City of Menifee
Community Facilities District No. 2026-3 (Cypress Sands) Page 1
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR
COMMUNITY FACILITIES DISTRICT NO. 2026-3 (CYPRESS SANDS)
OF THE CITY OF MENIFEE
A Special Tax (all capitalized terms not otherwise defined herein are defined in Section A, “Definitions”, below) shall be applicable to each Assessor’s Parcel of Taxable Property located within the boundaries of the City of Menifee Community Fa cilities District No. 2026-3 (Cypress Sands) ("CFD No. 2026-3”). The amount of Special Tax to be levied in each Fiscal Year on an Assessor’s Parcel shall be determined by the City Council of the City of Menifee, acting in its capa city as the legislative body of CFD No. 2026-3, by applying the appropriate Special Tax for Developed Property, Approved Property, Undeveloped Property, and Provisional Undeveloped Property that is not Exem pt Property as set forth below. All of the real property, unless exempted by law or by the provisions hereof in Section F, 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:
“Accessory Dwelling Unit” means a residential unit of limited size including a smaller second unit that shares an Assessor’s Parcel with Single Family Residential Property that has a stand-alone Residential Unit.
"Acre” or “Acreage" means the land area 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 record ed County parcel map or instrument. The square footage of an Assessor’s Parcel is equal to the Acreage multiplied by 43,560.
"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California.
"Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2026-3: the costs of computing the Special Tax A and preparing the Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Tax A (whether by the City or otherwise); the costs of remitting Special Tax A to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2026-3 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No . 2026-3 or any designee thereof of complying with continuing disclosure requirements of the City, CFD No. 2026-3 and any major property owner 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 Tax A; the costs of the City, CFD No. 2026-3 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City’s annual administration fees and third party expenses. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2026-3 for any other administrative purposes of CFD No. 2026-3, including attorney’s fees and other costs relate d to commencing and pursuing to completion any foreclosure of delinquent Special Tax A.
City of Menifee
Community Facilities District No. 2026-3 (Cypress Sands) Page 2
“Affordable Housing” means housing as defined in State Density Bonus Law, as amended, being Chapter
4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code of the State of California.
“Affordable Housing Property” means an Assessor’s Parcel containing a Residential Unit that is restricted as Affordable Housing.
"Approved Property" means all Assessor’s Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1
st preceding the Fiscal Year in which the Special Tax is being levied, (ii) that have an assigned Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, and (iii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied.
"Assessor’s Parcel" means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number.
"Assessor’s Parcel Map" means an official map of the Assesso r of the County designating parcels by Assessor’s Parcel Number.
"Assessor’s Parcel Number" means that number assigned to an Assessor’s Parcel by the County for purposes of identification.
"Assigned Special Tax A" means the Special Tax of that name described in Section D below.
"Backup Special Tax A" means the Special Tax of that name described in Section D below.
"Bonds" means any obligation to repay a sum of money, in cluding obligations in the form of bonds, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which the Special Tax of CFD No. 2026-3 have been pledged.
"Boundary Map" means a recorded map of the CFD which indicates the boundaries of the CFD.
"Building Permit" means the first legal document issued by the City giving official permission for new construction. For purposes of this definition, “Bui lding Permit” may or may not include expired or cancelled building permits, or any subsequent building permit document(s) authorizing new construction on an Assessor’s Parcel that are issued or changed by the City after the first original issuance, as determined by the CFD Administrator, provided that following such determination the Maximum Special Tax A that may be levied on all Assessor’s Parcels of Taxable Property will be at least 1.1 times annual debt service on all outstanding Bonds plus the estimated annual Administrative Expenses.
"Building Square Footage" or "BSF" means the square footage of a ssessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the Building Permit for such Assessor’s Parcel.
"Calendar Year" means the period commencing January 1 of any year and ending the following December
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Community Facilities District No. 2026-3 (Cypress Sands) Page 3
"CFD” or “CFD No. 2026-3” means Community Facilities District No. 2026-3 (Cypress Sands) established by the City under the Act.
“CFD Administrator" means an official of the City, or designee thereof, responsible for (i) determining the Special Tax A Requirement, (ii) determining the Spec ial Tax B Requirement, (iii) determining the Special Tax C (Contingent) Requirement, and (iv) providing for the levy and collection of the Special Taxes.
“City” means the City of Menifee, State of California.
"City Council" means the City Council of the City of Menif ee, acting as the legislative body of CFD No. 2026-3.
“Condominium Plan" means a condominium plan purusant to California Civil Code, Section 6624.
"County" means the County of Riverside, State of California.
"Developed Property" means all Assessor’s Parcels that: (i) are included in a Final Map that was recorded prior to the January 1
st preceding the Fiscal Year in which the Sp ecial Tax is being levied, (ii) have an Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, and (iii) for which a Buil ding Permit for new construction was issued on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied.
"Exempt Property" means all Assessor’s Parcels designated as being exempt from Special Tax A as provided for in Section F.
"Final Map" means a subdivision of property by recordatio n of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (Ca lifornia Government Code Section 66410 et seq.) or recordation of a Condominium Plan pursuant to California Civil Code Section 6624 that creates individual lots for which Building Permits may be issued without further subdivision.
