Mayor and City Council
May 3, 2023

RESOLUTION NO. 2023-062

RESOLUTION OF THE MAYOR AND CITY COUNCIL OF

THE CITY OF SAN BERNARDINO, CALIFORNIA,

AUTHORIZING THE ISSUANCE OF BONDS OF
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN

BERNARDINO, COUNTY OF SAN BERNARDINO, STATE
OF CALIFORNIA DESIGNATED 2023 SPECIAL TAX

BONDS, APPOINTING FISCAL AGENT, APPROVING

FISCAL AGENT AGREEMENT AND PURCHASE

CONTRACT AND AUTHORIZING NEGOTIATION OF

TERMS OF THE SALE OF SAID BONDS, APPROVING

PRELIMINARY OFFICIAL STATEMENT AND

AUTHORIZING PREPARATION OF FINAL OFFICIAL

STATEMENT, APPROVING CONTINUING DISCLOSURE

CERTIFICATE, FUNDING AGREEMENT AND SECURITY

AGREEMENT
WHEREAS, Community Facilities District 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “District”) was established on September 19, 2023, by adoption by the City Council (the “City Council”) of the City of San Bernardino (the “City”) of Resolution No. 2018-266; and WHEREAS, on September 19, 2023, the City Council also adopted Resolution No. 2018- 267 determining the necessity for the District to incur bonded indebtedness in an aggregate principal amount not to exceed $5,000,000; and
WHEREAS, on September 19, 2023, consolidated special elections were held within the District and there was submitted to the qualified voters of the District, among other propositions, the proposition of whether a bonded indebtedness in an aggregate principal amount not to exceed $5,000,000 should be incurred by and for the District for the purpose of financing certain public facilities for the benefit of the District (the “Facilities”), and more than two-thirds of the votes cast in said consolidated special elections were cast in favor of incurring such bonded indebtedness, and the District was thereby authorized to issue bonds in an aggregate principal amount not to exceed $5,000,000 for the purposes set forth in said proposition; and WHEREAS, the City Council has determined that it is necessary that bonds of the District designated “Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds” be issued in an aggregate principal amount, which shall not exceed $3,500,000 (the “Bonds”) to finance all or a portion of the costs of the acquisition, design or construction of the Facilities; and
WHEREAS, payment of the principal of and interest on the Bonds will be secured by special taxes to be levied on parcels of taxable property in the District (the “Special Taxes”); and Packet Pg. 1743
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WHEREAS, pursuant to Section 53345.8 of the California Government Code, the City Council, as the legislative body of the District, may sell bonds of the District only if it determines prior to the sale of such bonds that the value of the real property that would be subject to the Special Tax to pay debt service on the bonds will be at least three (3) times the principal amount of the bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Mello-Roos Community Facilities Act of 1982 (Section 53311, et seq., of the California Government Code) on property within the District or a special assessment levied on property within the District; and
WHEREAS, the appraised value of the taxable property within the District, based upon the appraisal prepared by Kitty Siino & Associates, Inc. (the “Appraiser”), and as set forth in the report of the Appraiser dated April 5, 2023 (the “Appraisal”), is $34,014,596, as of February 21, 2023 date of value; and
WHEREAS, if the Bonds are issued and sold in an aggregate principal amount that does not exceed $3,500,000, the appraised value of the taxable property in the District, as set forth in the Appraisal, will be more than three (3) times such principal amount of the Bonds, and there are no other special tax or assessment bonds of the District; and WHEREAS, there has been presented to the City Council a form of Purchase Contract (the “Purchase Contract”) whereby Hilltop Securities, Inc. (the “Underwriter”) has offered to purchase the Bonds from the City, and a form of Preliminary Official Statement relating to the Bonds; and WHEREAS, there has also been presented to the City Council a form of Fiscal Agent Agreement (the “Fiscal Agent Agreement”) with respect to the Bonds to be executed and delivered by the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”), whereby the Fiscal Agent will authenticate and deliver the Bonds and perform certain other duties; and
WHEREAS, there has also been presented to the City Council a form of Continuing Disclosure Certificate to be executed and delivered by the City, for the benefit of the owners of the Bonds and in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission, as amended (the “Rule”); and WHEREAS, there has also been presented to the City Council a form of Funding Agreement (“Funding Agreement”) and Security Agreement (“Security Agreement”) to be executed and delivered by and among the City and the property owners, SB17329, LLC and Verdemont Ranch LLC; and
WHEREAS, the City Council has considered the forms of the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract, the Preliminary Official Statement, the Funding Agreement, and the Security Agreement and has determined that it is in the best interest of the owners of property in and the future residents of the District that the City Council authorize the issuance and sale of the Bonds and the execution and delivery of said agreements and approve and authorize the distribution of the Preliminary Official Statement subject to the conditions hereinafter contained; and
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WHEREAS, Section 5852.1 of the Government Code of the State of California (“Section 5852.1”) provides that the City Council obtain from an underwriter, financial advisor or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Bonds, good faith estimates of: (a) the true interest cost of the Bonds, (b) the finance charge of the Bonds, meaning the sum of all fees and charges paid to third parties, (c) the amount of proceeds of the Bonds received less the finance charge described above and any reserves or capitalized interest paid or funded with proceeds of the Bonds and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds; and WHEREAS, in accordance with Section 5852.1, the City Council has obtained such good faith estimates from Columbia Capital Management, LLC, the City’s municipal advisor (the “Municipal Advisor”), and such estimates are disclosed in Exhibit A attached hereto; and WHEREAS, the City Council wishes at this time to authorize all proceedings relating to the issuance and sale of the Bonds and all other agreements and documents relating thereto.

