The HOA covers maintenance of the community gate, swimming pool, community center and restrooms, community park, as well as all walkways and community landscaping. The Lennar website currently quotes the monthly HOA fee at $361, which is more conservative than the DRE budget provided. Per Lennar representatives, the Villas (attached homes) includes an additional $91.60 per month supplemental fee due to their added benefits from the HOA which include the building exteriors, as typical for attached homes.

Topography: The subject lands are generally flat and at grade with streets on the east, west and south borders . The adjacent I -210 freeway (to the north) sits above the subject and there is a landscaped slope between the freeway and the subject. The subject has been fully graded with the lots and pads generally level with the internal streets.

Soils Condition: We have reviewed a “Geotechnical Investigation” for the subject site dated August 28, 2020, prepared by Leighton and Associates, Inc. of Rancho Cucamonga. The Report presents a summary of the observation and testing services provided by Leighton and Associates as well as their findings and suggestions for developing the site into Tract 20228. The Report concludes that the proposed development is geotechnically feasible, provided that the recommendations contained in the report are incorporated into the design and earthwork construction of the project as was currently planned.

It is an assumption of this appraisal that the soils are adequate to support the highest and best use conclusion and that all recommendations made within any and all reports were adhered to 440
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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 an Earthquake Fault Zone Boundary.

Environmental
Concerns: We have reviewed a “Phase I and Limited Phase II Environmental Site Assessment ” (“ESA”) dated September 2, 2020 , prepared by Leighton and Associates, Inc. of Ranc ho Cucamonga. The ESA concluded that the subject propert y was previously used for a residence and later as a chicken ranch. There was also a presence of fill materials/stockpiles on the site from 2000s onward. Historical usage of the site for agriculture and stockpiles presents a moderate concern with regards to possible residual pesticides, however soil samples were tested and all detected concentrations of petroleum hydrocarbons were below the acceptable residential screening levels. Overall, the ESA foun d 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 and Limited Phase II 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 First American Title Com pany as Order Number NHSC -6222114 (29) dated June 1, 2020 issued on Tentative Tract Map 20228.

Item Nos. 1, 1A, 2 and 3 refer to property taxes and special assessments including Etiwanda School District CFD No. 10, however not the subject CFD . Item No s. 4, 5 and 6 refer to easements for Crawford Canyon Mutual Water Company (recorded July 19, 1940), for street, highway and public utilities and incidental purposes for the City of Fontana (recorded August 29, 1996) and for pipelines and incidental purposes for San Gabriel Valley Mutual Water Company (recorded May 13, 1997). Item No. 7 refers to the terms and provisions contained in the School Facilities and Funding Agreement recorded November 25, 2019 on the site.
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It is an assumption of this appraisal report that the subject lands are free and clear of any liens and/or encumbrances other than Fontana CFD No. 99, the above referenced CFD No. 10 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: Inland Empire Utilities Agency
Water: Fontana Water Company
Schools: Etiwanda School District and Chaffey Joint
Union High School District

Streets/Access: Access to the subje ct property is convenient via I -15 to exit 116 Beech Avenue/Summit Avenue, eas t and stay on Beech as it turns south for 1.4 miles to South Highland Avenue; the subject has entrances from both Beech Avenue and South Highland Avenue.

Access is also convenien t via the I-210 exit 64B Cherry Avenue, south on Cherry and immediate east on South Highland Avenue where the subject is located three-quarters of a mile east of Cherry.

I-210 access is also possible from exit 66 Citrus Avenue, south on Citrus and immediat e west on South Highland Avenue, where the subject is one mile west of Citrus Avenue.

I-15 (1.3 miles west of the subject) is a major north/south freeway, which provides access to both international borders with Mexico and Canada.

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

I-10 (4.75 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

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.

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Beech Avenue is a smaller local arterial that turns from east/west to north/south, just east of I -15. Beech A venue turns into Wilson Avenue west of I-15, and provides access into the Rancho Fontana neighborhood where it terminates 1.75 miles south of the subject.

Beech Avenue picks up again at Foothill Boulevard/Route 66 and provides access throughout Fontana where it terminates south of I -

10. South Highland Avenue is a smaller local arterial providing east/west access. It begins less than one mile west of the subject at Cherry Avenue and continues paralleling the I -210 and providing access to the commercial centers along I -210. It becomes West Renaissance Parkway approximately 2.5 miles east of the subject.

Cherry Avenue has on/off ramps at I -10 and I -210 and provides access into central and south Fontana. Cherry Avenue turns into Duncan Canyon Road in the H unter’s Ridge neighborhood, approximately two miles northwest of the subject and ends at Mulberry Avenue, in the southwest industrial park area of Fontana, approximately seven miles southwest of the subject.

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 over two miles northeast of the subject.

Internal streets within the subject include: Wild Lane, Rid ge Lane, Horizon Street, Reserve Lane, and Park Lane. The main entrance is from Wild Lane off of South Highland Street, directly across from the community pool and recreation center. The models are located at the southeast corner of the subject at Ridge Lane and Reserve Lane.

Current Condition: The subject is being developed into 194 single-family homes consisting of pads for 100 condominiums and 94 small lots/pads for detached cluster homes . Upon our inspection, 130 of the homes were over 95 percent complete including 113 individually owned homes, eight model homes, and nine additional production homes owned by the builder ( seven in escrow). In addition, there were 53 homes under construction (less than 95 percent complete, 22 in escrow) and 11 additional finished lots/pads (none in escrow).

Costs to Complete: The subject property has been developed into 194 finished lots/pads with internal streets complete and utilities stubbed to each lot. Per Lennar’s representative they have paid all of the fees and there are an estimated $1,390,000 in remaining costs for the pool, clubhouse, landscaping and other common area improvements. It is our understanding that these costs are the builder’s responsibility and 443
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will be spread between the Lennar and Hearthstone owned lots as the individual owners are not responsible. Out of the total 194 lots/pads, 113 are individually owned leaving 81 lots, pads or homes owned by Lennar and Hearthstone. Lennar owns 36 which includes eight models, nine houses over 95 percent complete and 19 houses under construction. Hearthstone owns 34 houses under construction (under 95 percent complete) and 11 lots/pads. Dividing the $1,390,000 by the 81 lots results in remaining land development costs of $17,160.49 per lot/pad.

Improvement
Description: The Retreat is a gated community with two product lines. The Villas are attached condominiums arranged in five-plexes and features five floorplans sized 1,165 to 1,895 square feet . It should be noted that the building permits for the Villas reflect slightly larger home sizes, which are from 1,252 to 2,024 square feet. The two smallest sized plans are carriage units with the first floor being their garage and a stairwell and all of the living area upstairs. Per Lennar, the marketed home sizes are the smaller home sizes consisting of 1,165 to 1,895 square feet which is what we will reflect in this appraisal. Chateau features detached homes on small lots in a cluster format and has four floorplans sized 1,724 to 2,046 square feet which also reflects the permitted square footage. The models of the community are located at the south end of the subject at the intersection of Ridge Lane and Reserve Lane. The Retreat features two to three-bedroom floorplans featuring attached two-car garages, with some floorplans featuring an additional covered car port . Home exteriors feature Early California, Cottage, and Italian- influenced architectural detailing, dual glazed low-E windows, and insulated roll-up sectional garage doors. The Retreat homes offer Shaw vinyl and carpet floor coverings (with Emser Tile ceramic tile at entry) , bullnose drywall corners, two-panel interior doors and prewiring for light fixtures or ceiling fans in bedrooms and dining room. Kitchens include solid stone countertops (granite at Villas, choice of granite or quartz at Chateau), GE stainless steel appliances, and eat in islands. Homes at Chateau feature shaker style cabinetry in maple or thermofoil, while homes at Villas off er flat panel thermofoil cabinetry. All floorplans offer two car garages, with some side by side and other split with two single car garages (those with split car garages also offer a covered carport ). All homes include tankless water heaters, Wi-Fi heat mapping with Eero Pro 6 mesh Wi-Fi system, Honeywell smart thermostat, Schlage Encode smart Wi -Fi deadbolt, and Ring alarm security kit . One hundred and thirteen of the proposed 194 homes in the subject property have closed to individuals with closing dates between May 16, 2022 and February 15, 2023. Per Lennar, actual closed sales prices (including premium, upgrades, options and incentives) have ranged from $355,790 to $ 604,395. Current reported base asking prices range from $435,450 to $562,680 while 444
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grand opening base asking prices in November 2021 ranged from $448,000 to $596,000. 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. It should be noted that the seller is offering varying concessions including some rate buy downs, on a case-by-case basis. The incentives have ranged from $2,409 to $103,470 with an average amount of $36 ,976 per home for the 142 home sales to date. The houses which are over 95 percent complete are detailed below.

*Each asterisk designates one model home per that plan. “C” denotes carriage unit (first floor only holds garage and stairwell, all living and bedroom space on second floor). “CP” denotes a covered car port in addition to the garage.

In addition to the above, there are 53 homes under construction ( 30 at Villas and 23 at Chateau) and an additional 11 finished lots/pads (5 at Villas and 6 at Chateau).

The Retreat by Lennar

Plan

Bed/Bath
Floors/
Parking
Marketed
Sq. Ft.

Ind.

Owned
Bldr.

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 minimal 0.2 percent growth between January 2021 and January 2022, 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 0.75 percent over the next eight 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 COVID influence is still unknown on the County’s population growth. New home sales in most cities in the County in 2020 and 2021 were higher than the coastal communities due to affordability, the work from home factor, and the fact that millennials are finally entering the housing market. These factors may increase actual County population growth in 2022.

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 that of other Southern California regions. 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 economy entered what is now known as the COVID Recession. The housing market slowed down significantly early on, but by May 2020, new homes were going under contract and selling at well above average absorption rates from May 2020 through Spring of 2022 in the region. Since May 2022, the new home market has seen a slowdown in absorption rates 446
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due to the increasing interest rates, the high prices of homes, and the high rate of inflation which is shaking consumer confidence.

Economic growth in the Inland Empire was strong generally between 2015 (after the Great Recession), and until the economic shutdown due to COVID. The second half of 2020 and all of 2021 saw economic growth, however the first two quarters of 2022 saw GDP shrinking while the third and fourth quarters saw minimal growth with the advanced estimate for the year 2022 at 2.1 percent. The most recent unemployment rate for the County is 3.6 percent (per the December 2022 EDD report – most recent published), lower than the County’s pre-COVID unemployment rate in February 2020 of 3.7 percent.

While unemployment rates are at historical lows, the inflation factor is significantly affecting the economy.

The housing market played a large role in the past two recessions. In the Great Recession, due to increased interest rates and rising h ome 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 sub- prime and non-conventional mortgage markets, which played a role in the 2008 upheaval of Wall Street and contributed significantly to the U.S. economic downturn of the Great Recession. Due to stricter i ncome verification on new loans and the lack of available credit, coupled with job losses and 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.

During the COVID recession, new home sales were 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 onset of the COVID pandemic, prices did not appear to change in the County. Some builders increased concessions in March 2020, but by May 2020 concessions were back to where they were prior to COVID, and prices increased significantly until spring 2022 .

Per the Zonda National Economic and Housing Market Update (January 20, 2023), during 447
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their most recent survey of over 300 homebuilders nationwide, 94 percent of the builders stated they plan to slow housing starts or at least watch current sales to asses future starts. The rising interest rates alone did not seem to slow sales in Spring 2022. However, a combination of increasing home prices and falling consumer confidence, added to the significant interest rate increases h ave slowed home sales significantly. With the recent higher interest rates and increased home prices, the average monthly mortgage payment is up over 50 percent year-over-year.

Per the Zonda survey, as of mid-January 2023, over 75 percent of the new home builders in the Nation surveyed were stating they anticipate lower home prices in 2023 as compared to 2022 with about 20 percent thinking a decrease of 10- 20 percent and over 40 percent thinking a decrease of 5- 10 percent. D emand has slowed and is causing concern. Over 87 percent of builders are offering incentives (typically closing costs and rate buy -downs, however some incentives tied to options and upgrades), with Inland Empire projects averaging over $10,000 or about 3.2 percent. The builders’ largest concerns relate to: (1) interest rates, (2) consumer confidence, (3) inflation, (4) new home affordability, (5) economic uncertainty, (6) land prices, (7) materials cost, and (8) materials availability. The past year has seen a slowdown in both traffic and absorption due to the high inflation rates and resulting interest rate hikes.

Home loan mortgage rates have been and are still playing a huge part in the housing market. The Board held mortgage rates at all -time lows after the Great Recession and again after the COVID Recession in an attempt to assist the housing market’s recovery.

Low rates helped home sales during this time. However, first-time buyers are now having a hard time entering the housing market due to rising prices and rising interest rates. Per FRED, the average 30-year fixed mortgage has gone from 2.65 percent in January 2021 to 7.08 percent as in October 2022 with a decrease since then with current rates at 6.12 percent as of February 9, 2023. Mortgage applications had been spiking in late 2020 and 2021 due to the low rates, and the fear that they were going to start ticking up, which we are now 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 2022, historical 0.75 448
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percent increases in each of June, July, September, and Nov ember, a 0.50 percent increase in December 2022 and a 0.25 percent increase in February 2023 . This has increased the Federal Reserve rate from 0-0.25 percent to 4.5 – 4.75 percent in the past 12 months. The Board has recently stated they anticipate additio nal increases later this year. The Federal Reserve Rate increases are supposed to help slow the high inflation rate in the Nation. Per John Burns, a real estate consulting firm, 75 percent of builders nationwide are offering rate buy -downs in order to keep escrows closing. These include either buying down the interest rate for the entire 30- year term (32 percent of builder’s surveyed) or temporarily reducing the first two years of the rates (30 percent). These buydowns equate to incentives from one to six percent of the sales price which equates to costing the builders $6,000 to $36,000 on a $600,000 new home. Per Zonda’s Southern California Update for First Quarter 2023, their survey of public builders found they are now offering up to $75,000 in incentives with the majority in the $30,000 - $50,000 range.

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 as Ontario, Rancho Cucamonga, Fontana, Chino and Chino Hills in Southwest San Bernardino County. The increase in housing prices since 2012 combined 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 timeline for processing entitlements, 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 are fewer currently available in the Inland Empire. The majority of land sales over the past few years include individual tracts sold by a master developer within a master plan, single tracts of land with maps ready to record (such as the subject site) , or a public builder buying a larger piece of land, but developing the land for its own use.

Land sales in the Inland Empire slowly grew from 2012 up to a peak in 2017, with 2018 and 2019 showing lower land transactions. Once home sales exploded in May 2020, 449
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residential land sales followed with a significant number of residential land sales to builders in the Inland Empire durin g the second half of 2020 and throughout 2021. The beginning of 2022 continued with strong residential land sales until May when sales began to fall sharply. According to Zonda’s survey of builders regarding residential land purchases, as of January 2023 only two percent of the builders surveyed are “full steam ahead” with 52 percent “cautiously moving forward;” 17 percent “bidding lower on land” and 29 percent “pausing transactions.” In addition, many are delaying take- downs whenever possible. Currently there is a disconnect in the seller’s expectations as they are still hoping for March 2022 land prices, however builders have seen new home prices dropping from 5- 20 percent in the Inland Empire. As new home pricing drops, the construction costs do not, thus the majority of the decrease typically falls to the land value.

New Home Sales and Pricing
We have researched new single- family homes within the subject’s market in order to reflect residential trends. It should be noted these sales numbers and prices p ertain 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 February 19, 2023 Ryness Report, the year -to-date average sales rate ( 3.6 sales per month) is approxi mately 33 percent lower than the same time period of the previous year (5.4 sales per month). While it is early in the new year, the trend of a significant drop off in sales rates from the previous year has continued. New home sales rates started to level off in late Spring 2022, likely due to the increase in mortgage interest rates. As rates go down, purchasing power becomes larger, which gives new-home buying a boost. However, the flip side is that as interest rates rise, purchasing power becomes lower and therefore fewer people purchase new homes. Along with home sales comes a demand for appliances, furniture, building materials and services such as insurance, mortgage services, inspections, interior designers, and landscapers, all contributing to the area economy.

When comparing the February 19, 2023 Inland Empire Ryness Report to one year prior, there are 57 additional projects ( 182 in February 2022 and 239 in February 2023) and sales are nearly 35 percent lower year -to-date than the previous year. This does not 450
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appear to be due to limited inventory as there are additional projects, but rather because of an actual slowdown in sales activity likely due to the increase in interest rates. It should be noted that current sales rates are being compared to early 2022, which was a hugely successful time for the housing market, prior to the shifting market of Spring of 2022. To put this in perspective, when comparing year to date average new home sales from February 2022 to February 2023, average sales numbers in the Inland Empire are down 33 percent (per the Ryness Report dated February 19, 2023); however, when comparing year to date average new home sales from January 2020 (prior to the pandemic) to February 2023, sales are actually a little stronger (2.2 sales per week year -to-date average in January 2020 versus 3. 6 sales per week year -to-date average in February 2023).