"Fiscal Year" means the period commencing on July 1
st of any year and ending the following June 30th.
“Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.
“Land Use Category” means any of the categories listed in Table 1 of Section D.
"Maximum Special Tax A" means for each Assessor’s Parcel, the maximum Special Tax, determined in accordance with Section D below, that can be levied by CFD No. 2026-3 on such Assessor’s Parcel.
“Maximum Special Tax B” means the maximum Special Tax B, determined in accordance with Section L below, that can be levied in any Fi scal Year on an Assessor’s Parcel of Taxable Property within CFD No. 2026-3.
“Maximum Special Tax C (Contingent )” means the maximum Special Tax C (Contingent), determined in accordance with Section R below, that can be levied in any Fiscal Year on an A ssessor’s Parcel of Taxable Property within CFD No. 2026-3.
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Community Facilities District No. 2026-3 (Cypress Sands) Page 4
“Multifamily Property” means all Assessor’s Parcels of Develope d Property for which a Building Permit has been issued for the purpose of constructing a building or buildings comprised of attached Residential Units available for rental by the general public, not for sale to an end user, and under common management, as determined by the CFD Administrator.
"Non-Residential Property" means all Assessor's Parc els of Developed Property for which a Building Permit(s) was issued for a non-residential use. The CFD Administrator shall make the determination if an Assessor’s Parcel is Non-Residential Property.
"Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax obligation for an Assessor’s Parcel, as described in Section G.2.
"Prepayment Amount" means the amount required to prepay the Special Tax A obligation in full for an Assessor’s Parcel, as described in Section G.1.
“Property Owner Association” or “POA” means a corporation or association responsible for maintaining private improvements within CFD No. 2026-3.
“Proportionately” means for Taxable Property that is (i) Develo ped Property, that the ratio of the actual Special Tax A levy to the Assigned Special Tax is the same for all Assessor’s Parcels of Developed Property, (ii) Approved Property, that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is the same for all Assessor’s Parcels of Approved Proper ty, and (iii) Undeveloped Property or Provisional Undeveloped Property, that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax A per Acre is the same for all Assessor’s Parcels of Undeveloped Property or Provisional Undeveloped Property, as applicable.
"Provisional Undeveloped Property" means all Assessor’s Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuan t to the provisions of Section F, but cannot be classified as Exempt Property because to do so wo uld be reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section F.
"Rate and Method of Apportionment " means this Rate and Method of Apportionment of Special Tax for CFD No. 2026-3.
"Residential Property" means all Assessor’s Parcels of Develope d Property for which a Building Permit has been issued for purposes of constructing one or more Residential Units.
“Residential Unit” or "RU" means a residential unit that is used or intended to be used as a domicile by one or more persons, as determined by the CFD Admi nistrator. An Accessory Dwelling Unit that shares an Assessor’s Parcel with a Single Family Residential Property shall not be considered a Residential Unit for purposes of this Rate and Method of Apportionment.
“Single Family Residential Property” means all Assessor’s Parcels of Residential Property other than Multifamily Property.
"Special Tax(es)" means any of the special taxes authorized to be levied within CFD No. 2026-3 pursuant to the Act.
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Community Facilities District No. 2026-3 (Cypress Sands) Page 5
“Special Tax A” means the special tax authorized to be levi ed within CFD No. 2026-3 to fund the Special Tax A Requirement.
"Special Tax A Requirement" means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to replenish any reserve funds established in association with the Bonds (provided that the same amount was not previously levied), (v) an amount up to any anticipated shortfall due to Special Tax A delinquencies and (vi) for the collection or accumulation of funds for the acquisition or construction of facilities au thorized by CFD No. 2026-3 or the pa yment of debt service on Bonds anticipated to be issued, provided that the inclusion of such amount does not cause an increase in the levy of Special Tax A on Approved Property or Unde veloped Property as set forth in Steps Two or Three of Section E., less (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture.
“Special Tax B” means the annual special tax authorized to be levied within CFD No. 2026-3 to fund the Special Tax B Requirement.
“Special Tax B Requirement” means the amount required in any Fiscal Year to pay the direct costs of authorized maintenance services, fund an operating reserve for such se rvices as determined by the CFD Administrator, and pay an allocable share of Administ rative Expenses, less a credit for funds available to reduce the annual Special Tax B levy, as determined by the CFD Administrator. Under no circumstances shall the Special Tax B Requirement include funds for Bonds.
“Special Tax B Services” means the maintenance and operation services authorized to be funded by CFD No. 2026-3 and described in Exhibit “A” attached hereto.
“Special Tax C (Contingent)” means the special tax authorized to be levied within CFD No. 2026-3 to fund the Special Tax C (Contingent) Requirement following a Failure to Perform as described in Section P.
“Special Tax C (Contingent) Requirement” means the amount required in any Fiscal Year to pay the direct costs of Special Tax C (Contingent) Services anticipate d to be incurred or otherwise payable by the City, together with an allocable share of Administrative Expenses, less a credit for funds available to reduce the annual Special Tax C (Contingent) levy, as determined by the CFD Administrator.
“Special Tax C (Contingent) Services” means the City’s maintenance and operation of improvements otherwise required to be maintained by the Property Owner Association, as described in Exhibit “B” attached hereto, following a Failure to Perform as described in Section P.