BE IT RESOLVED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS:

SECTION 1. Findings. The City Council finds (a) that the preceding recitals are true and correct, (b) that the sale of the Bonds at private sale, without advertising for bids, will result in a lower overall cost to the District, and (c) that if the Bonds are issued and sold in an aggregate principal amount that does not exceed $3,500,000, the value of the parcels of real property within the District, which will be subject to the levy of the Special Taxes to pay the principal of and interest on the Bonds, based on the appraised value of such parcels as determined by the Appraiser and as set forth in the Appraisal, i.e., $34,014,596, will be more than three (3) times the principal amount of such Bonds and all other outstanding bonds that are secured by special taxes that are to be levied on such parcels or special assessments that have been levied on such parcels.

SECTION 2. Authorization of the Issuance of the Bonds. The City Council authorizes the issuance and sale of the Bonds in an aggregate principal amount which shall not exceed $3,500,000. The Mayor, the Mayor Pro Tem, the Interim City Manager and the Finance Director (each an “Authorized Representative”) are each authorized and directed to take all steps and actions which are necessary to accomplish the issuance, sale and delivery of the Bonds pursuant to the authorization given by and the conditions specified in this resolution. The Mayor and the City Clerk of the City are authorized to execute the Bonds for and on behalf of the City and the District by their manual or facsimile signatures. The Bonds shall be dated as of their date of delivery pursuant to the Purchase Contract.

SECTION 3. Approval of Fiscal Agent Agreement. The form of Fiscal Agent Agreement which provides generally for (i) the authentication and delivery by the Fiscal Agent of the Bonds, (ii) the establishment and administration by the Fiscal Agent of certain funds and accounts for the benefit of the City and the owners of the Bonds, (iii) the payment by the Fiscal Agent of the principal of and interest on the Bonds from the Special Tax Revenues (as defined therein), and (iv) the performance of other duties by the Fiscal Agent, is approved in the form provided to the City Council at the meeting at which this resolution is adopted, and the Authorized Representatives are Packet Pg. 1745
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each individually authorized to execute and deliver, on behalf of the City, such Fiscal Agent Agreement with respect to the Bonds.