New single -family home pricing (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 Inland Empire median new home price is $603,000 which is down from a record high of $646,000 in July 2022 per Zonda’s latest market report (Riverside-San Bernardino-Ontario, CA CBSA January 2022). This reflects an increase of over 140 percent from the bottom of the cycle and an increase of nearly 38 percent over its peak during the Great Recession, however a decrease from the 2022 peak of 6.6 percent. New home sale prices fluctuate based on the land value and competition more than on the cost of building the home. While finishes and sizes of homes can change, the basic costs on a per square foot basis typically do not fluctuate as much as land values, however there have been inflationary increases in construction costs adding to this increase.

We have reviewed Empire Economics’ Price Point Review Study on Fontana CFD No. 99 (The Retreat) dated March 6, 2023. Empire Economics did an original Price Point Study on the project in April 2020 in order to determine their market value for the various plans within the Retreat. The “Review Study” is to ascert ain if the prices have increased or decreased since the original Study. The Empire Economics Price Point Review Study 451
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concluded that, in all cases, the current market value of the homes was, on average, 17 percent higher than the original market values in 2020.

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, Ontario and Upland . We have two sets of comparable communities: one of attached communities most comparable to the Villas at the Retreat, and one of detached communities most comparable to Chateau at the Retreat. We found five additional attached communities comparable to th e Villas. The attached comparables have base prices ranging from $371,150 to $726,990, and the Villas current base pricing falls within this range from $435,450 to $527,750. We found eight additional detached communities comparable to the Chateau product l ine. The detached comparables have base prices ranging from $499,990 to $771,544, and Chateau’s current base pricing falls within this range from $540,490 to $562,280.

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 January 2023 ($738,250) reflects a decrease of 0. 7 percent from the previous month and 0.2 decrease year-over-year from $ 740,000 in January 20222.

Existing home sales in Southern California overall were down 41.1 percent year-over- year as of January 2023. The overall Southern California numbers compare to San Bernardino County with $446,900 as the median price paid for an existing home in the County in January 2023, down 4.3 percent from the previous month and 0.7 percent year over year ($45 0,000). Sales of existing homes in the County were down 53.6 percent year-over-year due to higher mortgage rates and high home prices. It is interesting to note that San Bernardino County has had the most significant drop in year -over-year sales, but is still generally in line with what’s happening in the Southern California market.

The slower sales rates in the existing home sales market is reflective of homeowners not ready to sell due to the changing market. Historically, the new home market captures around 20 percent of the overall home sales; however, in the past year, new home sales 452
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are capturing over 30 percent of total home sales. Below is a table showing the sales and prices for the Southern California area by County per the Cali fornia Association of Realtors.

Southern California Existing Home Sales
County
January
2023
December
2022
January
2022
Price MTM
% Change
Price YTY
% Change
Sales YTY
% Change
Los Angeles $778,540 $799,670 $800,960 -2.6% -2.8% -38.2% Orange $1,194,500 $1,131,760 $1,195,000 5.5% 0.0% -35.6% Riverside $585,000 $575,000 $590,000 1.7% -0.8% -46.5%
San Bernardino $446,900 $466,940 $450,000 -4.3% -0.7% -53.6% San Diego $824,950 $850,000 $875,000 -2.9% -5.7% -35.1% Ventura $815,000 $818,000 $850,000 -0.4% -4.1% -40.4%
Southern Calif. $738,250 $743,180 $740,000 -0.7% -0.2% -41.1% Source: California Association of Realtors

Based on January 2023 median existing homes prices, in comparison to all 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 $138,100 as c ompared to Riverside County, $331,640 as compared to Los Angeles County, $348,100 as compared to Ventura County, $378,050 as compared to San Diego County and $747,600 as compared to Orange County. That is, in January 2023 , the median priced home in San Ber nardino County was $ 747,600 less than the median priced home in Orange County ($1,194,500). 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 have seen more growth which put pressure on home prices in the Inland Empire. It’s worth noting that late 2022 actually saw the San Bernardino County advantage lower compared to previous months. It’s also important to note that June of 2022 was the first mon th where the majority of Southern California counties showed median price decreases from the previous month. Most counties were seeing substantial month- to-month median price increases over the past two years, and the widespread decrease appears to be a sign that the market has turned and the pricing run up has come to an end.

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. 453
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The number of sales and sale prices of existing homes within market areas sur rounding the subject are shown in the table below.

Community
Name
Location
To Subject
No. of
Sales
Jan. ‘23
Sales %
Change from
Jan. ‘22
Jan. ‘23
Median Sale
Price
Price % Change
from Jan. ‘22
North Fontana Larger Subject Vicinity 44 N/A $639,000 -2.4% Etiwanda West 19 -42.4% $1,080,000 10.2%
Rancho Fontana South 6 -76.9% $619,500 0.6%
Citrus Heights South Northeast 2 -71.4% $732,500 -3.0%
Walnut Village Immediate East 8 -46.7% $555,000 -0.89%
Rialto Far East 30 -47.4% $537,000 3.3%
Summit Heights North 5 -44.4% $748,000 3.2%
Sierra Lakes Northeast 12 -47.8% $680,000 1.5%
West End Southwest 20 -33.3% $627,500 -2.6%
Source: Redfin Housing Market Trends January 2023
The median home price of a detached resale home in the subject’s vicinity of North Fontana in January 2023 was $639,000, which is within the range of the resale detached home prices in the subject area. The low -end of the range relates to the Walnut Village and Rialto areas, which have older homes, while the high- end of the range relates to Etiwanda. Etiwanda is an upscale Rancho Cucamonga neighborhood on the west side of I-15, and stands as an outlier in the subject’s marketplace . This is because of Rancho Cucamonga’s more desirable address as well as Etiwanda’s highly ranked public schools.

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 decrease of 0.7 percent year -over-year from January 2022 to January 2023. This s uggests that the subject’s immediate marketplace is largely outperforming the County as a whole.

According to the Ryness Report dated February 19, 2023 , there are currently 21 new home projects in the subject’s Central-East San Bernardino submarket, with the City of Fontana housing 11 of them (including the subject’s two).

The Retreat - Sales and Pricing
The Retreat is comprised of 194 single family homes with marketed sizes from 1,165 to 2,046 square feet. The Retreat grand opened on November 13, 2021, with opening base pricing ranging from $448,000 to $596,000. Current base pricing at The Retreat ranges 454
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from $435,450 to $562,680 which is 2.8 to 5.5 percent lower than opening base prices.

Actual closed prices, including options, upgrades , premiums and concessions , have ranged from $355,790 to $604,395. The difference between the base pricing and the actual pricing is options, upgrades and premiums paid by the buyer offset by concessions given by the builder. The net concessions for the 142 sales within the subject property average $36,976 per unit. These concessions are decided on a case by case basis and have increased over the past eight months due to fluctuating mortgage rates. Within the subject, Lennar has sold and closed 113 homes to individuals, with an additional 29 homes in escrow which are due to close at completion. The total of 142 sales equates to an absorption rate of 9.5 sales per month spread across the two product types (4.6 sales per month for Villas and 4.9 sales per month for Chateau) . This is considered to be a strong absorption rate for t he subject marketplace. It should be noted that the strong absorption rate is partially due to the generous concessions being offered. Per the Ryness Report, a new home tracking service, as of February 19, 2023 the year-to-date average sales per project per month in the Inland Empire is 3.6 homes.

Summary

The Inland Empire had seen substantial increases in pricing since 2012 with most areas, including the subject, showing astronomical increases from mid-2020 through early 2022.

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. The latest statistics indicate a slowdown in sales as interest rates have risen substantially. The Fontana new- home submarket is performing well above market, resulting in strong sales rates within the Retreat. The subject market area saw an increase in pricing consistent with most of Southern California throughout 2020 and 2021, and appeared to be continuing in the beginning of 2022. The past few months have seen sales slow and pricing beginning to soften. Despite uncertainty hitting the market due to rising interest rates and inflation, most observers agree that the Inland Empire housing market is healthy and population growth is still estimated to occur in the area. It is believed that as the population continues to increase, housing growth will also continue, despite a slowdown. 455
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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”5

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 18.453 gross acres and 14.387 net acres per recorded Tract Map No. 20228. The site is located in the northern portion of the City of Fontana, at the northwest corner of South Highland Avenue and Beech Avenue, adjacent to the south of I -210. The lands are generally at street grade of surrounding streets and below the adjacent I-210, with the Interstate to the nort h, and existing residential homes to the east and south. To the west is the Inland Valley Islamic

5 The Appraisal of Real Estate, 11th Edition
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Center which separates the subject from another new home community: Highland Park by Richmond American which is currently marketing homes.

The subject site has been graded for 194 single family homes: 20 pads for 100 condominiums and 94 small lots for detached homes. The condominiums are arranged in five-plex buildings in a motorcourt formation, and the small lots are also arranged in a motorcourt style and c ontain approximately 3,000 square feet each. We have reviewed an Environmental Site Assessment 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. 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 South Highland Drive; or from I-210 exit Cherry Avenue or Citrus Avenue to South Highland Driv e. There is a regional shopping within one mile of the subject at Sierra Lakes Parkway and Citrus 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 R-3, or Multiple Family 12.1-24 du/acre. The subject lands fall within the California Landings Specific Plan, which denotes the subject as “Detached & Attached Cluster Residential” with no specified minimum lot 457
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size. In addition to the General Plan and Specific Plan zoning, the subject is covered by recorded Tract Map No. 20228 (recorded March 30, 2021) which subdivide s the subject property into a single lot along with condominium maps (recorded September 13, 2021 and September 20, 2021) which divide the property into 194 single-family units (pads for 100 attached condominiums and lots of 94 detached homes) along with a community center and pool, tot lot, setback areas and internal streets.

Based on the legality of us e 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.

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 showed strong increases in both sales and pricing in 2020, 2021 and the beginning of 2022. The second half of 2022 and the beginning of 2023 reflected a slowdown in sales and a softening in prices as interest rates have risen substantially. Within Fontana C FD No. 99, out of 194 proposed houses, there have been 142 home sales to date including 113 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 five projects to be comparable to the subject ’s Villas (attached) product line, and eight projects to be comparables to the subject’s Chateau (detached) product line. Homebuilding had not been able to keep up with the demand in 2020 and 2021 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. While the market softened in the second half of 2022, the Inland Empire is still seeing demand and new homes are still selling. Our search for land s ales found 12 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.

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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.

Highest and Best Use – “As Improved”
The subject property consists of Villas at the Retreat and Chateau at the Retreat with 194 proposed homes which are currently being marketed by Lennar. The Retreat began selling in November 2021 and has sold 142 homes, reflecting a sales rate of approximately 9.5 sales per month spread across the two product lines . Independently the Villas has an average absorption rate of 4. 6 sales per month while Chateau has an average absorption rate of 4.9 homes per month. Base prices at The Retreat have decreased slightly since grand opening from 2.8 to 5.5 percent per floorplan, with current base pricing ranging from $4 35,450 to $562,680. In marketing the homes the builder is offering concessions on a case by case basis. These concessions have ranged from $2,409 to $103,470 with an average of $36,976 on the 142 sales to date. While the incentives are showing a softening market, per Empire Economics’ Price Point Review Study, the plan pricing has increased on average 17 percent between proposed pricing in 2020 and current pricing. The decrease in pricing from late 2021 to late 2022 and the current incentives being given are consistent with the Inland Empire market. The sales absorption rate within The Retreat is considered to be strong . As discussed under the Inland Empire Housing Market section, within the Inland Empire, the year-to-date average sales per project is 3.6 homes per month, which the subject is outperforming. All of the homes are of good design and appear to be of good quality workmanship. It appears that 459
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The Retreat 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. 460
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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 both attached and small lot cluster residential lands, they are typically sold on the basis of a finished pad for a townhome unit or finished lot for a detached unit. That is, the sales price is determined by a finished pad or lot 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. Our search revealed several projects similar to the subject in that they have some attached and some cluster lots. These transactions are typically looked at on a blended price per unit, taking into consideration the overall density of the project.

In the case of the compl eted 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.

For 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. 461
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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 testing.

All of the value conclusions will take into consideration improvements and/or benefits to be funded by the Fontana CFD No. 99 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 The Retreat, there are 194 lots/pads in a physically finished condition, with 113 completed homes individually owned, 17 Lennar-owned homes that are complete or nearly complete (including 8 model homes), 53 Lennar or Hearthstone-owned homes that are under construction (under 95 percent complete), and 11 additional finished lots/pads owned by Hearthstone. As we are valuing a home under construction (under 95 percent complete) on the basis of a finished lot/pad, we will be valuing 64 lots/pads in our analysis; 19 owned by Lennar and 45 owned by Hearthstone. Please refer to Page 2 of this Appraisal Report to see the detailed ownership per unit.

We have searched the area and found the 12 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 purchase of proposed townhomes located at the northwest corner of Pine and Meadowhouse Avenues within the master planned community of the Preserve, located in Chino about fifteen miles southwest of the subject. The Preserve is a successful master planned community with significant amenities which has been 462
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offering lots to homebuilders over the past 10 years. Beazer Homes purchased the site in June 2022 for $19,952,500 or $133,909 for each of the 149 units based on a reported finished lot price of $205,000. The product consists of 2 and 3-story attached townhomes with an overall density of 14 dwelling units per acre. The lands closed in an unimproved condition with an approved tentative tract map. In comparison to the subject property, this transaction is considered to be inferior due to the higher density and the fact that this product is for all attached units versus the subject’s attached and detached product. In addition, this sale is considered to be superior due to closing in June 2022, prior to the majority of the softening in the subject market along with no freeway frontage.

Land Sale No. 2 pertains to the Meritage Homes purchase of an assemblage of land in Redlands, northwest of Texas Street and Domestic Avenue about 15 miles east of the subject site. The parcels were all raw land at time of sale. The site was in the East Valley Corridor Sp ecific Plan designated for science research park; however, in May 2021, Meritage Homes processed the Bergamot Specific Plan which was approved by the City along with a change of zoning allowing for 317 dwelling units including: 53 single-family detached (“SFD”) lots with a minimum square footage of 7,200; 144 SFD lots with a minimum size of 3,500 square feet; and, 120 motor-court cluster SFD lots with a density of 10 dwelling units per acre. Meritage assembled and purchased the parcels from four landowners and closed between April 13
th and June 8 th, 2022. The lands were tied up
over one-year prior. The total price for the lands was $16,657,000 and the finish lot price (blended for all three products) equated to $193,000. In comparison to the subject property this location is considered to be superior due to no freeway frontage, the lot size is considered superior (7,200, 3,500 and 2,000 square feet versus the subject’s attached and cluster units) along with the fact this transaction was negotiated in early 2021, prior to a substantial amount of appreciation in the subject marketplace. The condition of the lands for this transaction is considered to be significantly inferior as they were in a raw land state and the buyer changed the zoning and processed the mapping as compared to the subject finished lots, ready to build. While the costs are accounted for in the estimated finished lot price, the risk of development, processing time and market conditions are not considered.
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Land Sale No. 3 is known as Planning Area 2 of Paradise Knolls and is located in the southwest portion of the City of Jurupa Valley at the corner of Limonite Avenue and Beach Street, just north of the Santa Ana River about ten miles south of the subject. Century Communities purchased 155 units which included 120 two story townhome units and 35 detached cluster motorcourt units. They purchased the site from Lansing Companies in March 2022 for $8,761,000, or $56,523 per unit based on an estimated finished pad of $140,000 (blended for both products). The site closed in an unimproved condition with final engineering in process. The site was the old Paradise Knolls Golf Course which was rezoned for residential development, with Richmond American Homes currently selling their successful Bridle Path at Paradise Knolls in Planning Area 1. This transaction is considered to be superior to the subject in date of sale and no freeway frontage; however, inferior in comparison to the subject due to overall density and condition at time of sale.

The majority of these units are attached with an overall density of 16 dwelling units per acre while the subject has an overall density of around 1 2 dwelling units per acre. This site was also sold in an unimproved condition while the subject is finished lots/ pads with no risk of development remaining.

Data No. 4 pertains to the January 2022 purchase of 56 units located at the southwest corner of Bonnie View Drive and Willow Avenue in Rialto, about six miles southeast of the subject site. Century Communities p urchased the property from Koba Properties for $3,290,000 or $58,750 per unit based on a reported finished lot estimated at $188,000 per brokers familiar with the transaction. The site was unimproved at time of sale with an approved Tentative Tract Map and entitlements for 56 units with an overall density of 12 dwelling units per acre. In comparison to the subject site, while the density is similar, the Rialto location is considered to be inferior to the subject’s Fontana location; however, superior due to the date of sale along with no freeway frontage.

Land Sale No. 5 refers to the December 2021 purchase of 254 lots known as Appaloosa Springs, located southwest of Limonite Avenue and Clay Street in central Jurupa Valley, about 11 miles south of the subject site. The property was purchased by DR Horton from 464
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Inland Harbor for $22,200,000 or $87,402 per lot. The lots have a minimum lot size of 3,600 square feet , however many are up to 5,000 square feet and are mapped as conventional lots . According to brokers familiar with the transaction, the lands were purchased based on a finished lot price of $205,000. The property closed in an unimproved condition with an approved tentative tract map on the site. P er the city web site, the property is now going through final approvals. In comparison to the subject the date of sale, no freeway frontage and lot size /overall density are considered to be superior; however, the condition at time of sale is considered inferior.