"Taxable Property" means all Assessor’s Parcels within CFD No. 2026-3, which are not Exempt Property.
“Taxable Unit” means either a Residential Unit or an Acre.
“Trustee” means the trustee, fiscal agent, or paying agent under the Indenture.
"Undeveloped Property" means all Assessor’s Parcels of Taxable Property which are not Developed Property, Approved Property, or Provisional Undeveloped Property.
City of Menifee
Community Facilities District No. 2026-3 (Cypress Sands) Page 6
B. SPECIAL TAX A
Commencing Fiscal Year 2026-2027 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property, up to the applicable Maximum Special Tax A, to fund the Special Tax A Requirement.
C. ASSIGNMENT TO LAND USE CATEGORY FOR SPECIAL TAX A
Each Fiscal Year, beginning with Fiscal Year 2026-2027, each Assessor’s Parcel within CFD No. 2026-3 shall be classified as Taxable Property or Exempt Proper ty. In addition, each Assessor’s Parcel of Taxable Property shall be further classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property.
Assessor’s Parcels of Developed Property shall furthe r be classified as Residential Property or Non- Residential Property. Each Assessor’s Parcel of Residential Property shall further be classified as a Single Family Residential Property or Multifamily Property. Each Assessor’s Parcel of Single Family Residential Property shall be further assigned to a Land Use Category based on its Building Square Footage.
In the event that there are Assessor’s Parcel(s) for which one or more Building Permits for Residential Units have been issued and the County has not yet assigned final Assessor’s Parcel Number(s) to such Assessor’s Parcel(s) (in accordance with the Final Map or Condominium Plan), the amount of the Special T a x A l e v y o n s u c h A s s e s s o r ’ s P a r c e l f o r e a c h F i s c a l Y e a r s h a l l b e d e t e r m i n e d a s f o l l o w s : ( 1 ) t h e C F D Administrator shall first determine an amount of th e Maximum Special Tax A fo r such Assessor’s Parcel, based on the classification of such Assessor’s Parc el as Undeveloped Property; (2) the amount of the Special Tax for the Residential Units on such Assessor’s Parcel for which Building Permits have been issued shall be determined based on the Developed Property Special Tax A rates and such amount shall be levied as Developed Property in accordance with Step 1 of Section E below; and (3) the amount of the Special Tax on the Taxable Property in such Assessor’s Parcel not subject to the Special Tax A levy in clause (2) shall be equal to: (A) the percentage of the Maximum Special Tax A rate levied on Undeveloped Property pursuant to Step 3 of Section E below, multiplied by the total of the amount determined in clause (1), less (B) the amount determined in clause (2).
D. MAXIMUM SPECIAL TAX A
1. Developed Property
The Maximum Special Tax A for each Assessor’s Parcel of Single Family Residential Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax A for such Assessor’s Parcel or (ii) the Backup Special Tax A.
The Maximum Special Tax A for each Assessor’s Parc el of Multifamily Property and Non-Residential Property shall be the applicable Assigned Special Tax described in Table 1 of Section D.
a. Assigned Special Tax A
Each Fiscal Year, each Assessor’s Parcel of Single Family Residential Property, Multifamily Property or Non-Residential Property shall be subject to an Assigned Special Tax A. The Assigned Special Tax A for Fiscal Year 2026-2027 applicable to an Assessor's Parcel of Develope d Property shall be determined pursuant to Table 1 below.
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Community Facilities District No. 2026-3 (Cypress Sands) Page 7
TABLE 1
ASSIGNED SPECIAL A TAX FOR DEVELOPED PROPERTY
FISCAL YEAR 2026-2027
Land Use Category
Taxable
Unit Building Square Footage
Assigned
Special Tax A
Per Taxable
Unit
1. Single Family Residential Property RU Less than 1,400 sq. ft $2,630.00
2. Single Family Residential Property RU 1,400 sq. ft to 1,500 sq. ft $2,968.00
6. Single Family Residential Property RU Greater than 1,500 sq. ft $3,137.00
7. Multifamily Property Acre N/A $88,914.00
8. Non-Residential Property Acre N/A $88,914.00
On each July 1, commencing July 1, 2027, the Assigned Special Tax A rate for Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
b. Multiple Land Use Categories
In some instances an Assessor’s Parcel of Developed Property may contain more than one Land Use Category. The Maximum Special Tax A levied on an Assessor’s Parcel shall be the sum of the Maximum Special Tax A for each Taxable Unit for all Land Us e Categories located on the Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.
c. Backup Special Tax A
The Backup Special Tax A for an Assessor’s Parcel within a Final Map or Condominium Plan classified as Single Family Residential Property shall be $2,833 per Residential Unit.
Notwithstanding the foregoing, if all or any portio n of a Final Map or Condominium Plan within the boundaries of CFD No. 2026-3 is subsequently ch anged or modified, the Backup Special Tax A applicable to Single Family Residential Property and Approved Property within the changed or modified area shall be recalculated as follows:
1. Determine the total Backup Special Tax A anticipa ted to apply to the changed or modified Final Map or Condominium Plan area immediately prior to the change or modification.