SECTION 4. Approval of Preliminary Official Statement; Preparation of Final Official Statement. The Preliminary Official Statement is approved, and the Authorized Representatives are each individually authorized to consent to and assist in the preparation of such modifications thereto as may be specified by Best Best & Krieger LLP, bond counsel and disclosure counsel to the City (“Bond Counsel”), and the Municipal Advisor. The Authorized Representatives are each individually authorized to determine, with the assistance of Bond Counsel and the Municipal Advisor when the Preliminary Official Statement is to be deemed final within the meaning of the Rule and to deliver a certificate to that effect to the Underwriter. The Underwriter is authorized to distribute the Preliminary Official Statement as approved hereby, or as modified with the consent of the Interim City Manager or the Finance Director, or to prospective purchasers of the Bonds.

The Authorized Representatives and the Municipal Advisor are each authorized to participate in the preparation of the Final Official Statement, based on the Preliminary Official Statement, and such modifications thereto as may be agreed to by Bond Counsel, the Municipal Advisor and the Underwriter. The Authorized Representatives are each authorized to sign the Final Official Statement on behalf of the City and the District.

SECTION 5. Appointment of Professionals. The City Council hereby authorizes and approves the following professionals to provide services in connection with the issuance of the Bonds and authorizes the Director of Administrative Services to enter into engagement agreements thereto:
(a) Fiscal Agent. U.S. Bank Trust Company, National Association is appointed as Fiscal Agent pursuant to the Fiscal Agent Agreement and to take any and all action provided therein to be taken by the Fiscal Agent;
(b) Municipal Advisor. Columbia Capital Management, LLC is hereby appointed to provide municipal advisory services;
(c) Bond Counsel and Disclosure Counsel. Best Best & Krieger LLP is hereby appointed as bond and disclosure counsel in connection with the issuance of the Bonds; and (d) Special Tax Consultant. Spicer Consulting Group, LLC is hereby appointed as Special Tax Consultant in connection with the issuance of the Bonds.

SECTION 6. Sale of Bonds; Purchase Contract. The City Council approves and authorizes the issuance and sale of the Bonds by negotiation with the Underwriter pursuant to the Purchase Contract between the City and the Underwriter in the form presented to the City Council at the meeting at which this resolution is adopted, together with any changes therein or additions thereto which are deemed advisable by the Authorized Representatives upon consultation with Bond Counsel and the Municipal Advisor. The Authorized Representatives are each authorized and directed to execute and deliver the final form of the Purchase Contract on behalf of the City and the District upon the submission of an offer by the Underwriter to purchase the Bonds, which offer is acceptable to the Interim City Manager and is consistent with the requirements of this resolution; provided that the true interest cost on the Bonds shall not exceed six and one half Packet Pg. 1746
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percent (6.5%) the Underwriter’s discount for the purchase of the Bonds shall not be greater than one and one half percent (1.5%) (exclusive of original issue discount) of the aggregate principal amount of the Bonds; and the last maturity of the Bonds shall be paid and redeemed no later than September 1, 2053. When the Interim City Manager has negotiated the Purchase Contract with the Underwriter within the parameters specified above and when the other terms and conditions of the Purchase Contract are satisfactory to the Interim City Manager or the Finance Director or Deputy Finance Director and Bond Counsel, the Interim City Manager or the Finance Director or Deputy Finance Director is authorized to execute and deliver the Purchase Contract to the Underwriter on behalf of the City and the District.

SECTION 7. Funding Agreement and Security Agreement. The City Council approves the form of the Funding Agreement and Security Agreement and the Authorized Representatives are each authorized and directed to execute and deliver the final form of the Funding Agreement and Security Agreement on behalf of the City and the District.