Land Sale No. 6 refers to the sale of 526 lots which are known as the Gardens at Arboretum. Lennar purchased the acreage which is located 2.5 miles northeast of the subject site, from Lewis Group of Companies (North Fontana Investment Company) in December 2021 for $91,935,500 per public record. The purchase included at total of 526 units made up of 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 superior in date of sale, no freeway frontage and lot size/overall density as it includes a blended price with about one-half (275 of the 526 total unit) similar in size to the subject lots (triplex, 2,200 and 2,600 square foot lots); however, the additional 251 lots are conventional lots from 4,000 square feet to 6,000 square feet. 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 inferior to the subject when looking at number of pads/lots.

Land Sale No. 7 pertains to the purchase of 107 lots located at the northeast corner of San Savaine Road and South Highland Avenue in Fontana, adjacent to the west 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 465
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2021 for $18,691,821 based on a reported blended finished lot price of $285,000. The site is adjacent to the 210 Freeway , as is the subject . Richmond American Homes is currently selling their Cascade at Highlands project is on the conventional small lots with homes from 1,860 to 2,060 square feet and current base pricing from $560,990 to $596,990 and their Talise product with sizing from 1,410 to 1,950 square feet with current base pricing from $499,990 to $573,990. The overall density of this transaction is 10 dwelling units per acre, while the subject’s area of The Retreat has a density of about 12 dwelling units per acre. The subject has about one- half attached units while this transaction is for all detached units.

Land Sale No. 8 refers to the purchase by Landsea Homes of 489 units located about

2.5 miles north of the subject northwest of Duncan Canyon Road and Interstate 15.

Landsea purchased the site in September 2021 from R ichland 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 s quare 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 $2 85,000. 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 superior due about one-half of the lots being minimum 5,000 and minimum 10,000 square feet. In addition, this transaction is considered to be i nferior 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 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. 9 refers to the July 2021 purchase of 215 units known as Emerald Ridge South, located northwest of State Route 60 and Rubidoux Road about nine miles southeast of the subject property. Century Communities purchased the site from Signature Builder for $13,920,000 , or $64,744 unit for 118 attached townhomes and 97 466
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motor court cluster lots with a minimum lot size of 3,500 square feet. Per brokers familiar with the transaction, the price was based on a blended per unit finished price of $165,000; however the detached cluster lots were reportedly based on a finished lot value of $200,000. The site has an overall density of 8.43 dwelling units per acre. The lands were unimproved at time of sale with approved maps and final engineering in process. In comparison to the subject property, the overall density is slightly lower than the subject’s 12 dwelling units per acre making this transaction slightly superior.

Land Sale Nos. 10 , 11 and 12 refer to three separate sales within the Ontario Ranch which is located about ten miles southwest of the subject property. Ontario Ranch covers about 8,200 acres with about half of the area now approved for over 16 specific plans containing new home communities. While the original planning occurred well over a decade ago, the synergy and home sales have been generally since the great recession or in the past ten years. The Ontario Ranch is consistently shown as one of the m ost successful master planned communities in the nation by way of sales. It is different in that it is not a single developer, but rather several developers of various specific plans. Land Sale No. 7 is in regards to KB Home purchasing 432 proposed units ( 149 cluster units, 174 attached townhomes and 145 courtyard townhomes ) within the Esperanza Specific Plan with an overall density of 10 dwelling units per acre. The lands were purchased in July 2021 for $68,500,000 based on a reported blended per unit price of $239,000. The property closed in an unimproved condition with mapping in place and final engineering in process. Land Sale No. 9 refers to Shea Homes purchase of 224 proposed units (87 cluster lots and 137 townhome pads) located in the Rich Haven Specific Plan which is adjacent to the north of the Esperanza Specific Plan. Shea purchased the site in July 2021 for $21,645,500 based on a blended finished lot/pad value of $185,000. Shea is now selling their Oleander and Olive neighborhoods with pricing from the $550,000’ s to the upper $700,000’s. Land Sale No. 10 refers to Lennar’s purchase of 73 proposed units located within the Subarea 29 S pecific Plan in Ontario Ranch, just southwest of Land Sale Nos. 8 and 9. Lennar paid $7,076,287 for the site based on a reported finished lot price of $195,000. The site sold in an unimproved condition with a tentative tract map for 73 proposed cluster lots. In comparison to the subject site, the location of Ontario Ranch 467
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is considered to be slightly superior due to its closer proximity to LA and Orange Counties with excellent access for commuters.

The chart below summarizes the considerations used in adjusting the market data to the subject property.

Data
No. Location Date of
Sale
Lot Size /
Density
Finished
Lot Price Comparison to Subject
1 Chino 6/22
14 du/ac
Attached

$205,000
Superior o- Amenities, Date of Sale,
No Freeway Frontage
Inferior – Density / all attached
2 Redlands 4 / 22
7,200
3,500
Cluster

5.3 du/ac
$193,000
Blended
Superior – Overall density, Date of
Sale & No Freeway Frontage
Inferior – Condition
3 Jurupa Valley 3 / 22
Attach &
Cluster

14.7 du/ac
$140,000
Blended
Superior – Date of Sale & No
Freeway Frontage
Inferior – Density & Condition

4 Rialto 1/22 12 du/ac $188,000
Superior – Date of Sale, No Freeway
Frontage
Inferior - Location
5 Jurupa Valley 12 / 21 Cluster

3.7 du/ac $205,000
Superior – Date of Sale, Density &
No Freeway Frontage
Inferior - Condition

6 Arboretum,
Fontana 12 / 21
Triplex up to
6,000 sf / 4
du/ac
$274,000
Superior – Date of Sale & No
Freeway Frontage
Inferior – Number of Lots & Condition

7 Fontana 12 / 21 Small Lot /

10.3 du/ac $285,000 Superior – Density (no attached)

8 Fontana 9 / 21
Attach to
10,000 sf /
N/A
$285,000
Superior – Lot size & Density (no
attached)
Inferior – Number of Lots & Condition

9 Jurupa Valley 7 / 21
Attach &
Cluster /

8.4 du/ac
$165,000 Superior – Density
Inferior – Condition
10 Ontario Ranch 7 / 21
Attach &
Cluster / 8.7
du/ac
$239,000 Superior – Location
11 Ontario Ranch 7 / 21
Attach &
Cluster /

12.9 du/ac
$185,000

Superior - Location

12 Ontario Ranch 6/21 Cluster /
12 du/ac $195,000 Superior - Location

As discussed under the Inland Empire County Housing Market section earlier within this report the Inland Empire real estate market rose significantly between January 2020 and June 2022 and since then has decreased. Median home pricing rose approximately fifty percent between January 2020 and June 2022, however an over eight percent decrease has been seen since that time (according to the California Association of Realtor’s). The increases were 19.6 percent in 2020; 17.5 percent in 2021, 9.6 percent the first six months 468
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of 2022 and an 8.6 percent decline since then. While the new home price fluctuations do affect the quality of the home (higher finishes with higher prices), most of the price fluctuations fall to the land value.

The above market data depicts a wide range of overall finished lot/pad price range from $140,000 to $285,000 with the low end being for a higher density product with about 80 percent of the units attached and the high-end all having a lower density. The subject was purchased in May 2021 based on a finished lot value estimate of $160,000, however this was prior t o significant appreciation in the marketplace. It is interesting to note that the adjacent property sold eight months later based on a $285,000 finished lot, however it did have a slightly lower density (all small lot detached units). During this time span , land transactions were becoming sparce as homes were selling at increased rates due to the low interest rates and work from home factor; thus builders, at times, paid a premium for the land. In the past six months, land sale closings have become sparse as new home prices have fallen with no new closings in the subject market since June 2022. New homebuilders had purchased land based on the higher new home sales rates and now that sales have slowed significantly, they are bui lding out the land purchased ov er the past year or two much slower than originally anticipated.

Our search of the subject area resulted in two escrows for similar density projects in Fontana which were cancelled in the past six months. These were located at the northeast and northwest corner of Citrus and Summit Avenues in Fontana. These two transactions had gone into escrow in 2021 and were anticipated to close in late 2022 based on finished lots of $215,000 for the 9.3 du/acre site and $225,000 for the 8.1 du/acre site. This would have set the top of our market value but the buyers backed out of both escrows.

Based on the market data, we have concluded that the subject lots/pads have a blended finished price of $195,000. There are 25 homes under construction (under 95 percent complete), of which 19 are owned by Lennar and six are owned by Hearthstone. In addition, Hearthstone owns 39 remaining finished pads/lots. Based on the above and 469
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considering the remaining costs as discussed in the Property Description section, the land value is calculated as follows:

Lennar Ownership of Lots/Pads:
19 Lots/Pads x $195,000 $3,705,000
Less: Remaining Costs ($17,160.49 x 19) ( 326,049)
Current Value of 19 Lots/Pads $3,378,951
Hearthstone Ownership:
45 Lots/Pads x $195,000 $8,775,000
Less: Remaining Costs ($17,160.49 x 45) ( 772,222) Current Value of 45 Lots/Pads $8,002,778

Retail House Valuation – The Retreat
Within The Retreat , there are 113 individually owned homes and 17 homes over 95 percent complete owned by Lennar. The builder-owned homes over 95 percent complete include nine production homes and eight model homes.

Due to the single ownership of multiple houses ( 17 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 The Retreat 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 usin g an appropriate rate to determine the builder - owned 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 each neighborhood using the concl uded 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 The Retreat, with both the Villas and Chateau product lines. 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 470
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neighboring areas of Jurupa Valley, Rialto, Ontario, and Upland. For the detached (Chateau) comparables, we were able to focus the majority of comparables in the subject’s City, as Fontana currently houses a multitude of detached actively selling projects. However, for the attached (Villas) comparables, we had to broaden our scope to include Ontario and Upland as there were only two comparable attached communities currently selling in the subject’s city of Fontana including the subject. Our search of the subject property and the local Multiple Listing Service (MLS) has resulted in no re-sales or current resale listings within either the Villas or Chateau at The Retreat . It should be noted that the building permits for the Villas indicate a larger home square footage. However; per Lennar the difference is unhabitable area, thus they are marketing the smaller square footage which will be used in our analysis. The floorplans are detailed below.

In addition to the above, there are 53 homes under construction (30 at Villas and 23 at Chateau) and an additional 11 finished lots/pads (5 at Villas and 6 at Chateau).

The most appropriate new home comparable data for Villas at The Retreat Plan 1 are shown as follows.

The Retreat by Lennar

Plan

Bed/Bath
Floors/
Parking
Marketed
Sq. Ft.

Ind.

Owned
Bldr.

Owned
Villas at the Retreat (Attached Condos)
1C 2 / 2 2 / 2 1,165 11 2*
2C 2 / 2 2 / 2 1,243 11 2*
3 3 / 3 2 / 2 1,687 10 3*
4 3 / 3 2 / 2 1,771 10 3*
5 3 / 3 2 / 2 1,895 10 3*
Villas Subtotals: 52 13
Chateau at the Retreat (Small Lot Detached Condos)
1 3 / 3 2 / 2 + CP 1,724 17 2*
2 3 / 2.5 2 / 2 + CP 1,961 13 0
3 3 / 2.5 2 / 2 + CP 1,987 13 1*
4 3 / 2.5 2 / 2 2,046 18 1*
Chateau Subtotals: 61 4
The Retreat Total: 113 17
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Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1C 2 / 2 2 / 2 1,165 --
A1 2C 2 / 2 2 / 2 1,243 $356.64
A2 1C 2 / 2 2 / 2 1,309 $329.26
A3 2 2 / 2.5 2 / 2T 1,391 $331.06
A3 3 3 / 3 2 / 2 1,324 $326.66
A4 1C 1 / 1.5 2 / 1 972 $431.74
A4 2 2 / 2.5 2 / 2T 1,110 $457.03
A5 1C 2 / 2 2 / 2 1,216 $429.19
A6 1 2 / 2.5 3 / 2T 1,360 $400.73
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor)
• “A” stands for “Attached” home
• “T” denotes for “Tandem” garage

The comparable communities are located in Fontana, Upland and Ontario, as our search was expanded in order to include attached product communities with floorplans sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, school districts, 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 range from $329.26 to $457.03 per square foot. Villas Plan 1 is shown as 1,252 square feet on the building permit however is marketed as 1,165 square feet. We will use the marketed square footage in our analysis. The Retreat Villas Plan 1 has a current base asking price of $376.35 per square foot. There have been 11 closings of Villas Plan 1 with sales prices ranging from $305.40 to $366.78 per square foot. There are three current escrows of Villas Plan 1 with a sales price range of $311.62 to $385.41 per square foot. 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 including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 1 the concessions range from $8,170 to $69,611 or from $7.01 to $59.75 per square foot. It should also be noted that the escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 1 has a base current market value of $310.00 per square foot. This calculates as follows:

1,165 sf x $310.00 = $361,150

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The most appropriate new home comparable data for Villas at The Retreat Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2C 2 / 2 2 / 2 1,243 --
A1 1C 2 / 2 2 / 2 1,165 $376.35
A2 1C 2 / 2 2 / 2 1,309 $329.26
A3 2 2 / 2.5 2 / 2T 1,391 $331.06
A3 3 3 / 3 2 / 2 1,324 $326.66
A4 2 2 / 2.5 2 / 2T 1,110 $457.03
A5 1C 2 / 2 2 / 2 1,216 $429.19
A5 2 3 / 2.5 2 / 2 1,389 $410.30
A6 1 2 / 2.5 3 / 2T 1,360 $400.73
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor)
• “A” stands for “Attached” home
• “T” denotes for “Tandem” garage

The Retreat Villas Plan 2 has a current base asking price of $356.64 per square foot. There have been 11 closings of Villas Plan 2 with sales prices ranging from $335.33 to $385.92 per square foot. There are four current escrows of Villas Plan 2 with a sales price range of $312.13 to $328.81 per square foot. 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 including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 2 the concessions range from $2,409 to $51,514 or from $1.94 to $41.44 per square foot. It 473
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should also be noted that the escrow price range is lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas at The Retreat Plan 2 has a base current market value of $310.00 per square foot. This calculates as follows:
1,243 sf x $310.00 = $385,330

The most appropriate new home comparable data for Villas at The Retreat Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 3 / 3 2 / 2 1,687 --
A1 4 3 / 3 2 / 2 1,771 $290.88
A2 3 3 / 2.5 2 / 2 1,604 $307.98
A3 4 3 / 2.5 2 / 2 1,652 $305.18
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 4 3 / 2.5 2 / 2 1,692 $340.89
A4 5 3 / 2.5 2 / 2 1,722 $351.36
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A5 3 3 / 2.5 2 / 2 1,628 $375.86
A6 3 3 / 3.5 3 / 2 1,654 $397.21
• “A” stands for “Attached” home

The Villas Plan 3 has a current base asking price of $298.93 per square foot. There have been 10 closings of Villas at the Retreat Plan 3 with sales prices ranging from $258.76 to $306.46 per square foot. There are three current escrows of Villas Plan 3 with a sales price 474
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range of $266.63 to $272.63 per square foot. 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 including concessions.

The builder is currently giving concessions which may include an interest rate buy-down.

For Villas Plan 3 the concessions range from $8,000 to $92,075 or from $4.74 to $54.58 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 3 has a base current market value of $260.00 per square foot. This calculates as follows:
1,687 sf x $260.00 = $438,620

The most appropriate new home comparable data for Villas at the Retreat Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 3 / 3 2 / 2 1,771 --
A1 3 3 / 3 2 / 2 1,687 $298.93
A1 5 3 / 3 2 / 2 1,895 $278.50
A2 3 3 / 2.5 2 / 2 1,604 $307.98
A2 4 3 / 3 2 / 2 1,900 $277.37
A3 4 3 / 2.5 2 / 2 1,652 $305.18
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 4 3 / 2.5 2 / 2 1,692 $340.89
A4 5 3 / 2.5 2 / 2 1,722 $351.36
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A5 3 3 / 2.5 2 / 2 1,628 $375.86
A6 3 3 / 3.5 3 / 2 1,654 $397.21
• “A” stands for “Attached” home

The Villas at the Retreat Plan 4 has a current base asking price of $290.88 per square foot.

There have been 10 closings of Villas Plan 4 with sales prices ranging from $239.35 to $320.72 per square foot. There are four current escrows of Villas Plan 4 with a sales price range of $245.98 to $268.34 per square foot. 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 including concessions.

The builder is currently giving concessions which may include an interest rate buy-down.