2. Divide the amount determined pursuant to paragraph 1 above by the total number of Residential Units constructed and/or anticipated to be cons tructed within such changed or modified Final Map or condominium plan area, as reasonably determined by the CFD Administrator.
The amount determined pursuant to paragraph 2 above shall be the Backup Special Tax A per Residential Unit applicable to A ssessor’s Parcels of Single Family Residential Property and Approved Property within such changed or modified Final Map or Condominium Plan area.
Notwithstanding the foregoing, the Backup Specia l Tax A for an Assessor’s Parcel of Developed Property for which a certificate of occupancy has been granted shall not be revised.
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Community Facilities District No. 2026-3 (Cypress Sands) Page 8
On each July 1, commencing July 1, 2027, the Back up Special Tax A shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
2. Approved Property
The Maximum Special Tax A for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Residential Property shall be the Backup Special Tax A computed pursuant to Section D.1.c above.
The Maximum Special Tax A for each Assessor’s Parc el of Approved Property not expected to be classified as Single Family Residential Property shall be $88,914 per Acre.
On each July 1, commencing July 1, 2027, the Maximum Special Tax A rate for Approved Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
3. Undeveloped Property and Provisional Undeveloped Property
The Maximum Special Tax A for each Assessor’s Pa rcel of Undeveloped Property and Provisional Undeveloped Property shall be $88,914 per Acre.
On each July 1, commencing July 1, 2027, the Maximum Special Tax A rate for Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX A
Commencing Fiscal Year 2026-2027 and for each subsequent Fiscal Year, the City Council shall levy Special Tax A on all Taxable Property in accordance with the following steps:
Step One: The Special Tax A shall be levied Propor tionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax A rates in Table 1 to satisfy the Special Tax A Requirement.
Step Two: If additional moneys are needed to satisfy the Special Tax A Requirement after the first step has been completed, the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax A applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax A Requirement.
Step Three: If additional moneys are needed to satisfy the Special Tax A Re quirement after the first two steps have been completed, the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax A applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax A Requirement.
Step Four: If additional moneys are needed to sa tisfy the Special Tax A Re quirement after the first three steps have been completed, then the Sp ecial Tax A levy on each Assessor's Parcel of Developed Property for which the Maximu m Special Tax A is the Backup Special Tax A
City of Menifee
Community Facilities District No. 2026-3 (Cypress Sands) Page 9
shall be increased in equal percentages from the Assigned Special Tax A up to 100% of the Backup Special Tax A as needed to satisfy the Special Tax A Requirement.
Step Five: If additional moneys are needed to sa tisfy the Special Tax A Re quirement after the first four steps have been completed, the Special Tax A shall be levied Proportionately on each Assessor’s Parcel of Provisional Undevelo ped Property up to 100% of the Maximum Special Tax A applicable to each such Assesso r’s Parcel as needed to satisfy the Special Tax A Requirement.
Notwithstanding the above, under no circumstances will the Special Tax A levied in any Fiscal Year against any Assessor’s Parcel of Residential Property as a re sult of a delinquency in the payment of the Special Tax A applicable to any other Assessor’s Parcel be increased by more than ten percent (10%) above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default.
F. EXEMPTIONS
The City shall classify as Exempt Property, in the following order of priority, (i) Assessor’s Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor’s Parcels whic h are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor’s Parcels which are privately owned and are encumbered by or restricted solely for public uses, (vi) Assessor’s Parcels which are classified as Non-Residential Property, or (vii) Assessor’s Parcels restricted to other types of public uses determined by the City Council.
Affordable Housing Property shall be exempt from Special Tax A. Affordable Housing Property shall remain subject to Special Tax B and Special Tax C (C ontingent), as applicable, at the rates and in the manner provided herein.
G. PREPAYMENT OF SPECIAL TAX
The following additional definitions apply to this Section G:
“CFD Facilities” means $5,500,000 expressed in 2026 dollars, whic h shall increase by the Construction Inflation Index on July 1, 2027, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the facilities under the authorized bonding program for CFD No. 2026- 3, or (ii) determined by the City Council concurrently with a covenant that it will not issue any more Bonds to finance additional facilities to be supported by Special Tax A levied under this Rate and Method of Apportionment.
“Construction Fund” means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are available for expenditure to acquire or construct facilities eligible to be financed by CFD No. 2026-3.
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“Construction Inflation Index” means the greater of (i) 2% and (ii) the annual percentage change in the Engineering News-Record Building Cost Index for the ci ty of Los Angeles, measured as of the Calendar Year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building Cost Index for the City of Los Angeles.
“Future Facilities Costs” means the CFD Facilities minus (i) amo unts deposited in the Construction Fund, (ii) amounts deposited in any escrow accounts funded by the Outstanding Bonds and anticipated to fund public facilities costs, and (iii) pub lic facility costs funded by interest earnings on the Construction Fund actually earned prior to the date of prepayment, but in no event shall such amount be less than zero.
“Outstanding Bonds” means all previously issued Bonds issued and secured by the levy of Special Tax A which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Tax.