For Villas Plan 4 the concessions range from $2,657 to $103,470 or from $1.50 to $58.42 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 4 has a base current market value of $245.00 per square foot. This calculates as follows:
1,771 sf x $245.00 = $433,895

The most appropriate new home comparable data for The Retreat Villas Plan 5 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 5 3 / 3 2 / 2 1,895 --
A1 4 3 / 3 2 / 2 1,771 $290.88
A2 4 3 / 3 2 / 2 1,900 $277.37
A2 5 4 / 3 2 / 2 1,922 $286.16
A3 5 3 / 2.5 2 / 2 1,826 $277.93
A4 6 3 / 2.5 2 / 2 1,799 $337.98
A6 4 4 / 3.5 3 / 2 2,202 $330.15
• “A” stands for “Attached” home

The comparable communities are located in Fontana, Upland and Ontario, as our search was expanded in order to include attached product communities with floorplans sized similar to the subject. All are of similar quality, design and appeal. Adjustments were considered (when applicable) for location, school districts, 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 range from $277.37 to $337.98 per square foot. Villas Plan 5 is shown as 2,024 square feet on the building permit however is marketed as 1,895 square feet. We will use the marketed square 476
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footage in our analysis. The Villas at the Retreat Plan 5 has a current base asking price of $278.50 per square foot. There have been 10 closings of Villas Plan 5 with sales prices ranging from $207.62 to $282.03 per square foot. There are three current escrows of Villas Plan 5 with a sales price range of $241.60 to $266.23 per square foot. 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 including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Villas Plan 5 the concessions range from $3,956 to $95,552 or from $2.09 to $50.42 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Villas Plan 5 has a base current market value of $2 35.00 per square foot. This calculates as follows:
1,895 sf x $235.00 = $445,325

The most appropriate new home comparable data for Chateau at The Retreat Plan 1 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 1 3 / 3 2 / 2 + CP 1,724 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D3 2 3 / 2.5 2 / 2 1,650 $319.99
D3 3 3 / 2.5 2 / 2 1,710 $313.44
D4 1 3 / 2.5 2 / 2 1,879 $284.73
D6 1 3 / 2.5 2 / 2 1,795 $306.99
D6 2 3 / 2.5 2 / 2 1,832 $297.48
D7 1 3 / 2.5 2 / 2 1,822 $298.47
D9 2 3 / 2.5 2 / 2 1,705 $318.07
D9 3 3 / 2.5 2 / 2 1,843 $306.30
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, master plan amenities, stories, sales concessions, CFD taxes, common area benefits, total square footage, room count, garage 477
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space and other amenities. The new home comparables have a base price range from $284.73 to $319.99 per square foot. Chateau at The Retreat Plan 1 has a current base asking price of $313.51 per square foot. There have been 17 closings of Chateau Plan 1 with sales prices ranging from $268.86 to $345.17 per square foot. There are three current escrows of Chateau Plan 1 with a sales price range of $278.93 to $292.10 per square foot.

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 including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 1 the concessions range from $4,729 to $89,167 or from $2.74 to $51.72 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating. It has been concluded that Chateau Plan 1 has a base current market value of $270.00 per square foot. This calculates as follows:
1,724 sf x $270.00 = $465,480

The most appropriate new home comparable data for Chateau at The Retreat Plan 2 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 2 3 / 2.5 2 / 2+ CP 1,961 --
D1 1 3 / 3 2 / 2 + CP 1,724 $313.51
D1 3 3 / 2.5 2 / 2 + CP 1,987 $282.66
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D2 2 3 / 2.5 2 / 3 1,930 $297.92
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 2 3 / 2.5 2 / 2 1,832 $297.48
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D8 1 3 / 2 1 / 2 2,080 $278.84
D9 3 3 / 2.5 2 / 2 1,843 $306.30
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (w hen 478
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applicable) for location, lot size, school districts, 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 range from $278.84 to $344.25 per square foot. Chateau at The Retreat Plan 2 has a current base asking price of $286.77 per square foot. There have been 13 closings of Chateau Plan 2 with sales prices ranging from $249.19 to $307.78 per square foot. There is one current escrow of a Chateau Plan 2 with a sales price of $246.84 per square foot. 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 including concessions. The builder is currently giving concessions which may include an interest rate buy -down. For Chateau Plan 2 the concessions range from $4,848 to $88,336 or from $2.47 to $45.05 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating.

It has been concluded that Chateau Plan 2 has a base current market value of $245.00 per square foot. This calculates as follows:
1,961 sf x $245.00 = $480,445

The most appropriate new home comparable data for Chateau at The Retreat Plan 3 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 3 3 / 2.5 2 / 2+ CP 1,987 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D1 4 3 / 2.5 2 / 2 2,046 $275.01
D2 1 3 / 2.5 2 / 2 1,860 $301.61
D2 2 3 / 2.5 2 / 3 1,930 $297.92
D2 3 4 / 3 2 / 3 2,065 $290.55
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D8 1 3 / 2 1 / 2 2,080 $278.84
D8 2 3 / 2.5 2 / 2 2,180 $242.20
D9 4 4 / 3 2 / 2 2,064 $286.58
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s)

479
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City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 70
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, 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 range from $242.20 to $344.25 per square foot. Chateau at The Retreat Plan 3 has a current base asking price of $282.66 per square foot. There have been 13 closings of Chateau Plan 3 with sales prices ranging from $262.51 to $303.11 per square foot. There are three current escrows of Chateau Plan 3 with a sales price range of $249.34 to $262.87 per square foot.

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 including concessions. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 3 the concessions range from $3,959 to $64,140 or from $1.99 to $32.28 per square foot. It should also be noted that the current escrows are near the bottom of the closed sales, suggesting the market is not appreciating. It has been concluded that Chateau Plan 3 has a base current market value of $248.00 per square foot. This calculates as follows:
1,987 sf x $248.00 = $492,776

The most appropriate new home comparable data for Chateau at The Retreat Plan 4 are shown below.

Data Model Rm. Ct. Flrs/Pkg. Sq. Ft. Price/SF
Subj. 4 3 / 2.5 2 / 2 2,046 --
D1 2 3 / 2.5 2 / 2 + CP 1,961 $286.77
D1 3 3 / 2.5 2 / 2 + CP 1,987 $282.66
D2 3 4 / 3 2 / 3 2,065 $290.55
D3 4 4 / 3 2 / 2 1,950 $294.35
D4 2 3 / 2.5 2 / 3 1,997 $280.77
D5 1 3 / 3 2 / 2 2,006 $344.25
D6 3 3 / 2.5 2 / 2 2,007 $281.65
D7 2 3 / 2.5 2 / 2 1,932 $290.91
D7 3 3 / 2.5 2 / 2 2,207 $268.21
D8 1 3 / 2 1 / 2 2,080 $278.84
D9 4 4 / 3 2 / 2 2,064 $286.58
• “D” stands for “Detached” home
• “CP” denotes a covered “Car Port” in addition to garage(s) 480
_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 71
The majority of the comparable communities are located in Fontana; however, our search was expanded to the surrounding cities of Jurupa Valley and Rialto in order to include comparables with lots sized similar to the subject. Adjustments were considered (when applicable) for location, lot size, school districts, 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 range from $242.20 to $344.25 per square foot. Chateau at The Retreat Plan 4 has a current base asking price of $275.01 per square foot. There have been 18 closings of Chateau Plan 4 with sales prices ranging from $260.57 to $295.40 per square foot. There are five current escrows of Chateau Plan 4 with a sales price range of $247.83 to $270.89 per square foot.

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. The builder is currently giving concessions which may include an interest rate buy-down. For Chateau Plan 4 the concessions range from $7,151 to $78,388 or from $3.50 to $38.31 per square foot. It should also be noted that some escrow prices are lower than the closed sales, suggesting a decreasing market. It has been concluded that Chateau Plan 4 has a base current market value of $ 245.00 per square foot. This calculates as follows:
2,046 sf x $245.00 = $501,270

Builder Owned Retail Value – The Retreat

Within the subject property, there are 17 Lennar-owned houses over 95 percent complete, eight 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 $40,000 premium has been included with each of the model homes. As con cluded above, the retail base value conclusions for the builder -owned homes within The Retreat are calculated as follows:

481
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City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 72
Villas Plan 1 (2 x $361,150) $ 722,300
Villas Plan 2 (2 x $385,330) 770,660
Villas Plan 3 (3 x $438,620) 1,315,860
Villas Plan 4 (3 x $433,895) 1,301,685
Villas Plan 5 (3 x $445,325) 1,335,975
Chateau Plan 1 (2 x $465,480) 930,960
Chateau Plan 2 (0 x $480,445) 0
Chateau Plan 3 (1 x $492,776) 492,776
Chateau Plan 4 (1 x $501,270) 501,270
Model Upgrades (8 x $40,000) 320,000
Total Retail Value $7,691,486

Absorption Period
In order to arrive at an absorption period for the 17 builder-owned homes, the absorption rate for the subject neighborhood along with the surrounding developments has been reviewed. The Retreat grand opened in November 2021 and consists of 194 homes. There have been 142 sales since November 2021 suggesting an average absorption of 9.5 homes per month across the two product lines, which is considered to be very good for the subject area with the subject’s price points. When looking at each product line individually, the Villas have averaged a sales pace of 4.6 sales per month while Chateau has averaged a sales pace of 4.9 sales per month. It is interesting to note that Chateau’s sales rate has slowed considerably with the past four months averaging 2.0 sales per month. Taking into consideration the product, concluded sales prices and current escrows, along with the current unstable interest rates, it has been concluded that the 17 builder-owned homes will be absorbed within a five-month period at the concluded values.

Remaining Costs
As disc ussed under the remaining costs section earlier within this report, there are $17,160.49 per lot in remaining land development costs associated with the builder - owned homes, which equates to a total of $ 291,728 for the subject 17 homes. It is an assumption of this analysis that the remaining costs will be spread evenly over the five- month 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 482
_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 73
administrative costs. These costs typically range from six to ten percent depending on varying factors such as absorption period, intensity of marketing, etc. Due to the volatile market, we are considering e ight percent for marketing expenses and two percent for general and administrative costs for a total of ten 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 great 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. 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

The homes within The Retreat began selling in November 2021 with the product being well received in the marketplace with a 9.5 sales per month average across the two product lines.

While Chateau home sales have slowed in the past three months, the Villa home sales have stayed steady the past three months. Based on the sales rate within both communities in 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 The Retreat is $5,717,727.

483
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City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 74
The Retreat – Lennar Ownership

19 Lots/Pads owned by Lennar $ 3,378,951
17 Houses (including 8 models) Lennar-owned 5,717,727 Total Lennar Ownership $ 9,096,678

The Retreat – Hearthstone Ownership

45 Lots/Pads owned by Hearthstone $ 8,002,778

Individual Owners Value Conclusion – The Retreat
There are 113 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:

Villas Plan 1 (11 x $361,150) $ 3,972,650
Villas Plan 2 (11 x $385,330) 4,238,630
Villas Plan 3 (10 x $438,620) 4,386,200
Villas Plan 4 (10 x $433,895) 4,338,950
Villas Plan 5 (10 x $445,325) 4,453,250
Chateau Plan 1 (17 x $465,480) 7,913,160
Chateau Plan 2 (13 x $480,445) 6,245,785
Chateau Plan 3 (13 x $492,776) 6,406,088
Chateau Plan 4 (18 x $501,270) 9,022,860
Total Individual Owned $50,977,573

In an additional review, we have reviewed the original builder sales prices for the homes within the subject property. Closings for the 113 homes occurred between May 16, 2022 and February 15, 2023. The reported closing prices by the builder for the 113 individually owned homes total $57,778,049, which is 13.3 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 higher than the base pricing. However, in the past year public builders have increased concessions with rate buy -downs occurring which have totaled up to $100,000 in concessions with an average of over $36,000 per sale within the Retreat. When reviewing the amount of concessions, the sales prior to May 2022 (when the market began softening due to increasing interest rates) had an average concession of $20,901 per unit while the sales since May 1, 2022 have an average concession of $46,264 or over twice the amount 484
_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 75
in early 2022. The current market and most recent sales not only reflect higher incentives, but also lower pricing. Opening base prices in November 2021 ranged from $448,000 to $531,000 for the Villas while the Chateau opening base prices were from $570,900 to $596,000. December base pricing for the Villas was from $418,000 to $515,000 and $546,900 to $574,000 for the Chateau. C urrent base prices are from $435,450 to $527,750 for the Villas and from $540,490 to $562,680 for Chateau. This shows the adjusting of prices to meet the market and suggests that pricing has been decreasing.

The decreasing market and the increasing incentives have been taken into account in our analysis. The above valuation is for the minimum market v alue 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 ; however it does take concessions into consideration. It is our conclusion that the original builder sales prices further substantiate the concluded minimum market value for the individually owned homes

485
_________________________________________________________________________________________________________ Appraisal Report
City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 76

APPRAISAL REPORT SUMMARY

The appraisal assignment was to value the subject property within Fontana CFD No. 99 which consists of 194 proposed residential units. The 194 units are known as The Retreat, being marketed and sold by Lennar, and are located in the northern portion of the City of Fontana. The subject includes two product lines: The Villas are attached units and comprises 100 of the 1 94 units, and Chateau which are small lot detached units and comprise 94 of the 194 total units. As of February 17, 2023, individuals have pur chased and closed on 113 of the total 194 proposed houses, with an additional 29 homes in escrow which are due to close upon completion. The community has enjoyed good sales rates, however a slowdown in the absorption has been seen within the Chateau product line over the last few months. 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 and found none.

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 determ ined 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. 99 bond proceeds along with the Fontana CFD No. 99 special tax lien. The concluded aggregate value for the subject properties, subject to their respective special tax lien, is:

The Retreat:

Hearthstone Ownership (45 pads) $ 8,002,778
Lennar Ownership (19 pads & 17 houses) $ 9,096,678
Individual Owners (113 houses) $ 50,977,573
Total Aggregate Value CFD No. 99 $ 68,077,029

The above values are stated as of said date of value and subject to the attached Assumptions and Limiting Conditions and Appraiser’s Certification. 486
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City of Fontana CFD No. 99 (The Retreat by Lennar)
Kitty Siino & Associates, Inc. Page 77
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 performed any appraisal services on the subject property in the past three years. In January 2023 an appraisal was completed with a date of value of January 3, 2023. Due to a time delay, an update was needed which is this report.

9. No other appraisers have provided significant professional as sistance 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 Pr ofessional 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)
487

ADDENDA

488

FONTANA CFD NO. 99 BOUNDARY MAP

489

490

TRACT MAP No. 20228
& Condominium Maps
491

492

493

494

DISCOUNTED CASH FLOW ANALYSIS

495

Fontana CFD 99 The Retreat - Lennar-Owned Houses Disc. Cash Flow Analysis

MONTH Months MONTH 1 MONTH 2 MONTH 3 MONTH 4 MONTH 5 TOTAL 5 INCOME:

Retail Sales 7,691,486 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $7,691,486

TOTAL INCOME $1,538,297 $1,538,297 $1,538,297 $1,538,297 $1,538,297 $7,691,486

EXPENSES:

Remaining Costs ($58,345) ($58,346) ($58,345) ($58,346) ($58,346) ($291,728) Marketing & Carrying Expenses 10% ($153,830) ($153,830) ($153,830) ($153,830) ($153,830) ($769,149) Profit 10% ($153,830) ($153,830) ($153,830) ($153,830) ($153,830) ($769,149)

TOTAL EXPENSES ($366,004) ($366,005) ($366,004) ($366,005) ($366,005) ($1,830,025)

NET CASH FLOW $1,172,293 $1,172,292 $1,172,293 $1,172,292 $1,172,292 $5,861,461 Discount Factor 10% 0.9917 0.9835 0.9754 0.9673 0.9594

DISCOUNTED CASH FLOW $1,162,604 $1,152,995 $1,143,467 $1,134,016 $1,124,644 $5,717,727

CUMULATIVE DISCOUNTED $1,162,604 $2,315,599 $3,459,067 $4,593,083 $5,717,727 $5,717,727

CASH FLOW

496

FINISHED LOT LAND SALES MAP
& SUMMARY CHART
497

FINISHED LOT LAND SALES MAP

498

FINISHED LOT LAND SALES SUMMARY CHART

Data
No. Location / APN / Buyer / Seller Sales
Date
#
Lots Lot Size Sales Price /
Price per Lot
Est.

Finished
Lot Price
Comments
1 Zinnia at the Preserve, NE/W of Pine
Avenue & Meadowhouse Avenue,
Chino / 1057-041-13, 1057-061-12 /
Beazer Homes / Lewis Group of
Companies
Jun-22 149 14 du/ac

$19,952,500 /
$133,909

$205,000
Closed in unimproved condition with an
approved tentative tract map. This project
consists of 2/3-story attached townhomes.
2 Bergamont, NW of Texas Street &
Domestic Avenue, Redlands / 0167-
031-02 / Meritage Homes / Various
Investors (Assemblage)
Apr-22 –
June 22 317
7,200
3,500
10 du/ac
$16,657,000 / $193,000
(blended)
Closed in unimproved condition with an
approved Specific Plan, Environmental Impact
Report, and Tentative Tract Map. It consists of
three planning areas:
- PA 1: 53 lots, SFD, 7,200 sf
- PA 2: 144 lots, SFD, 3,500 sf
- PA 3: 120 lots, Motorcourt Cluster, 10 du/ac
$52,546
3 Planning Area 2 of Paradise Knolls,
SWC & SEC of Limonite Avenue &
Beach Street, Jurupa Valley / 162-230-
012, -014 / Century Communities /
Lansing Companies
Mar-22 155 16 du/acre
(blended)
$8,761,000 / $140,000
(blended)
Closed in unimproved condition with final
engineering in process. Consists of 120 two
story townhomes and 35 detached motorcourt
cluster units.
$56,523
4 The Depot, SWC Bonnie View Dr and
willow Avenue, Rialto / 0131-021-36,
37 and 38 / Century Communities /
Koba Properties
Jan-22 56 12 du/ac

$3,290,000 /
$58,750 $188,000 Closed in an unimproved condition with an approved TTM
5 Appaloosa Springs, SW of Limonite
Avenue & Clay Street, Jurupa Valley /
163-400-001, -052 / DR Horton /
Inland Harbor
Dec-21 254 3,600 $22,200,000 / $205,000
Closed in unimproved condition with an
approved tentative tract map. Single product
line SFD with lots ranging 3,600-5,000 sf $87,402
6 Gardens at Arboretum, NWC of Sierra
Avenue & Casa Grande Avenue,
Fontana / 0239-131-45 / Lennar /
Lewis Group of Companies
Dec-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 (4,990 sf), 88 Lots
• SFD (6,000 sf), 64 Lots
499

7 Highland, NW of Beech Avenue &
South Highland Avenue, Fontana /
0228-021-09 / Richmond American
Homes / Stratham Group
Dec-21 107
10 du/ac
(blended)
Small
Detached
$18,691,821 / $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
$174,690
8 Monarch Hills (Narra Hills), NW of
Duncan Canyon Road & Interstate 15,
Fontana / 0226-075-18 / Landsea
Homes / Richland Communities
Sept-21 489 Varies $42,736,000 / $285,000*
*Represents blended price for townhomes,
cluster, 5,000 sf lots and 10,000 sf lots. Sold in
unimproved condition. Portion is hillside
allowing for views.
-PA1, 154 lots, 10,000 sf ($360,000 FLV)
- PA 2, 79 lots, 5,000 sf ($295,000 FLV)
-PA 3, 127 lots, cluster product ($245,000 FLV)
-PA 4, 129 units, townhomes ($175,000 FLV)
$87,395*
9 Emerald Ridge South, NW of State
Route 60 & Rubidoux Road, Jurupa
Valley / 178-191-01, 02, 04 & 15 /
Century Communities / Signature
Builder
July-21 215 12 du/ac
3,500
$13,920,000 / $165,000
(blended)
Closed in unimproved condition with final
engineering in process.