1. Prepayment in Full
The Special Tax A obligation may be prepaid and perm anently satisfied for (i) Assessor’s Parcels of Developed Property, (ii) Assessor’s Parcels of Approv ed Property or Undeveloped Property for which a Building Permit has been issued, (iii) Assessor’s Parc els of Approved Property or Undeveloped Property for which a Building Permit has not been issued and (iv) Assessor’s Parcels of Provisional Undeveloped Property. The Special Tax A obligation applicable to an Assessor’s Parcel may be fully prepaid and the obligation to pay the Special Tax A for such Assessor’ s Parcel permanently satisfied as described herein; provided that a prepayment may be made only if th ere are no delinquent Special Tax A 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 A obligation for such Assessor’s Parcel shall provide the CFD Administrator with written notice of intent to prepay, and within 5 business days of receipt of such notice, the CFD Administrator shall notify such owner of the amount of the non-re fundable deposit determined to cover the cost to be incurred by the CFD in calculating the Prepayment Am ount (as defined below) for the Assessor’s Parcel.
Within 15 days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the Prepayment Amount for the Assessor’s Parcel. Prepayment must be made not less than 60 days prior to the redemption date for any Bonds to be redeemed with the proceeds of such prepaid Special Tax A.
The Prepayment Amount shall be calculated as follows (some capitalized terms are defined below):
Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
Equals: Prepayment Amount
The Prepayment Amount shall be determined as of the proposed prepayment date as follows:
1. Confirm that no Special Tax A delinque ncies apply to such Assessor’s Parcel.
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2. For an Assessor’s Parcel of Developed Prop erty, compute the Maximum Special Tax A for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Ma ximum Special Tax A for the Assessor’s Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has not been issued, or Provisional Undeveloped Property, compute the Maximum Special Tax A for the Assessor’s Parcel.
3. Divide the Maximum Special Tax A derived pursuant to paragraph 2 by the total amount of Maximum Special Tax A that could be levied assumi ng build out of all Assessor’s Parcels of Taxable Property based on the applicable Maximum Special Tax A for Assessor’s Parcels of Developed Property not including any Assessor’s Parc els for which the Special Tax A obligation has been previously prepaid.
4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the “Bond Redemption Amount”).
5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the “Redemption Premium”).
6. Determine the Future Facilities Costs.
7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the amount of Future Facilities Costs for the Assessor’s Parcel (the “Future Facilities Amount”).
8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax prepayments.
9. Determine the Special Tax A levied on the Assesso r’s Parcel in the current Fiscal Year which have not yet been paid.
10. Determine the amount the CFD Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount.
11. Add the amounts derived pursuant to paragra phs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the “Defeasance Amount”).
12. Verify the administrative fees and expenses of the CFD, the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Special Tax A obligation fo r the Assessor’s Parcel and the redemption of Outstanding Bonds (the “Administrative Fees and Expenses”).
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13. The reserve fund credit (the “Reserve Fund Cr edit”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayme nt from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.
14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeas ance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit.
15. From the Prepayment Amount, the Bond Rede mption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments. The Future Facilities Amount shall be deposited into the Construction Fu nd. The Administrative Fees and Expenses shall be retained by the CFD.
The Prepayment Amount may be sufficient to redeem other than a $5,000 increm ent of Bonds. In such event, the increment above $5,000 or an integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next redemption from other Special Tax prepayments of Outstanding Bonds or to make debt service payments.
As a result of the payment of the current Fiscal Ye ar’s Special Tax A levy as determined pursuant to paragraph 9 above, the CFD Administrator shall remove the current Fiscal Year’s Special Tax A levy for the Assessor’s Parcel from the County tax roll. With respect to any Assessor’s Parcel for which the Special Tax A obligation is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Tax A obligation and the release of the Special Tax lien for the Assessor’s Parcel, and the obligation to pay the Special Tax for such Assessor’s Parcel shall cease.
Notwithstanding the foregoing, no Special Tax pr epayment shall be allowed unless the amount of Maximum Special Tax A that may be levied on all Assessor’s Parcels of Taxable Property after the proposed prepayment will be at least 1.1 times maximum annua l debt service on the Bonds that will remain outstanding after the prepayment plus the estimated annual Administrative Expenses.
Tenders of Bonds in prepayment of the Special Tax A obligation may be accepted upon the terms and conditions established by the City Council pursuant to the Act. However, the use of Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the City Council.
2. Prepayment in Part
The Special Tax A obligation for an Assessor’s Parc el of Developed Property, Approved Property, Undeveloped Property, or Provisional Undeveloped Pr operty may be partially prepaid. For purposes of determining the Partial Prepayment Amount, the provisio ns of Section G.1 shall be modified as provided by the following formula:
PP = ((P
E – A) x F) + A
These terms have the following meaning:
PP = Partial Prepayment Amount
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PE = the Prepayment Amount calculated according to Section G.1 F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Special Tax A obligation
A = the Administrative Fees and Expenses determined pursuant to Section G.1 The owner of an Assessor’s Parcel who desires to pa rtially prepay the Special Tax A obligation for the Assessor’s Parcel shall notify the CF D Administrator of (i) such owner’s intent to partially prepay the Special Tax A obligation, (ii) the percentage of the Special Tax A obligation such owner wishes to prepay, and (iii) the company or agency that will be acting as the escrow agent, if any. Within 5 days of receipt of such notice, the CFD Administrator shall notify such property owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Partial Prepayment Amount. Within 15 business days of receipt of such non-refundable deposit, the CFD Administrator shall notify such owner of the amount of the Partial Prep ayment Amount for the Assessor’s Parcel. A Partial Prepayment Amount must be made not less than 60 days prior to the redemption date for the Outstanding Bonds to be redeemed with the proceeds of the Partial Prepayment Amount.