Emerald Ridge South consists of two product
lines:
• 118 townhomes, 12 du/ac
• 97 lots, 3,500 sf ($200,000 FLV)
$64,744
10 Esperanza, SEC of Edison Avenue &
Scholar Way, Ontario / 0218-252-08 /
KB Home / Richland Communities
July-21 432 10 du/ac
(blended)
$68,500,000 / $239,000
(blended)
Closed in unimproved condition with final
engineering in process. Esperanza consists of
149 cluster units, 174 townhomes, and 145
courtyard townhomes.
$158,565
11 Gateway Ontario, NWC of Clifton
Avenue & Edison Avenue, Ontario /
0218-211-12 / Shea Homes / GDC
Communities
July-21 224 12 du/ac
(blended)
$21,645,500 / $185,000
(blended)
Closed in unimproved condition with final
engineering in process. Gateway Ontario
consists of 87 cluster units and 137 townhomes.
$96,632
12 Planning Area 27 of Subarea 29, SW
of Sumner Avenue and Merrill Avenue,
Ontario / 1073-171-16 / Century /
Lewis Group of Companies
June-21 73 12 du/ac
$7,076,287 / $195,000
Closed in unimproved condition with an
approved tentative tract map. PA 27 consists of
cluster product. $96,935

500

IMPROVED ATTACHED RESIDENTIAL

SALES MAP & SUMMARY CHART

501

IMPROVED RESIDENTIAL SALES SUMMARY MAP – ATTACHED HOMES

502

IMPROVED RESIDENTIAL SALES SUMMARY CHART – ATTACHED HOMES

Data
No.

Project Name
Location/Developer Plan Room
Count
Floors/
Parking Size (SF) Product Type /
Absorption Base Sales Price Price/SF
A1
(Subj.)
Villas at The Retreat, South
Highland Avenue and
Beech Avenue, Fontana /
Lennar
1C 2 / 2 2 / 2 1,165 $435,450 $376.35
2C 2 / 2 2 / 2 1,243 Motorcourt $443,300 $356.64
3 3 / 3 2 / 2 1,687 Attached $504,300 $298.93
4 3 / 3 2 / 2 1,771 4.6 sales/mo $515,150 $290.88
5 3 / 3 2 / 2 1,895 $527,750 $278.50
A2
Birch Bend at Shady Trails,
Citrus Avenue and
Parkhouse Drive, Fontana /
Tri Pointe Homes
1C 2 / 2 2 / 2 1,309 $431,000 $329.26
2 2 / 2.5 2 / 2 1,556 Row $489,000 $314.27
3 3 / 2.5 2 / 2 1,604 Townhomes $494,000 $307.98
4 3 / 3 2 / 2 1,900 4.6 sales/mo $527,000 $277.37
5 4 / 3 2 / 2 1,922 $550,000 $286.16
A3
Woodridge at Gabion
Ranch, Sierra Avenue and
Summit Avenue, Fontana /
Lennar
1C 1 / 1.5 2 / 1 849 $361,150 $425.38
2 2 / 2.5 2 / 2T 1,391 Motorcourt $460,500 $331.06
3 3 / 3 2 / 2 1,324 Townhomes $432,500 $326.66
4 3 / 2.5 2 / 2 1,652 6.2 sales/mo $504,150 $305.18
5 3 / 2.5 2 / 2 1,826 $507,500 $277.93
A4
Citrus at Canvas Park,
NEC Haven Avenue and
Ontario Ranch Road,
Ontario / Brookfield
1C 1 / 1.5 2 / 1 972 $419,650 $431.74
2 2 / 2.5 2 / 2T 1,110 Motorcourt $507,299 $457.03
3 2 / 2 2 / 2T 1,459 Townhomes $515,890 $353.59
4 3 / 2.5 2 / 2 1,692 6.0 sales/mo $576,783 $340.89
5 3 / 2.5 2 / 2 1,722 $605,042 $351.36
6 3 / 2.5 2 / 2 1,799 $608,029 $337.98
A5
Ventana, NWC Haven
Avenue and Eucalyptus,
Ontario / PLC Communities
1C 2 / 2 2 / 2 1,216 Motorcourt $521,900 $429.19
2 3 / 2.5 2 / 2 1,389 Townhomes $569,900 $410.30
3 3 / 2.5 2 / 2 1,628 1.9 sales/mo $611,900 $375.86
A6
Nuvo Piedmonte / SW
Milliken Avenue and Fourth
Street, North Ontario / The
New Home Company
1 2 / 2.5 3 / 2T 1,360 Motorcourt $544,990 $400.73
2 3 / 2.5 3 / 2T 1,494 3-Story $590,990 $395.58
3 3 / 3.5 3 / 2 1,654 Townhomes $656,990 $397.21
4 4 / 3.5 3 / 2 2,202 3.7 sales/mo $726,990 $330.15
• “C” denotes “Carriage” unit (first floor only holds garage and stairwell, all living and bedroom space on second floor) • “T” denotes for “Tandem” garage

503

IMPROVED DETACHED RESIDENTIAL

SALES MAP & SUMMARY CHART

504

IMPROVED RESIDENTIAL SALES SUMMARY MAP – DETACHED HOMES

505

IMPROVED RESIDENTIAL SALES SUMMARY CHART – DETACHED HOMES

Data
No.

Project Name
Location/Developer Plan Room
Count
Floors/
Parking Size (SF) Product Type /
Absorption
Base Sales
Price Price/SF
D1
(Subj.)
Chateau at The Retreat, South
Highland Avenue and Beech
Avenue, Fontana / Lennar
1 3 / 3 2 / 2 + CP 1,724 $540,490 $313.51
2 3 / 2.5 2 / 2 + CP 1,961 3,000 sf lots $562,365 $286.77 3 3 / 2.5 2 / 2 + CP 1,987 4.9 sales/mo $561,645 $282.66 4 3 / 2.5 2 / 2 2,046 $562,680 $275.01
D2
Cascade at Highland Park, South
Highland Avenue and San Servaine
Road, Fontana / Richmond
American
1 3 / 2.5 2 / 2 1,860 4,000 sf lot $560,990 $301.61
2 3 / 2.5 2 / 3 1,930 1.2 sales/mo $574,990 $297.92
3 4 / 3 2 / 3 2,065 $599,990 $290.55
D3
Talise at Highland Park, South
Highland Avenue and San Servaine
Road, Fontana / Richmond
American
1 3 / 2.5 2 / 2 1,410 $499,990 $354.60
2 3 / 2.5 2 / 2 1,650 Det. Cluster lots $527,990 $319.99 3 3 / 2.5 2 / 2 1,710 Grand Opening $535,990 $313.44
4 4 / 3 2 / 2 1,950 $573,990 $294.35
D4
Sienna at Aurora Park, Victoria
Street and Kestral Drive, Fontana /
TRI Pointe Homes
1 3 / 2.5 2 / 2 1,879 7,200 sf lots $535,000 $284.73
2 3 / 2.5 2 / 3 1,997 2.6 sales/mo $560,700 $280.77
3 4 / 3 2 / 3 2,264 $586,000 $258.83
D5
Goldenrod at Aurora Park, Victoria
Street and Kestral Drive, Fontana /
TRI Pointe Homes
1 3 / 3 2 / 2 2,006 7,200 sf lots $690,570 $344.25
2 4 / 3 2 / 2 2,292 2.3 sales/mo $713,562 $311.33
3 5 / 4 2 / 3 2,743 $771,544 $281.28
D6
Rivello at Monterado, Citrus Avenue
and Duncan Canyon Road, Fontana
/ Lennar
1 3 / 2.5 2 / 2 1,795 7,200 sf lots $551,050 $306.99
2 3 / 2.5 2 / 2 1,832 4.2 sales/mo $544,990 $297.48
3 3 / 2.5 2 / 2 2,007 $565,280 $281.65
D7
Salerno at Monterado, Citrus
Avenue and Duncan Canyon Road,
Fontana / Lennar
1 3 / 2.5 2 / 2 1,822 7,200 sf lots $543,820 $298.47
2 3 / 2.5 2 / 2 1,932 3.5 sales/mo $562,040 $290.91
3 3 / 2.5 2 / 2 2,207 $591,940 $268.21
D8
Seasons at Acacia, SE of East
Merrill Avenue and South Sycamore
Ave, Rialto / Richmond American
Homes
1 3 / 2 1 / 2 2,080 $579,990 $278.84
2 3 / 2.5 2 / 2 2,180 3,700 sf lots $527,990 $242.20
3 3 / 2.5 2 / 2 2,380 2.1 sales/mo $554,990 $233.19
4 4 / 2.5 2 / 2 2,640 $574,990 $217.80
506

D9
Discovery at Shadow Rock / NE of
Pacific Avenue & La Canada Drive,
Jurupa Valley / Lennar
1 3 / 2 1 / 2 1,547 $535,120 $345.91
2 3 / 2.5 2 / 2 1,705 4,700 sf lots $542,305 $318.07
3 3 / 2.5 2 / 2 1,843 5.3 sales/mo $564,510 $306.30
4 4 / 3 2 / 2 2,064 $591,510 $286.58

• “CP” denotes a covered “Car Port” in addition to garage(s)

507

APPRAISER’S QUALIFICATIONS

508

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 sal e 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.

509

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 Publi c Policy Program, February 2009 and March 2011
510
City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-2123 Agenda Date: 4/11/2023
Agenda #: J. Category: Consent Calendar
FROM:

City Manager's Office
SUBJECT:

Consider opposition to Assembly Bill (AB) 1000 and support for Assembly Bill (AB) 1748.

RECOMMENDATION:

Authorize the Mayor and City Council to sign a letter of opposition to AB 1000 and a letter of support for AB 1748.

COUNCIL GOALS:
· Promote economic development by concentrating on job creation. · Promote economic development by pursuing business attraction, retention, and expansion.
· Promote economic development by being business friendly at all levels and striving to constantly improve the city's competitiveness.

DISCUSSION:

In the last legislative session, Assemblymember Eloise Gomez Reyes wrote, and the state legislature nearly passed AB 1547, which would prohibit local governments from approving a warehouse development project where the distance between the boundary of the project site and sensitive land use is less than 3,000 yards. The City Council opposed this bill and the bill died in April of 2022.

At the start of the current legislative session, Assemblymember Gomez Reyes introduced AB 1000, which would allow for a warehouse that is within 1,000 feet of a sensitive receptor to be approved if and only if they impose a minimum setback of 750 feet and adopt all of the specific mitigation measures that will reduce the project’simpacts to public health in a manner comparable to imposing a 1,000 foot setback.

Concurrently, Assemblymember James Ramos introduced an alternative bill called AB 1748, which would prohibit the County of Riverside, the County of San Bernardino, and any of the cities within those counties from approving any warehouse development unless the local agency imposes a minimum setback of 300 feet or follows an industrial guideline framework.

The City Council strongly opposes legislation that seeks to limit local land use authority. Given AB 1000’s widespread impact on the city’s ability to review and approve developments, staff recommends the City Council authorize the Mayor and City Council to sign a letter of opposition to AB 1000 and alternatively sign a letter of support for AB 1748.

City of Fontana Printed on 4/6/2023Page 1 of 2
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File #: 21-2123 Agenda Date: 4/11/2023
Agenda #: J. Category: Consent Calendar
FISCAL IMPACT:

AB 1000 will significantly reduce economic development and city revenue.

MOTION:

Approve staff recommendation.

City of Fontana Printed on 4/6/2023Page 2 of 2
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4/5/23, 11:03 AM Bill Text - AB-1000 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1000 1/5 SHARE THIS:

Date Published: 03/30/2023 09:00 PM
ASSEMBLY BILL NO. 1000
AB-1000 Qualifying logistics use projects. (2023-2024)
AMENDED IN ASSEMBLY MARCH 30, 2023
CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION
Introduced by Assembly Member Reyes
February 15, 2023
An act to amend Section 65580 of add Chapter 2.8 (commencing with Section 65098) to Division 1 of Title 7 of the Government Code, relating to land use.

LEGISLATIVE COUNSEL'S DIGEST
AB 1000, as amended, Reyes. Land use: housing. Qualifying logistics use projects. (1) Existing law, the Planning and Zoning Law, sets forth various requirements relating to the review of development project permit applications and the issuance of development permits for specified classes of development projects.

This bill would prohibit a local agency from approving the development or expansion of any qualifying logistics use, as defined, within 1,000 feet of sensitive receptors, as defined, except as provided. The bill would authorize a local agency to approve the development or expansion of a qualifying logistics use greater than 750 feet from a sensitive receptor and within 1,000 feet of a sensitive receptor only if the local agency takes certain actions, including, among other things, conducting a cumulative analysis of the air quality impacts of the warehouse development project, as specified. The bill would require a local agency, upon receipt of an application for a warehouse development project, to take certain actions, including posting information on its internet website that is easily accessible and easily understandable by the public, as specified.

The bill would require the lead agency to conduct at least one scoping meeting at a location within one mile of the project site, except as provided. At the scoping meeting, the bill would require the lead agency to provide a description of the project and any information known about the project’s potential environmental impacts and take public comments regarding potential environmental impacts of the project, as specified. In a meeting in which a warehouse development project is being considered, the bill would require the lead agency, upon request, to provide translation services in a requested threshold language.

By modifying and increasing the duties of local agencies with regard to qualifying logistics use projects, the bill would impose a state-mandated local program.

Home Bill Information California LawPublicationsOther ResourcesMy SubscriptionsMy Favorites 513
4/5/23, 11:03 AM Bill Text - AB-1000 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1000 2/5 The bill would authorize an individual affected by a violation of these provisions or the Attorney General to bring an action to enjoin a violation of the provisions of this bill. (2) The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities. (3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law declares the importance of, and general responsibility for, making housing available and affordable for all Californians.

This bill would make nonsubstantive changes to those provisions.