With respect to any Assessor’s Parcel for which the Special Tax A obligat ion is partially prepaid, the CFD Administrator shall (i) distribute the Partial Prepayme nt Amount as provided in Paragraph 15 of Section G.1, and (ii) indicate in the records of the CFD that there has been a partial prepayment for the Assessor’s Parcel and that a portion of the Special Tax A obligati on equal to the remaining percentage (1.00 - F) of the applicable Special Tax A will continue to be levied on the Assessor’s Parcel pursuant to Section E.
H. TERMINATION OF SPECIAL TAX A
For each Fiscal Year that any Bonds are outstanding the Special Tax A shall be levied on all Assessor’s Parcels subject to the Special Tax pursuant to Section E. The Special Tax A shall cease not later than the 2071-2072 Fiscal Year, however, Special Tax A will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all the required interest and principal payments on the CFD No. 2026-3 Bonds have been paid; (ii) all authorized fac ilities of CFD No. 2026-3 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Tax A remain uncollected and (iv) all other obligations of CFD No. 2026-3 have been satisfied.
I. MANNER OF COLLECTION
The Special Tax A shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2026-3 may collect Special Tax A at a different time or in a different manner if necessary to meet its financia l obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act.
J. SPECIAL TAX B
Commencing Fiscal Year 2026-2027 and for each subsequent Fiscal Year, the City Council shall levy Special Tax B on all Taxable Property, up to the applicable Maximum Special Tax B, to fund the Special Tax B Requirement.
K. ASSIGNMENT TO LAND USE CATEGORY FOR SPECIAL TAX B
For each Fiscal Year, all Assessor’s Parcels of Taxable Property shall be classified as Developed Property,
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Approved Property, or Undeveloped Property and shall be subject to the levy of Special Tax B as determined pursuant to Sections L and M below. De veloped Property and Approved Property shall be classified as Residential Property or Non-Resident ial Property. Residential Property shall be further classified as Single Family Residential Property or Multifamily Property. For purposes of determining the applicable Maximum Special Tax B, Affordable Housing Property shall be separately identified by the CFD Administrator based upon a recorded affordability rest riction, regulatory agreement, or other City- approved instrument. No more than six (6) Residentia l Units within CFD No. 2026-3 shall be classified as Affordable Housing Property and subject to the Maximum Special Tax B applicable to Affordable Housing Property.
L. MAXIMUM SPECIAL TAX B
For Fiscal Year 2026-2027, the Maximum Special Tax B for Developed Property shall be as shown in Table 2 below. For Single Family Residential Property, the number of Residential Units shall be determined by the CFD Administrator based on the Building Permit, Final Map, or other City-approved development information.
TABLE 2
MAXIMUM SPECIAL TAX B FOR DEVELOPED PROPERTY
FISCAL YEAR 2026-2027
Land Use Category
Taxable
Unit Classification
Maximum
Special Tax B
Per Taxable
Unit
1. Single Family Residential Property RU Market Rate $440.00
2. Affordable Housing Property RU Affordable $125.00
3. Multifamily Property Acre N/A [TBD]
4. Non-Residential Property Acre N/A [TBD]
On each July 1, commencing July 1, 2027, the Maximum Special Tax B shall increase by i) the percentage increase in the Consumer Price Index for all Urban Consumers for the Riverside-San Bernardino-Ontario California Standard Metropolitan Statistical Area since the beginning of the preceding Fiscal Year or ii) by two percent (2.0%), whichever is greater.
The Maximum Special Tax B for Approved Property and Undeveloped Property for Fiscal Year 2026-2027 shall be [TBD] per Acre and shall increase annually by i) the percentage increase in the Consumer Price Index for all Urban Consumers for the Riverside-San Bernardino-Ontario California Standard Metropolitan Statistical Area since the beginning of the preceding Fi scal Year or ii) by two percent (2.0%), whichever is greater.
M. METHOD OF APPORTIONMENT OF ANNUAL SPECIAL TAX B
Commencing Fiscal Year 2026-2027 and for each subsequent Fiscal Year, the City Council shall determine the Special Tax B Requirement and shall levy Special Tax B on Taxable Property until the aggregate amount of Special Tax B equals the Special Tax B Requirement. Special Tax B shall first be levied Proportionately on Developed Property up to 100% of the applicable Maximum Special Tax B; if additional moneys are needed, it shall next be levied Proportionately on Approved Property up to 100% of the applicable
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Maximum Special Tax B; and if additional moneys are needed, it shall then be levied Proportionately on Undeveloped Property up to 100% of the applicable Maximum Special Tax B.
N. DURATION OF SPECIAL TAX B
Special Tax B shall be levied in perpetuity to fund the Special Tax B Requirement, unless no longer required as determined by the City Council.