Vote: majority Appropriation: no Fiscal Committee: noyes Local Program: noyes THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Chapter 2.8 (commencing with Section 65098) is added to Division 1 of Title 7 of the Government Code, to read:

CHAPTER 2.8. The Good Neighbor Policy
65098. This chapter shall be known, and may be cited, as “The Good Neighbor Policy.” 65098.1. For purposes of this chapter:
(a) “Development or expansion of any qualifying logistics use” means any of the following:
(1) The development of any qualifying logistics use.
(2) The expansion of any existing qualifying logistics use. (3) The expansion of any existing logistics use, where the logistics use after the expansion would be a qualifying logistics use.
(b) “Local agency” means a city, including a charter city, county, or a city and county. (c) “Qualifying logistics use” means any logistics use with 100,000 or more square feet of building space, including, but not limited to, warehouses.
(d) “Sensitive receptors” means one or more of the following:
(1) A residence, including, but not limited to, a private home, apartment, condominium unit, group home, dormitory unit, retirement home, or shelter.
(2) A school, including, but not limited to, a preschool, prekindergarten, or school maintaining kindergarten or any of grades 1 to 12, inclusive.
(3) A daycare facility, including, but not limited to, in-home daycare. (4) A health care facility, including, but not limited to, any hospital, medical clinic, community clinic, medical center, nursing home, long-term care facility, hospice, convalescent facility, or similar live-in housing. (5) A community center.
(6) An established community place of worship.
(7) An incarceration facility, including, but not limited to, a prison or jail. (8) A public playground, public recreation field, or public recreation center. 65098.3. (a) A local agency shall not approve the development or expansion of any qualifying logistics use that is within 1,000 feet of a sensitive receptor except as provided in subdivision (b). 514
4/5/23, 11:03 AM Bill Text - AB-1000 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1000 3/5 (b) A local agency may approve the development or expansion of a qualifying logistics use that is greater than 750 feet from and within 1,000 feet of a sensitive receptor only if the local agency does all of the following:
(1) Conducts a cumulative analysis of the air quality impacts of the warehouse development project, thoroughly considering the project’s incremental impact in combination with past, present, and reasonably foreseeable future projects, even if the project’s individual impacts alone do not exceed the applicable significance thresholds. When developing the analysis, the local agency shall identify actions to address cumulative warehouse impacts, including emissions and health risk analyses, as well as develop mitigation plans that include quantifiable reductions in pollution and incorporate cumulative impacts. (2) Requires all heavy-duty vehicles domiciled onsite to be model year 2014 or later from the start of operations and shall expedite a transition to zero emission vehicles, with the fleet fully zero emission by December 31, 2025, or when commercially available for the intended application, whichever date is later. (A) For the purposes of this subdivision, a zero-emission vehicle shall ordinarily be considered commercially available if the vehicle is capable of serving the intended purpose and is included in the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP). (B) The local agency shall be responsible for the final determination of commercial availability based on all the facts and circumstances at the time the determination is made. A local agency shall not determine that those vehicles are commercially unavailable unless the operator submits documentation from a minimum of three electric vehicle dealers identified on HVIP’s internet website demonstrating the inability to obtain the required electric vehicles or equipment needed within six months. (3) Requires owners, operators, or tenants of the qualifying facilities to utilize a clean fleet of light- and medium-duty vehicles as part of business operations. For any light- or medium-duty vehicle domiciled onsite, all of the following “clean fleet” requirements apply:
(A) Thirty-three percent of the fleet shall be zero-emission vehicles at start of operations. (B) Sixty-five percent of the fleet shall be zero-emission vehicles by December 31, 2024. (C) Eighty percent of the fleet will be zero-emission vehicles by December 31, 2026. (D) One hundred percent of the fleet will be zero-emission vehicles by December 31, 2028. (4) Requires all onsite equipment used at the warehouse to be zero emission with the necessary charging or fueling stations provided.
(5) Requires all off-road construction equipment used for the warehouse development project to be zero emission, where available, or hybrid electric-diesel and all diesel-fueled off-road construction equipment to be equipped with State Air Resources Board Tier 4 engines compliant with the standards set forth in Article 4 (commencing with Section 2420) of Chapter 9 of Division 3 of Title 13 of the California Code of Regulations as written on January 1, 2023.
(6) Requires zero-emission truck charging or fueling stations proportional to the number of dock doors at the project, running conduit to designated locations for future zero-emission truck charging stations. (7) Requires constructing electric plugs for electric transport refrigeration units at every dock door and requires truck operators with transport refrigeration units to use the electric plugs when at loading docks. An owner of a facility is exempt from the requirements of this subdivision if the owner records a covenant on the title of the underlying property that ensures the property shall not be used to provide refrigerated warehouse space. (8) Requires installation of solar photovoltaic systems and companion battery storage on the project site of a specified electrical generation capacity that is equal to or greater than the building’s projected energy needs, including all electrical chargers and designing all project building roofs to accommodate the maximum future coverage of solar panels and installing the maximum solar power generation capacity feasible. (9) Prohibits trucks onsite from idling for more than three minutes and requires operators to turn off an engine when not in use.
(10) Prohibits the idling of heavy construction equipment for more than five minutes. 65098.5. Upon receipt of an application for a warehouse development project, a local agency shall do all of the following: 515
4/5/23, 11:03 AM Bill Text - AB-1000 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1000 4/5 (a) Post information on its internet website that is easily accessible and easily understandable by the public regarding both of the following:
(1) The project, including a complete and accurate project description, maps, and drawings of the project design.
(2) The process by which interested members of the public can provide comments and input regarding the project.
(b) Mail or cause to be delivered a notice with a brief description of the warehouse development project and instructions to obtain information posted pursuant to subdivision (a) to both of the following:
(1) All owners and occupants of properties located within 1,000 feet of the project site. (2) All schools located within two miles of the project site. (c) Provide the information and notices required pursuant to this section in English and all threshold languages. 65098.7. (a) The lead agency shall conduct at least one scoping meeting at a location within one mile of the project site except as provided in subdivision (b).
(b) If the lead agency makes a good faith effort and is unable to secure a location for the scoping meeting within one mile of the project site, the lead agency may hold the meeting at another location that meets both of the following requirements:
(1) The meeting location is readily accessible to residents of disadvantaged communities located within one- half of one mile of the project site.
(2) If feasible, the meeting location is located within one-half of one mile of a transit stop. (c) If the scoping meeting is held on a weekday, the scoping meeting shall be held between the hours of 5 p.m. and 8 p.m.
(d) At the scoping meeting, the lead agency shall do both of the following:
(1) Provide a description of the project and any information known about the project’s potential environmental impacts.
(2) Take public comments regarding potential environmental impacts of the project, including any social and economic impacts related to a direct or indirect physical change caused by the project, project alternatives, and mitigation measures that would avoid or reduce any potentially significant environmental impacts. (e) In a meeting in which a warehouse development project is being considered, the public agency, upon request, shall provide translation services in a requested threshold language. 65098.9. An individual affected by a violation of this chapter or the Attorney General may bring an action to enjoin a violation of this chapter.

SEC. 2. The Legislature finds and declares that Section 1 of this act adding Chapter 2.8 (commencing with Section 65098) to Division 1 of Title 7 of the Government Code addresses a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 1 of this act applies to all cities, including charter cities.

SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.

SECTION 1.Section 65580 of the Government Code is amended to read:
65580.The Legislature finds and declares as follows:
(a)The availability of housing is of vital statewide importance and the early attainment of decent housing and a suitable living environment for every Californian, including farmworkers, is a priority of the highest order. (b)The early attainment of this goal requires the cooperative participation of government and the private sector in an effort to expand housing opportunities and accommodate the housing needs of Californians of all economic 516
4/5/23, 11:03 AM Bill Text - AB-1000 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1000 5/5 levels.
(c)Providing housing that is affordable to low- and moderate-income households requires the cooperation of all levels of government.
(d)Local and state governments have a responsibility to use the powers vested in them to facilitate the improvement and development of housing to make adequate provision for the housing needs of all economic segments of the community.
(e)The Legislature recognizes that, in carrying out this responsibility, each local government also has the responsibility to consider economic, environmental, and fiscal factors and community goals set forth in the general plan and to cooperate with other local governments and the state in addressing regional housing needs. (f)Designating and maintaining a supply of land and adequate sites suitable, feasible, and available for the development of housing sufficient to meet the locality’s housing need for all income levels is essential to achieving the state’s housing goals and the purposes of this article. 517
4/5/23, 11:04 AM Bill Text - AB-1748 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1748 1/3 SHARE THIS:

Date Published: 03/30/2023 09:00 PM
ASSEMBLY BILL NO. 1748
AB-1748 Qualifying logistics use projects. (2023-2024)
AMENDED IN ASSEMBLY MARCH 30, 2023
CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION
Introduced by Assembly Member Ramos
February 17, 2023
An act to amend Section 1 of the Government Code, relating to state government. An act to add Chapter

2.8 (commencing with Section 65098) to Division 1 of Title 7 of the Government Code, relating to local government.

LEGISLATIVE COUNSEL'S DIGEST
AB 1748, as amended, Ramos. Government Code. Qualifying logistics use projects.

Existing law, the Planning and Zoning Law, sets forth various requirements relating to the review of development project permit applications and the issuance of development permits for specified classes of development projects.

This bill would prohibit the County of Riverside, the County of San Bernardino, and any of the cities within those counties from approving the development or expansion of any qualifying logistics use, as defined, that is adjacent to sensitive receptors, as defined, unless the local agency imposes a minimum setback on the qualifying logistics use of 300 feet or follows an industrial guideline framework, as specified. By imposing new requirements on local agencies, the bill would impose a state-mandated local program.

The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Counties of Riverside and San Bernardino and the cities located within those counties.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law establishes the Government Code and prescribes general provisions for purposes of its Home Bill Information California LawPublicationsOther ResourcesMy SubscriptionsMy Favorites 518
4/5/23, 11:04 AM Bill Text - AB-1748 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1748 2/3 interpretation.

This bill would make a nonsubstantive change to the provision naming the Government Code.

Vote: majority Appropriation: no Fiscal Committee: noyes Local Program: noyes THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Chapter 2.8 (commencing with Section 65098) is added to Division 1 of Title 7 of the Government Code, to read:

CHAPTER 2.8. Qualifying Logistics Use Projects
65098. (a) For purposes of this section:
(1) “Development or expansion of any qualifying logistics use” means any of the following:
(A) The development of any qualifying logistics use.
(B) The expansion of any existing qualifying logistics use. (C) The expansion of any existing logistics use, where the logistics use after the expansion would be a qualifying logistics use.
(2) “Local agency” means any of the following:
(A) The County of Riverside.
(B) The County of San Bernardino.
(C) Any city located within the County of Riverside or the County of San Bernardino. (3) “Qualifying logistics use” means any logistics use with 400,000 or more square feet of building space, including, but not limited to, warehouses.
(4) “Sensitive receptors” means one or more of the following:
(A) A legally permitted residence, including, but not limited to, a private home, apartment, condominium unit, group home, dormitory unit, retirement home, or shelter. (B) A school, including, but not limited to, preschool, prekindergarten, or school maintaining kindergarten or any of grades 1 to 12, inclusive.
(C) A licensed daycare facility.
(D) A health care facility, including, but not limited to, any hospital, medical clinic, community clinic, medical center, nursing home, long-term care facility, hospices, convalescent facility, or similar live-in housing.
(E) A community center.
(F) An established community place of worship.
(G) A public playground, public recreation field, or public recreation center. (b) A local agency shall not approve the development or expansion of any qualifying logistics use that is adjacent to a sensitive receptor unless the local agency does either of the following:
(1) Imposes a minimum setback on the qualifying logistics use of 300 feet from the building’s loading docks measured from the property line of any sensitive receptor to the nearest dock door using a direct straight-line method.
(2) Follows an industrial guideline framework, good neighbor policy, or sustainability ordinance adopted by the local agency, which, in its discretion, adequately balances siting qualifying logistics uses next to sensitive receptors.

SEC. 2. The Legislature finds and declares that Section 1 of this act adding Chapter 2.8 (commencing with Section 65098) to Division 1 of Title 7 of the Government Code addresses a matter of statewide concern rather 519 4/5/23, 11:04 AM Bill Text - AB-1748 Qualifying logistics use projects. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB1748 3/3 than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Section 1 of this act applies to all cities within the Counties of Riverside and San Bernardino, including charter cities.

SEC. 3. The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the significant need to protect homes, schools, daycare facilities, and other sensitive receptors in the Counties of Riverside and San Bernardino, and in the cities located within those counties, from the potential harm created by large warehouses and other logistics uses.

SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.

SECTION 1.Section 1 of the Government Code is amended to read:

1.This act shall be known and may be cited as the Government Code. 520
DRAFT Sample Letter

April 6, 2023

The Honorable James Ramos
State Capitol
P.O. Box 942849
Sacramento, CA 94249

Dear Assemblymember Ramos:

On April 11, 2023, the Fontana City Council formally voted to support your legislation AB 1748, which would allow the County of Riverside, the County of San Bernardino, and any of the cities within those counties the ability to approve of a development or the expansion of a logistics business if these agencies impose a minimum setback of 300 feet from a sensitive receptor. As stated by State Attorney General Rob Bonta, the City of Fontana has already adopted the most stringent environmental standards in California for new warehouse projects. We are proud to serve as a model for other cities across the state and the Inland Empire. The logistics industry is the backbone of Southern California’s economy, and we greatly appreciate collaborating with your office on this important issue.

If you have any questions or comments, please feel free to contact the city at (909) 350-7606.

Sincerely,

[Fontana City Council Member Names and Signatures]

521
DRAFT Sample Letter
April 6, 2023

The Honorable Eloise Gomez Reyes
California State Assembly
State Capitol
P.O. Box 942849
Sacramento, CA 94249

Dear Assemblymember Gomez Reyes:

On Tuesday April 11, 2023, the Fontana City Council formally voted to oppose your legislation AB 1000, which would prohibit the city from approving any development or expanding any logistics business within 1,000 feet of a sensitive receptor. The logistics industry is the backbone of Southern California’s economy, and we must work toget her to create common sense policies that work to benefit all people and businesses. Recently, the Governor announced that the State of California is projecting a $22.5B budget deficit, which could signal the end of a decade’s worth of economic growth in the nation’s most populous state. It is critical now more than ever that we work together to create a policy that addresses both the needs of the community and ensures the future success of our economy. According to State Attorney General Rob Bonta, the City of Fontana has already adopted the most stringent environmental standards in California for new warehouse projects. This ordinance serves as a model for AB 1000 and other cities across the state.

If there is an opportunity to work with your office on AB 1000, please feel free to contact the City of Fontana at (909) 350-7606.

Sincerely,

[Fontana City Council Member Names and Signatures]

522
City of Fontana
Action Report
City Council Meeting
8353 Sierra Avenue
Fontana, CA 92335
File #: 21-2042 Agenda Date: 4/11/2023
Agenda #: A. Category: Public Hearing
FROM:

Housing
SUBJECT:

Public Hearing and Adoption of HUD Community Development Block Grant, HOME Investment Partnerships Program, and Emergency Solutions Grant 2023 Annual Action Plan RECOMMENDATION:

1. Adopt the draft FY2023-24 Annual Action Plan for Community Development Block Grant (CDBG), HOME Investment Partnerships Program (HOME), and Emergency Solutions Grant (ESG) programming;

2. Authorize the City Manager, or City Manager’s designee, to execute and transmit any documents necessary or desirable, including but not limited to purchase agreements that may include acquisitions costs up to the full amount of the allocated funds, to ensure the City's timely receipt and execution of Community Development Block Grant (CDBG), HOME Investment Partnerships Program (HOME), and Emergency Solutions Grant (ESG) programs;

3. Authorize the City Manager, or City Manager’s designee, to execute and transmit any documents necessary or desirable, including but not limited to purchase agreements that may include acquisitions costs up to the full amount of the allocated funds, to facilitate the timely administration of the Community Development Block Grant (CDBG) Acquisition, Rehabilitation, and Rental Program including but not limited to property purchase agreements.

COUNCIL GOALS:
· To practice sound fiscal management by producing timely and accurate financial information. · To concentrate on inter-governmental relations by pursuing financial participation from county, state and federal governments.

DISCUSSION:

The City of Fontana receives Community Development Block Grant (CDBG), HOME Investment Partnerships (HOME), and Emergency Solutions Grant (ESG) funds from the U.S. Department of Housing and Urban Development (HUD) each year. In order to receive these funds, HUD mandates that all entitlement communities receiving CDBG, HOME and ESG funds prepare and submit an Action Plan outlining the planned projects, one-year goals and budgets for the CDBG, HOME and ESG programs to be implemented in an effort to address the priority needs and goals identified in the 2020-2024 Consolidated Plan. Six of the seven priority goals will be addressed in the 2023-24 Action Plan. This Action Plan does not include any funds for public facilities and infrastructure activities.

HUD announced annual allocations for FY2023 on February 27, 2023. Next fiscal year, the City will City of Fontana Printed on 4/6/2023Page 1 of 3
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Agenda #: A. Category: Public Hearing
receive an $1.9 million of CDBG funds, $738,533 of HOME funds and $175,340 of ESG funds from HUD. In addition, the City has $2,811,024.35 in carryover HOME funds set aside for future affordable housing projects and activities.

The following CDBG projects are included in the draft FY2023-24 Action Plan:

Strategy/Goal Project Funding
N/A CDBG Administration $358,291
Ensure equal access to housing
opportunities/ Fair housing services
Fair Housing $37,500
Provide public services for low-income
residents/families
Public Safety and Recreational
Scholarships
$296,843
Expand the supply of affordable
housing
Acquisition, Rehabilitation, and
Rental Program
$1,286,324
Total: $1,978,958
The CDBG Acquisition, Rehabilitation, and Rental Program is designed to increase the City’s affordable housing stock by purchasing, rehabilitating, and renting single-family properties to income- eligible households at or below 80% Area Median Income (AMI). The Housing staff bids on and purchases properties that are available on the market for sale and then rehabilitates them, in order to offer suitable living conditions for low-income families.

In order to have a successful program and to ensure that staff is able to compete with private purchasers, the following processes have been established:
· The Housing Development Manager would be authorized to submit offers on potential properties
· The Deputy City Manager (for purchases up to $50,000) or the City Manager (for all purchases over $50,000 and up to the full amount of allocated funds) would be authorized to finalize any contractual and/or escrow documents in order to purchase the properties. · Only the City Manager would be authorized to sign the Certificate of Acceptance that is attached to the Grant Deed to complete the acquisition.

Staff will report to City Council annually on property purchases in the Consolidated Annual Performance and Evaluation Report (CAPER).

The following HOME projects are included in the draft Action Plan:

Strategy/Goal Project Funding
N/A HOME Administration $73,853
Ensure equal access to housing
opportunities/ Fair housing services
Affordable Rental Housing
(including CHDO set-aside)
$664,680
Total: $738,533
The following ESG projects are included in the draft Action Plan:

Strategy/Goal Project Funding
N/A ESG Administration $13,150
Prevent and eliminate homelessness
& homelessness prevention services.

Homelessness Prevention $113,533
Prevent and eliminate homelessness
& homelessness prevention services.

Rapid Re-Housing Program $48,657
Total: $175,340
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File #: 21-2042 Agenda Date: 4/11/2023
Agenda #: A. Category: Public HearingStrategy/Goal Project Funding N/A ESG Administration $13,150
Prevent and eliminate homelessness
& homelessness prevention services.

Homelessness Prevention $113,533
Prevent and eliminate homelessness
& homelessness prevention services.

Rapid Re-Housing Program $48,657
Total: $175,340
Citizen Participation in the Development of the draft One-Year Action Plan In compliance with federal regulations and the City’sadopted Citizen Participation Plan, the Notice of Public Hearing and notice of availability of the aforementioned draft documents were published in the Press Enterprise, San Bernardino Sun and the El Chicano on March 9, 2023.

The draft documents were made available for public review and comment from March 13, 2023 through April 11, 2023 at the Library and multiple locations at City Hall/Development Services buildings. Additionally, it was posted on the City’swebsite. The Public Hearing scheduled for April 11, 2023, at 7:00 p.m. provides another opportunity for public input. Any and all comments received during the process (at public meetings and/or in writing) with respect to a particular draft document will be incorporated into the final draft document, as applicable, prior to submission to HUD.

FISCAL IMPACT:

The fiscal impact associated with this approval of this item is $1,978,958 of federal Community Development Block Grant (CDBG) program funds, $738,533 of HOME Investment Partnerships (HOME) funds, and $175,340 of Emergency Solutions Grant (ESG) funds and is included in the proposed 2023-24 budget in various Fund 362 and 363 projects.

Project # 30200011-362 $395,791 Project # 30200012-362 $175,340 Project # 04032033-362 $250,000 Project # 30200017-363 $73,853 Project # 30200016-362 $46,843 Project # 30200006-363 $664,680 Project # 30200002-362 $1,286,324
MOTION:

Approve staff recommendation.

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Annual Action Plan
FY 2023-2024
Public Review
April 11, 2023
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Table of Contents
Executive Summary ............................................................................................................................ - 1 - AP-05 Executive Summary - 24 CFR 91.200(c), 91.220(b) ............................................................... - 1 - PR-05 Lead & Responsible Agencies – 91.200(b) ............................................................................. - 4 - AP-10 Consultation – 91.100, 91.200(b), 91.215(l) .......................................................................... - 5 - AP-12 Participation – 91.105, 91.200(c) ........................................................................................ - 20 - Expected Resources ......................................................................................................................... - 21 - AP-15 Expected Resources – 91.220(c)(1,2) ................................................................................. - 21 - Annual Goals and Objectives ............................................................................................................ - 25 - AP-20 Annual Goals and Objectives............................................................................................... - 25 - AP-35 Projects – 91.220(d) ........................................................................................................... - 27 - AP-38 Project Summary ................................................................................................................ - 28 - AP-50 Geographic Distribution – 91.220(f) ..................................................................................... - 31 - Affordable Housing ........................................................................................................................... - 32 - AP-55 Affordable Housing – 91.220(g) ........................................................................................... - 32 - AP-60 Public Housing – 91.220(h) ................................................................................................. - 34 - AP-65 Homeless and Other Special Needs Activities – 91.220(i) ..................................................... - 34 - AP-75 Barriers to affordable housing – 91.220(j) ............................................................................ - 40 - AP-85 Other Actions – 91.220(k) ................................................................................................... - 41 - Program Specific Requirements ........................................................................................................ - 44 - AP-90 Program Specific Requirements – 91.220(l)(1,2,4) ............................................................... - 44 -

Action Plan Tables
Table 1 – Responsible Agencies .......................................................................................................... - 4 - Table 2 - Agencies, groups, organizations who participated................................................................ - 17 - Table 3 – Other local/ regional/ federal planning efforts....................................................................... - 18 - Table 4 – Citizen Participation Outreach ............................................................................................ - 20 - Table 5 - Expected Resources – Priority Table ................................................................................... - 22 - Table 6 – Goals Summary ................................................................................................................. - 25 - Table 7 - Goals Description ............................................................................................................... - 26 - Table 8 - Project Information ............................................................................................................. - 27 - Table 9 - Project Summary ................................................................................................................ - 30 - DRAFT
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City of Fontana iii 2023 Annual Action Plan

Table 10 - Geographic Distribution .................................................................................................... - 31 - Table 11 - One Year Goals for Affordable Housing by Support Requirement ........................................ - 33 - Table 12 - One Year Goals for Affordable Housing by Support Type ................................................... - 33 -

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City of Fontana iv 2023 Annual Action Plan

Version History
No. Summary of Changes
1 Published Draft for Public Comment: Sent to HUD for Approval:

Conducted Public Hearing: Approved by HUD:

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City of Fontana - 1 - 2023 Annual Action Plan

Executive Summary
AP-05 Executive Summary - 24 CFR 91.200(c), 91.220(b)

1. Introduction
The 2023-2024 Action Plan is the City of Fontana’s Annual Plan for the investment of annual allocations of Community Development Block Grant (CDBG), Home Investment Partnerships (HOME) and Emergency Solutions Grant (ESG) funds from the U.S. Department of Housing and Urban Development (HUD) during the fiscal year 2023-2024. These grant programs are consistent with HUD’s national strategy to provide decent housing opportunities, a suitable living environment, and economic opportunities, particularly for people with low- and moderate-income.

In consideration of finite grant resources, the goals and projects within this Action Plan outline the areas and population segments with the greatest level of need for a particular program or activity and intends to invest grant resources in high leverage opportunities where data suggests the City will be able to maximize the impact of every dollar. The Action Plan utilizes the priority needs identified in the 2020 – 2024 Consolidated Plan process, which identified the City’s priority needs, including the rationale for establishing allocation priorities and specific measurable goals to be addressed during the five-year period.

Within the 2023-2024 Action Plan, the City proposes the following activities:
2023-2024 CDBG PROGRAM

Public Service Activities
Public Safety $ 250,000
Scholarship Program $ 46,843
Capital Activities
Rental Housing Acquisition/Rehabilitation Program $1 ,286,324 Program Administration Activities
CDBG Program Administration $3 58,291
Inland Fair Housing & Mediation Board: Fair Housing Services $ 37,500

2022-2023 HOME PROGRAM

Housing Activities
Courtplace Phase 1 $ 111,810
Project TBD $4 42,090
CHDO TBD $ 110,780
Program Administration Activities
HOME Program Administration $7 3,853

2022-2023 ESG PROGRAM

Homeless Activities
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City of Fontana - 2 - 2023 Annual Action Plan

Homeless Services $ 162,190
ESG Administration $ 13,150

2. Summarize the objectives and outcomes identified in the Plan HUD’s Community Planning and Development (CPD) Outcome Performance Measurement Framework classifies objectives in three categories: decent housing, a suitable living environment, and economic opportunity. Based on the Consolidated Plan process conducted in 2020, the City’s current Strategic Plan identifies seven high priority needs to be addressed through the implementation of activities aligned with seven Strategic Plan goals.

The high priority needs for Fontana include:
• Preserve the supply of affordable housing
• Expand the supply of affordable housing
• Ensure equal access to housing opportunities
• Prevent and eliminate homelessness
• Provide public services for low-income residents
• Improve public facilities and infrastructure
• Provide for program administration
Consistent with HUD’s national goals for the CDBG, ESG and HOME programs to provide decent housing opportunities, maintain a suitable living environment and expand economic opportunities for low- and moderate-income residents, the priority needs listed above will be addressed over the remaining year through the implementation of CDBG, ESG and HOME funded activities aligned with the following seven measurable Strategic Plan goals:
• Affordable housing preservation
• Affordable rental housing development
• Fair housing services
• Homelessness prevention services
• Public Services for low-income families
• City of Fontana public facilities improvements
• Program administration
Activities proposed in the 2023 Action Plan address the following goals:
• Affordable rental housing development
• Fair housing services
• Homelessness prevention services
• Public Services for low-income families
• Program administration
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City of Fontana - 3 - 2023 Annual Action Plan

3. Evaluation of past performance
The City of Fontana continues to administer programs which prioritize addressing the impacts of the COVID-19 pandemic within the City. In program year 2022, those activities shifted from rental and mortgage assistance to a hotel/ motel voucher activity to address the needs of those experiencing homelessness, in addition to homeless prevention activities.

Concurrently, the City administers programs with HUD’s typical priorities on people with low- and moderate income. In program year 2021 those projects were:

1. Ensuring equal access to opportunities: The annual goal was to educate and counsel 90 residents and landlords of Fontana on fair housing. This was met and exceed; 618 residents were served.

2. Public Safety Assistance: The annual goal was to serve 2,200. This was met and exceed; 59,230 residents of Fontana actually benefitted.

3. Affordable Housing Preservation: The annual goal was to serve 10 households. This was met and exceed; 13 households actually benefitted.

4. Affordable Rental Housing Development: The annual goal was to construct 11 new units and rehab five units. A total of eight units were constructed and one rental property was acquired.

5. Homeless prevention/ rapid rehousing: The annual goal was to serve 122 individuals. This was met and exceed; 124 individuals actually benefitted.

4. Summary of Citizen Participation Process and consultation process In accordance with the City of Fontana's Citizen Participation Plan (CPP), the City conducted a 30-day public comment period from March 13 to April 11, 2023. The City conducted a public hearing April 11, 2023, to receive comments on the draft Action Plan. As noted in the City's CPP, the second public hearing required during the program year is conducted during the CAPER process.

5. Summary of public comments
No comments were received.

6. Summary of comments or views not accepted and the reasons for not accepting them No comments were received.

7. Summary

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PR-05 Lead & Responsible Agencies – 91.200(b)

1. Agency/entity responsible for preparing/administering the Consolidated Plan The following are the agencies/entities responsible for preparing the Consolidated Plan and those responsible for administration of each grant program and funding source.

Agency Role Name Department/Agency
CDBG Administrator FONTANA Housing Department
HOME Administrator FONTANA Housing Department
ESG Administrator FONTANA Housing Department
Table 1 – Responsible Agencies
Narrative
The City of Fontana Housing Department is the lead agency responsible for administration of the CDBG, HOME, and ESG programs. The Housing Department is responsible for the day-to-day implementation of the programs and the development of the Five-Year Consolidated Plan and the Annual Action Plan. In addition, the City has contracted with MDG Associates, Inc. to prepare the 2023 Annual Action Plan.

In the development of this Consolidated Plan, MDG Associates, Inc. developed and implemented a comprehensive citizen participation and consultation process and conducted a needs assessment and market analysis to identify levels of relative need regarding affordable housing, homelessness, special needs, and community development. This information was gathered through consultation with public officials and local agencies, public outreach and community meetings, review of demographic and economic data, and housing market analysis.

In the implementation of the 2023 Annual Action Plan, the Housing Department shall be responsible for all grants planning, management, and monitoring duties necessary to comply with HUD regulations and City policy.

Consolidated Plan Public Contact Information
Valerie Gonzales, Housing Development Manager
8353 Sierra Avenue
Fontana, CA 92335
(909) 350-6739
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AP-10 Consultation – 91.100, 91.200(b), 91.215(l)

1. Introduction
As part of the Consolidated Planning process the City of Fontana consulted with representatives from multiple agencies, groups, and organizations involved in the development of affordable housing, creation of job opportunities for low- and moderate-income residents, and/or provision of services to children, elderly persons, persons with disabilities, persons with HIV/AIDS and their families, and homeless persons. To facilitate this consultation, the City solicited feedback through the following methods:
• Stakeholder surveys (web-based and paper-surveys)
• Individual stakeholder consultations
• Community meetings
• Public hearings
• Receipt of written comments
The input gathered from these consultation partners helped establish and inform the objectives and goals described in the Strategic Plan. Specific comments received from consultation partners are included in the Attachments section of the Consolidated Plan.

Provide a concise summary of the jurisdiction’s activities to enhance coordination between public and assisted housing providers and private and governme ntal health, mental health and service agencies (91.215(I)).

The City recognizes the importance of careful coordination and alignment among various service providers to maximize the effectiveness of their programs. As a result, during the development of this Consolidated Plan, the City consulted closely with organizations that provide assisted housing, health services and other community-focused agencies. Outreach efforts included surveys which addressed coordination, invitations to community meetings and follow-up in-person interviews where appropriate.

The City further recognizes the importance of continued coordination and alignment throughout the five- year planning period with these organizations and agencies. The City will continue strengthening relationships and alignment among these organizations.

Describe coordination with the Continuum of Care and efforts to address the needs of homeless persons (particularly chronically homeless individuals and families, families with children, veterans, and unaccompanied youth) and persons at risk of homelessness San Bernardino County’s homeless Continuum of Care (COC) is comprised of a network of public, private, faith-based, for-profit, and nonprofit service providers who utilize several federal, state and local resources to provide services for homeless people. The region’s municipalities, including the City of Fontana, also provide resources for services that assist the homeless and those at risk of becoming homeless. The DRAFT
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City of Fontana - 6 - 2023 Annual Action Plan

nonprofit and faith-based community plays a key role in the current COC system. Hundreds of agencies throughout the County provide programs ranging from feeding the homeless on the street to creating permanent supportive housing opportunities. These services are available to homeless families with children, and single men and women. The nonprofit and faith-based community also serves special needs populations, such as victims of domestic violence, veterans, the disabled and youth.

The COC guides the development of homeless strategies and the implementation of programs to end homelessness throughout the region. The City provided a detailed questionnaire to the COC to identify the COC’s perceived needs in the county and its objectives to address the needs of different homeless persons populations, specifically chronically homeless families and individuals, families with children, veterans, unaccompanied youth and persons at risk of homelessness. Following the delivery and response to this questionnaire, the City followed up with the COC to clarify existing needs and objectives and understand opportunities for collaboration and coordination during the five-year planning process.

Describe consultation with the Continuum(s) of Care that serves the jurisdiction's area in determining how to allocate ESG funds, develop performance standards and evaluate outcomes, and develop funding, policies and procedures for the administration of HMIS
In the development of the 2020-2024 Consolidated Plan, the City of Fontana consulted 84 housing, social services, governmental and other entities involved in housing and community development in Fontana and throughout the region to obtain valuable information on the priority needs in the City and how CDBG, ESG, HOME, and other resources should be invested to provide decent affordable housing, a suitable living environment and economic opportunities for low- and moderate-income residents. The San Bernardino County Continuum of Care (COC) was consulted directly in person, by telephone, and by email to discuss performance standards, outcomes, and policies and procedures for HMIS.

Through a competitive process Water of Life Church was awarded a multi-year ESG subrecipient contract for provision of homeless services. FY 2022 is the last year of the contract. The Water of Life Church must comply with the City’s performance standards and achieve established outcomes.

The table below provides a listing of the entities consulted as part of this planning process.

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2. Describe Agencies, groups, organizations and others who participated in the process and describe the jurisdictions consultations with housing, social service agencies and other entities 1 Agency/Group/Organization San Bernardino County Interagency Council on Homelessness
Agency/Group/Organization Type Services-homeless
Regional organization
What section of the Plan was addressed
by Consultation?
Homelessness Strategy
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
In person, personal calls, sent letter and e-mail with
copy of Needs Survey as well as link to the survey.

How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Personal call, emails and sent letter and e-mail with
copy of Needs Survey as well as link to the survey.

Through this consultation, Fontana preserved lines of
communication between the stakeholder and the City
to be an active participant in housing and community
development planning in the jurisdiction. Fontana
sought specific input, feedback, and recommendations
related to the topics highlighted above from this
stakeholder.
4 Agency/Group/Organization City of Fontana Housing Authority Agency/Group/Organization Type PHA
What section of the Plan was addressed
by Consultation?
Public Housing Needs
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Personal calls and sent letter and e-mail with copy of
Needs Survey as well as link to the survey. Through this consultation, Fontana preserved lines of
communication between the stakeholder and the City
to be an active participant in housing and community
development planning in the jurisdiction. Fontana
sought specific input, feedback, and recommendations
related to the topics highlighted above from this
stakeholder.
5 Agency/Group/Organization Fontana Unified School District Agency/Group/Organization Type Services-Children
Services-Education
Other government - Local
What section of the Plan was addressed
by Consultation?
Public Services
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
6 Agency/Group/Organization Water of Life Church
Agency/Group/Organization Type Services-Homeless
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What section of the Plan was addressed
by Consultation?
Homeless Needs-Chronically homeless
Homeless Needs-Veterans
Homeless Needs-Families with Children
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
7 Agency/Group/Organization BOYS AND GIRLS CLUB OF FONTANA Agency/Group/Organization Type Services-Children
What section of the Plan was addressed
by Consultation?
Other-Public Services
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
8 Agency/Group/Organization Jamboree Housing
Agency/Group/Organization Type Housing
What section of the Plan was addressed
by Consultation?
Housing Need Assessment
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
9 Agency/Group/Organization California Apartment Association Agency/Group/Organization Type Services-Housing
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What section of the Plan was addressed
by Consultation?
Housing Needs Assessment
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
10 Agency/Group/Organization OPARC
Agency/Group/Organization Type Services-Persons with Disabilities What section of the Plan was addressed
by Consultation?
Non-Homeless Special Needs
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
11 Agency/Group/Organization Inland Regional Center
Agency/Group/Organization Type Services-Persons with Disabilities What section of the Plan was addressed
by Consultation?
Non-Homeless Special Needs
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
12 Agency/Group/Organization Foothill AIDS Project
Agency/Group/Organization Type Services-Persons with HIV/AIDS DRAFT
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What section of the Plan was addressed
by Consultation?
Non-Homeless Special Needs
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
13 Agency/Group/Organization OPTION HOUSE
Agency/Group/Organization Type Services-Victims of Domestic Violence What section of the Plan was addressed
by Consultation?
Non-Homeless Special Needs
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
14 Agency/Group/Organization FRAZEE COMMUNITY CENTER
Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed
by Consultation?
Homelessness Strategy
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.