O. MANNER OF COLLECTION OF SPECIAL TAX B
Special Tax B shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2026-3 may collect Special Tax B at a different time or in a different manner if necessary to meet its funding requirements.
P. SPECIAL TAX C (CONTINGENT)
The City Council may levy the Special Tax C (Contingent), commencing in the first Fiscal Year following the occurrence of any of the following events (each such event, a “Failure to Perform”):
a. the Property Owner Association files a voluntary petition in bankruptcy or the approval by a court of competent jurisdiction of a petition applicable to the Property Owner Association of any proceedings instituted under the Federal Bankruptcy Code, as amended;
b. the Property Owner Association is dissolved;
c. the Property Owner Association fails to levy annual assessments sufficient to fund (i) the maintenance for the then Property Owner Association owned and/or Property Owner Association maintained Maintenance Services (C ontingent) or (ii) the replacement of such facilities related to the Maintenance Services (Contingent) in accordance with (A) the requirements of the then current reserve funding plan of the Property Owner Association performed pursuant to California Civil Code Section 5550 or (B) if California Civil Code 5550 is no longer applicable, the requirements of the then applicable law and/or regulations governing the Property Owner Association’s requirements to budget for and finance such replacement; or
d. the Property Owner Association fails to mainta in the Maintenance Services (Contingent) at the same level as defined within the Property Owner Association maintenance specifications. In the event the Property Owner Association maintena nce specifications do not meet the City maintenance requirements, the City Council will have sole discretion to determine the required level of maintenance required for purposes of this section.
In the event of the occurrence of a Failure to Perform described in “c.” or “d.” above, the City shall give the Property Owner Association written notice of such event. If such Failure to Perform is reasonably capable of being cured within sixty (60) days from the date of such notice, the Property Owner Association shall have such period of time to cure such Failure to Perform prior to the levy by the City Council of Special Tax C (Contingent). If such Failure to Perform is such that it is reasonably capable of being cured, but not within such sixty (60) day period and the Property Owner Association (i) initiates corrective action within such sixty (60) day period, and (ii) diligently, continually, and in good faith works to effect a cure of such Failure to Perform as soon as possible, then the Property Owner Asso ciation shall have such
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additional time, as is reasonably necessary, to cure su ch Failure to Perform prior to the levy by the City Council of Special Tax C (Contingent).
The City Council may suspend the levy of Special Tax C (Contingent) if the Property Owner Association has cured the Failure to Perform to the satisfaction of the City Council and the Property Owner Association has agreed to such conditions as th e City Council may find necessary to minimize the occurrence of such Failure to Perform in the future. In the event the City Council initiates the Special Tax C (Contingent), it will apply to all Assessor’s Parcels of Taxable Property in addition to, and not in lieu of, the Special Tax B.
For purposes of Special Tax C (Contingent), Affordable Housing Property shall be classified according to its underlying residential land use and shall not be exem pt from or subject to a reduced Maximum Special Tax C (Contingent) by reason of its classification as Affordable Housing Property.
Q. ASSIGNMENT TO LAND USE CATEGORY FOR SPECIAL TAX C (CONTINGENT)
For each Fiscal Year in which Special Tax C (Contingent) is authorized to be levied, all Assessor’s Parcels of Taxable Property shall be classified as Developed Property, Approved Property, or Undeveloped Property.
Developed Property and Approved Property shall be further classified as Residential Property or Non- Residential Property. Residential Property shall be further classified as Single Family Residential Property or Multifamily Property.
R. MAXIMUM SPECIAL TAX C (CONTINGENT)
For Fiscal Year 2026-2027, the Maximum Special Tax C (Contingent) shall be as shown in Table 3 below.
TABLE 3
MAXIMUM SPECIAL TAX C (CONTINGENT) FOR DEVELOPED PROPERTY FISCAL YEAR 2026-2027
Land Use Category
Taxable
Unit Classification
Maximum Special
Tax C (Contingent)
Per Taxable Unit
1. Single Family Residential Property RU All Residential [TBD]
2. Multifamily Property Acre N/A [TBD]
3. Non-Residential Property Acre N/A [TBD]
The Maximum Special Tax C (Contingent) for Approved Property and Undeveloped Property for Fiscal Year 2026-2027 shall be [TBD] per Acre. The Maximum Special Tax C (Contingent) shall increase annually by i) the percentage increase in the Consumer Price Index for all Urban Consumers for the Riverside-San Bernardino-Ontario California Standard Metropolitan Statistical Area since the beginning of the preceding Fiscal Year or ii) by two percent (2.0%), whichever is greater.
S. METHOD OF APPORTIONMENT OF ANNUAL SPECIAL TAX C (CONTINGENT)
Commencing with the first Fiscal Year in which Specia l Tax C (Contingent) is authorized to be levied and for each subsequent Fiscal Year, the City Council shall determine the Special Tax C (Contingent) Requirement and shall levy Special Tax C (Contingent ) on Taxable Property until the aggregate amount equals the Special Tax C (Contingent) Requirement. Special Tax C (Contingent) shall first be levied
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Proportionately on Developed Property up to 100% of the applicable Maximum Special Tax C (Contingent); if additional moneys are needed, it shall next be levied Proportionately on Approved Property; and if additional moneys are needed, it shall then be levied Proportionately on Undeveloped Property.
T. DURATION OF SPECIAL TAX C (CONTINGENT)
Special Tax C (Contingent) shall be levied in perpetuity when required to fund the Special Tax C (Contingent) Requirement, unless no longer required as determined by the City Council.
U. MANNER OF COLLECTION OF SPECIAL TAX C (CONTINGENT)
Special Tax C (Contingent) shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2026-3 may collect Special Tax C (Contingent) at a different time or in a different manner if necessary to meet its funding requirements.
V. APPEALS OF SPECIAL TAXES
Any taxpayer may file a written appeal of a Special Tax levied on his/her Assessor’s Parcel(s) with the CFD Administrator, provided that the appellant is current in his/her payments of all Special Taxes. During the pendency of an appeal, all Special Taxes previously le vied must be paid on or before the applicable payment date. The appeal must specify the reasons why the appellant claims the Special Tax is in error.
The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determin ation. If the CFD Admini strator agrees with the appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant’s Assessor’s Parcel(s), as appropriate. No refunds of previously paid Special Taxes shall be made unless approved by the CFD Administrator.
The CFD Administrator shall interpret this Rate and Method of Apportionment and make determinations relative to the classification of property and the annu al levy and administration of Special Tax A, Special Tax B, and Special Tax C (Contingent). Any taxpayer who disputes such a determination may appeal as provided herein.
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EXHIBIT “A”
DESCRIPTION OF AUTHORIZED SPECIAL TAX B SERVICES
The services which may be funded with proceeds of Special Tax B of CFD No. 2026-3, as provided by Section 53313 of the Act, will include a ll costs attributable to maintainin g, servicing, cleaning, repairing and/or replacing landscaped areas (m ay include reserves for replacement) in public street right-of-way, public landscaping, public open spaces and other sim ilar landscaped areas officially dedicated for public use. These services including the following:
(a) maintenance and lighting of parks, park ways, streets, roads and open space, which maintenance and lighting services may include, without limitation, furnishing of electrical power to street lights and traffic signals; repair and replacement of damaged or inoperative light bulbs, fixtures and standards; maintenance (including irrigation and repl acement) of landscaping vegetation situated on or adjacent to parks, parkways, streets, roads and open space; maintenance and repair of irrigation facilities; maintenance of public signage; graffiti removal from and maintenance and repair of public structures situated on parks, parkways, streets, roads and op en space; maintenance and repair of playground or recreation program equipment or facilities situated on any park; and
(b) maintenance and operation of water quality improvements which include storm drainage and flood protection facilities, including, without limitation, drainage inlets, catch basin inserts, infiltration basins, flood control channels, fossil fuel filters, and similar facilities. Maintenance services may include but is not limited to the repair, removal or replacement of all or part of any of the water quality improvements, fossil fuel filters within the public right-of-way including the removal of petroleum hydrocarbons and other pollutants from water runoff, or appurtenant facilities, clearing of inlets and outlets; erosion repairs; and cleanup to improvem ents, and other items necessary for the maintenance and servicing of the water quality basin improvements within flood control channel improvements; and
(c) public street sweeping, on the segments of the arterials within the boundaries of CFD No. 2026-3; as well as local roads within residential su bdivisions located within CFD No. 2026-3; and any portions adjacent to the properties within CFD No. 2026-3; and
In addition to payment of the cost and expense of the forgoing services, proceeds of the special tax may be expended to pay “Administrative Expenses,” as said term is defined in the Rate and Method of Apportionment.
The above services may be financed by proceeds of Special Tax B of CFD No. 2026-3 only to the extent that they are in addition to those provided in the territory of CFD No. 2026-3 before CFD No. 2026-3 was created.
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EXHIBIT “B”
DESCRIPTION OF AUTHORIZED SPECIAL TAX C (CONTINGENT) SERVICES
The services which may be funded with proceeds of Special Tax C (Contingent) of CFD No. 2026-3, as provided by Section 53313 of the Act, will include all costs attributable to maintaining, servicing, cleaning, repairing and/or replacing landscaped areas (may include reserves for replacement) in public street right- of-way, public landscaping, public open spaces and other similar landscaped areas officially dedicated for public use. These services including the following:
(a) maintenance and operation of water quality improvements which include storm drainage and flood protection facilities, including, without limitation, drainage inlets, catch basin inserts, infiltration basins, flood control channels, fossil fuel filters, and similar facilities. Maintenance services may include but is not limited to the repair, removal or replacement of all or part of any of the water quality improvements, fossil fuel filters within the public right-of-way including the removal of petroleum hydrocarbons and other pollutants from water runoff, or appurtenant facilities, clearing of inlets and outlets; erosion repairs; and cleanup to improvem ents, and other items necessary for the maintenance and servicing of the water quality basin improvements within flood control channel improvements; and
In addition to payment of the cost and expense of the forgoing services, proceeds of the special tax may be expended to pay “Administrative Expenses,” as said term is defined in the Rate and Method of Apportionment.
The above services may be financed by proceeds of Special Tax C (Contingent) of CFD No. 2026-3 only to the extent that they are in addition to those prov ided in the territory of CFD No. 2026-3 before CFD No. 2026-3 was created.