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15 Agency/Group/Organization San Bernardino County Homeless Provider Network Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed
by Consultation?
Homelessness Strategy
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
16 Agency/Group/Organization COC SB County Office of Homeless Services Agency/Group/Organization Type Services-homeless
What section of the Plan was addressed
by Consultation?
Homelessness Strategy
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
17 Agency/Group/Organization SAN BERNARDINO COUNTY LIBRARY Agency/Group/Organization Type Services-Education
Other government - County
What section of the Plan was addressed
by Consultation?
Non-Homeless Special Needs
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How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
18 Agency/Group/Organization Quality Management Group
Agency/Group/Organization Type Housing
What section of the Plan was addressed
by Consultation?
Housing Needs Assessment
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
19 Agency/Group/Organization San Bernardino County Superintendent of Schools Agency/Group/Organization Type Services-Education
What section of the Plan was addressed
by Consultation?
Homeless Needs - Families with children
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana preserved lines of communication between the
stakeholder and the City to be an active participant in housing and community development planning in the
jurisdiction. Fontana sought specific input, feedback,
and recommendations related to the topics highlighted
above from this stakeholder.
20 Agency/Group/Organization Chaffey College - Fontana Campus Agency/Group/Organization Type Services-Education
Other government - Local
What section of the Plan was addressed
by Consultation?
Other-Public Education
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City of Fontana - 14 - 2023 Annual Action Plan

How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
21 Agency/Group/Organization CA SBDC Small Business Development Center Agency/Group/Organization Type Services-Employment
What section of the Plan was addressed
by Consultation?
Economic Development
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
22 Agency/Group/Organization Inland Empire Economic Partnership (IEEP) Agency/Group/Organization Type Services-Employment
What section of the Plan was addressed
by Consultation?
Economic Development
How was the Agency/Group/Organization
consulted and what are the anticipated
outcomes of the consultation or areas for
improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
23 Agency/Group/Organization San Bernardino County Workforce Investment Board Agency/Group/Organization Type Services-Employment
What section of the Plan was addressed
by Consultation?
Economic Development
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City of Fontana - 15 - 2023 Annual Action Plan

How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
24 Agency/Group/Organization Inland Fair Housing and Mediation Board (IFHMB) Agency/Group/Organization Type Service-Fair Housing
What section of the Plan was addressed
by Consultation?
Housing Need Assessment
Homelessness Strategy
Homeless Needs - Chronically homeless
Homeless Needs - Families with children
Homelessness Needs - Veterans
Homelessness Needs - Unaccompanied youth
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
25 Agency/Group/Organization San Bernardino County Transitional Assistance Department
Agency/Group/Organization Type Services-Children
Child Welfare Agency
Other government - Local
What section of the Plan was addressed
by Consultation?
Public Services
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.

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City of Fontana - 16 - 2023 Annual Action Plan

26 Agency/Group/Organization San Bernardino County Department of Behavioral Health
Agency/Group/Organization Type Publicly Funded Institution/System of Care What section of the Plan was addressed
by Consultation?
Public Health
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
27 Agency/Group/Organization City of Fontana Chamber of Commerce Agency/Group/Organization Type Business and Civic Leaders What section of the Plan was addressed
by Consultation?
Economic Development
How was the Agency/Group/Organization
consulted and what are the anticipated
outcomes of the consultation or areas for
improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
28 Agency/Group/Organization Southern CA Council of Governments (SCAG) Agency/Group/Organization Type Regional organization
What section of the Plan was addressed
by Consultation?
Economic Development
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.

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City of Fontana - 17 - 2023 Annual Action Plan

29 Agency/Group/Organization City of Fontana Police Department Agency/Group/Organization Type Government – Local
What section of the Plan was addressed
by Consultation?
Public Safety
Correctional program
Homeless Assistance
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.
30 Agency/Group/Organization Target Store (Fontana North) Agency/Group/Organization Type Business Leaders
What section of the Plan was addressed
by Consultation?
Economic Development
How was the Agency/Group/
Organization consulted and what are the
anticipated outcomes of the consultation
or areas for improved coordination?
Sent letter and e-mail with copy of Needs Survey as
well as link to the survey. Through this consultation,
Fontana opened or preserved lines of communication
between the stakeholder and the City to be an active
participant in housing and community development
planning in the jurisdiction. Fontana sought specific
input, feedback, and recommendations related to the
topics highlighted above from this stakeholder.

Table 2 - Agencies, groups, organizations who participated Identify any Agency Types not consulted and provide rationale for not consulting The City attempts to maintain a current and comprehensive list of agencies, organizations and other stakeholders and invited representatives from each entity to participate in the planning process at multiple points. If an agency did not attend meetings or participate in surveys, it was done so by the agency’s choice.

If an agency or organization was not consulted and would like to be included in the City’s list of stakeholders, the agency or organization may contact the CDBG Project Specialist at (909) 350-6625.

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City of Fontana - 18 - 2023 Annual Action Plan

Other local/regional/state/federal planning efforts considered when preparing the Plan Name of Plan Lead
Organization
How do the goals of your Strategic Plan overlap with the goals of each plan?
Continuum of
Care
County of San
Bernardino
Department of
Public Social
Services -
Homeless
Programs Unit

The Homelessness Prevention Services goal of the Strategic Plan is consistent with the County of San Bernardino Homelessness Action Plan.

City of Fontana
2021-2029
Housing
Element
City of Fontana
Community
Development
Department
The goals of the Strategic Plan are consistent with the Housing Element with respect to affordable housing development, affordable housing preservation and furthering fair housing choice.

Table 3 – Other local/ regional/ federal planning efforts

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City of Fontana - 19 - 2023 Annual Action Plan

Describe cooperation and coordination with other public entities, including the State and any adjacent units of general local government, in the implementation of the Consolidated Plan (91.215(l)) In the development of the 2020-2024 Consolidated Plan, the City afforded the following other public entities with the opportunity to provide input on the Consolidated Plan and welcomes their input concerning the future implementation of projects to address the nine Strategic Plan goals:
• City of Rialto
• City of Rancho Cucamonga
• City of San Bernardino
• Council on Aging
• County of San Bernardino
• Court Appointed Special Advocates (CASA)
• Federal Emergency Management Agency (FEMA)
• Fontana Unified School District
• Housing Authority of the County of San Bernardino
• Inland Empire Regional Broadband Consortium
• Inland Regional Center
• San Bernardino Associated Governments (SANBAG)
• San Bernardino County Economic Development Agency
• San Bernardino County Environmental Health Department • San Bernardino County Public Health Department
• San Bernardino County Pre-School Services Department
• San Bernardino County Transportation Commission (RCTC) • San Bernardino County Sheriff’s Department (POP Program) • San Bernardino County Victims Services
• Southern California Council of Governments (SCAG)
• State of California Department of Housing and Community Development • State of California Employment Development Department • U.S Department of the Interior – Bureau of Land Management

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City of Fontana - 20 - 2023 Annual Action Plan

AP-12 Participation – 91.105, 91.200(c)

1. Summary of citizen participation process/Efforts made to broaden citizen participation In accordance with the City of Fontana’s Citizen Participation Plan, the City conducts two public hearings during the program year to gather feedback on program activities, needs, and accomplishments. The City conducted its first public hearing to review the draft CAPER in 2021. The second public hearing, to gather feedback on the draft Annual Action Plan, was conducted on June 14, 2022.

Additionally, the City made the draft Action Plan available for comment for a period of 30 days.

Citizen Participation Outreach
Sort Order Mode of Outreach Target of Outreach Summary of response/attendance
Summary of
comments received
Summary of comments
not accepted
and reasons
URL (If
applicable)
1 Comment Period
(March 13 – April
11, 2023)
All No comments
received
No comments
received
n/a n/a
2 Public Hearing
(April 11, 2023)
All No comments
received
No comments
received
n/a n/a
Table 4 – Citizen Participation Outreach

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City of Fontana - 21 - 2023 Annual Action Plan

Expected Resources
AP-15 Expected Resources – 91.220(c)(1,2)
Introduction
For the 2023-2024 program year, the City has been allocated $1,978,958 CDBG funds, $175,340 ESG funds and $738,533 HOME funds from HUD for the program activities described in this Action Plan to be implemented from July 1, 2023 to June 30, 2024.

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City of Fontana - 22 - 2023 Annual Action Plan

Anticipated Resources
Program Source of
Funds Uses of Funds
Expected Amount Available Year 4 Expected
Amount
Available
Remainder of
ConPlan
$
Narrative
Description
Annual
Allocation: $
Program
Income: $
Prior Year
Resources: $
Total:
$
CDBG public -
federal
• Admin and
Planning
• Housing
• Public
Improvements
Public Services
1,978,958 0 70,039 2,048,997 2,300,000 The expected
amount available
for the remainder
of the
Consolidated
Plan period
assumes level
funding in future
years.

HOME public -
federal
• Acquisition/
Rehabilitation
Multifamily rental new
construction
738,533 97,538 2,713,286 3,549,357 650,000 The expected amount available
for the remainder
of the
Consolidated
Plan period
assumes level
funding in future
years.

ESG public -
federal
Rapid re-housing &
homeless prevention
175,340 0 0 175,340 180,000 The expected
amount available
for the remainder
of the
Consolidated
Plan period
assumes level
funding in future
years.

Table 5 - Expected Resources – Priority Table1

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City of Fontana - 23 - 2023 Annual Action Plan

Explain how federal funds will leverage those additional resources (private, state and local funds), including a description of how matching requirements will be satisfied To address housing and community development needs in Fontana and maximize the effectiveness of available funds, the City will leverage its CDBG and HOME entitlement grants with a variety of funding resources. The City’s former Redevelopment Agency was the primary non-federal source of leveraged funds. With the elimination of the City’s Redevelopment Agency, the City’s ability to leverage federal funds has been substantially reduced. The City and its development partners will continue to seek new opportunities to leverage federal funds, such as the Low-Income Tax Credit program and U.S. Department of Housing and Urban Development Section 202 and 811 for the Elderly Program.

Federal Resources
• Continuum of Care (COC) Program
• HUD Veterans Affairs supportive Housing (HUD-VASH)
• Supportive Housing for the Elderly (Section 202)
• Supportive Housing for Persons with Disabilities (Section 811) • Housing Opportunities for Persons with AIDS (HOPWA)
• Youthbuild
• Federal Low-Income Housing Tax Credit Program
State Resources
• State Low-Income Housing Tax Credit Program
• CalHome Program
• Multifamily Housing Program (MHP)
• Housing Related Parks Grant
• CalHFA Single and Multi-Family Program
• Mental Health Service Act (MHSA) Funding
• Homeless Housing, Assistance and Prevention (HHAP) Program • Homeless Emergency Aid Program (HEAP)
• California Emergency Solutions and Housing Program (CESH) Local Resources
• San Bernardino County Homeless Partnership (SBCHP)
• Housing Authority of the County of San Bernardino (HACSB) • Southern California Home Financing Authority (SCHFA) Funding • San Bernardino County Continuum of Care Program
Matching Requirements
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City of Fontana - 24 - 2023 Annual Action Plan

HOME:

HUD requires that the City provide a 25 percent match for their HOME annual allocation. In accordance with 24 CFR 92.222, satisfying the distress criteria established by the HOME Program regulations are provided a match reduction. The match reductions are granted due to fiscal distress, severe fiscal distress, and Presidential disaster declarations. When a local jurisdiction meets one of the distress criteria, it is determined to be in fiscal distress and receives a reduction of match. The City of Fontana received a 50% match reduction from HUD in FY 2022 and was required to match 12.5% of HOME Funds using non- federal funds. The City anticipates the same determination and matching requirements in FY 2023. Any funds that are used in a HOME activity in excess of the required match will be documented by the City and reported to HUD as part of the Consolidated Annual Performance and Evaluation Report (CAPER) each year.

ESG:

HUD requires the City provide 100 percent match for its total expenditures. The City requires the ESG subrecipient provide match from its own resources in the form of cash and from qualified non-cash sources. The City provides match for all Administrative costs incurred from qualified sources.

If appropriate, describe publicly owned land or property located within the jurisdiction that may be used to address the needs identified in the plan
Fontana will comply with new State requirements under AB1486 and AB1255 to inventory and support developers to access and utilize surplus municipal and state land for the construction of affordable housing.

If such sites are identified, the City will consider the use of HUD funding or other resources to assist with site preparation and/ or development. At this time, no publicly owned land or property is expected to be used to address the needs in this plan, unless the City addresses ADA Transition Plan needs with CDBG funds.

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City of Fontana - 25 - 2023 Annual Action Plan

Annual Goals and Objectives
AP-20 Annual Goals and Objectives
Sort Order Goal Name Start
Year
End
Year Category Geographic
Area
Needs
Addressed Funding ($) Goal Outcome Indicator
1 Fair Housing
Services
2023 2024 Affordable
Housing
Citywide Ensure equal
access to
housing
opportunities
CDBG: 37,500 Other: 90 persons
2 Public Services
for low-income
residents
2023 2024 Non-Housing
Community
Development
Citywide Provide public
services to
low-income
residents
CDBG: 296,843 Public service activities other
than Low/Moderate Income
Housing Benefit: 20,250
Persons Assisted
3 Homelessness
Prevention
Services
2023 2024 Homeless Citywide Prevent and
eliminate
homelessness
ESG: 175,340 100 Persons Assisted
50 Households Assisted
4 Affordable Rental
Housing
Development
2023 2024 Affordable
Housing
Development
Citywide Expand the
supply of
affordable
housing
CDBG: 1,286,223
HOME: 2,700,000
($111,810 Fiscal
Year 2023,
$2,490,651 Prior
Year Unallocated,
$97,538 Program
Income)
Rental units constructed: 11
Housing Units.

Units acquired/ rehabbed: 2
housing units
5 City of Fontana
CDBG and
HOME Program
Administration
2023 2024 Program
Administration
N/A Comply with
federal CDBG
and HOME
statutes and
regulations
CDBG: $358,291
HOME: $73,853
Program Administration
Table 6 – Goals Summary

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City of Fontana - 26 - 2023 Annual Action Plan

Goal Descriptions
1 Goal Name Fair Housing Services
Goal
Description
This program will provide fair housing services including education, outreach, enforcement, landlord/tenant counseling, and mediation services for the residents of the City of Fontana. Fontana residents are provided services at the Inland Fair Housing and Mediation Board office located in the City of Ontario.
2 Goal Name Public Services for low-income families
Goal
Description
These programs will provide services to low- and moderate-income families with a range of public services including but not limited to youth services, childcare, seniors and crime prevention. 3 Goal Name Homelessness Prevention Services
Goal
Description
These programs will support a continuum of services to prevent and eliminate homelessness including but not limited to homeless prevention and rapid rehousing programs. If and when necessary, Fontana will use HUD funding to address urgent issues and conditions impacting the health and safety of homeless residents and those at risk of becoming homeless. 4 Goal Name Affordable Rental Housing Development
Goal
Description
In partnership with housing developers, leverage HOME, CDBG and other housing funds in support of the development of new rental housing units affordable to households earning less than 30, 60 or 80 percent of Area Median Income (AMI) or the acquisition and rehabilitation of existing housing units affordable to household earning less than 80 percent of AMI. 5 Goal Name City of Fontana CDBG and HOME Administration Goal
Description
These funds will be used to comply with federal statutes and regulations pertaining to the CDBG and HOME Programs.

Table 7 - Goals Description
Estimate the number of extremely low -income, low-income and moderate-income families to whom the jurisdiction will provide affordable housing as defined by HOME 91.215(b)
Through the FY2023 goals, the City will provide housing to 13 income-eligible households. Income limits of assisted households will be determined through the specific activities.

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City of Fontana - 27 - 2023 Annual Action Plan

AP-35 Projects – 91.220(d)
Introduction
To address the high priority needs identified in the Strategic Plan to the 2020-2024 Consolidated Plan, the City of Fontana will invest CDBG, HOME, and ESG funds in projects that preserve affordable housing, provide fair housing services, provide services to low- and moderate-income residents, provide public services to low- and moderate-income residents, prevent homelessness, preserve neighborhoods, and improve public facilities and infrastructure. Together, these projects will address the housing and community development needs of Fontana residents-particularly those residents residing in the low- and moderate-income CDBG Target Areas.

Fontana City CouncilApril 11, 2023

Fontana City Council
April 11, 2023