SECTION 8. Accountability Measures. Pursuant to Section 53410 of the California Government Code, the issuance of and sale of the Bonds is subject to the following accountability measures:
(a) The proceeds of the Bonds shall be applied only for the specific purposes identified in the propositions regarding the authorization of the District incurring bonded indebtedness which the qualified electors of the District approved in the election held on August 15, 2018;
(b) Except as otherwise provided in the Fiscal Agent Agreement, the proceeds of the sale of the Bonds shall be deposited in the funds and accounts established pursuant to the Fiscal Agent Agreement and the proceeds deposited in each such fund or account shall be expended as provided in the Fiscal Agent Agreement with respect to each such fund or account; and
(c) The Finance Director or Deputy Finance Director shall file a report with the City Council at least once in each calendar year, beginning in 2023, which shall contain the information required by Section 53411 of the California Government Code with respect to the expenditure of the proceeds of the sale of the Bonds and the status of the construction and acquisition of the public facilities comprising the Project (as defined in the Fiscal Agent Agreement).

SECTION 9. Findings Regarding the Levy and Rates of Special Taxes. The City Council finds that the City will covenant in the Fiscal Agent Agreement, for the benefit of the owners of the Bonds, that it will not initiate proceedings under the Mello-Roos Community Facilities Act of 1982 to reduce the Maximum Special Tax rates on then existing Developed Property (as defined in the Fiscal Agent Agreement) in the District below the amounts which are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds. The City Council further finds and determines that any reduction or limitation of the Special Tax rates below the Maximum Rates would interfere with the timely retirement of the Bonds.

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SECTION 10. Approval of Continuing Disclosure Certificate. The Continuing Disclosure Certificate is approved in the form submitted to the City Council at the meeting at which this resolution is adopted, and the Interim City Manager or the Finance Director or Deputy Finance Director is authorized to execute and deliver said certificate on behalf of the City.

SECTION 11. Modifications. The approval of the Fiscal Agent Agreement, the Continuing Disclosure Certificate and the Purchase Contract given by this resolution shall apply to any modification or amendment of any of said agreements which is agreed upon and approved by Bond Counsel, the Municipal Advisor and the Interim City Manager or the Finance Director or Deputy Finance Director as being necessary to carry out the provisions thereof and the authorization and direction provided in this resolution.

SECTION 12. Further Action. The Authorized Representatives are authorized to take any and all action which is directed by Bond Counsel with respect to the execution and delivery of the Fiscal Agent Agreement, the Continuing Disclosure Certificate and the Purchase Contract and the issuance, sale and delivery of the Bonds, which in the opinion of Bond Counsel is necessary in order for the authorization and direction provided in this resolution to be carried out.

SECTION 13. Conditions of Approval. The approvals, authorization and direction given by this resolution are conditioned upon the satisfaction of the requirements of Section 6 hereof with respect to the issuance and sale of the Bonds. The officers of the City designated above shall not take any action with respect to the execution and delivery of the Fiscal Agent Agreement, the Continuing Disclosure Certificate and the Purchase Contract or the issuance, sale and delivery of the Bonds unless and until such conditions are satisfied; provided, however, that upon satisfaction of such conditions, this resolution shall be fully effective and shall be carried out by such officers without further approval or action of the City Council. The approvals, authorization and direction provided by this resolution shall continue, subject to the satisfaction of such conditions, until December 31, 2022, and the Bonds may be sold, and the Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract, the Preliminary Official Statement and the Final Official Statement may be dated, entered into, executed and delivered or distributed, as appropriate, on any date selected by the Authorized Representatives and the Municipal Advisor and the Underwriter prior to said date.

SECTION 14. Severability. If any provision of this Resolution or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications, and to this end the provisions of this Resolution are declared to be severable.

SECTION 15. Electronic and Digital Signatures. The City Council hereby approves the execution and delivery of all agreements, documents, certificates and instruments referred to herein with electronic signatures as may be permitted under the California Uniform Electronic Transactions Act and digital signatures as may be permitted under Section 16.5 of the California Government Code using DocuSign.

SECTION 16. Effective Date. This Resolution shall become effective immediately.

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APPROVED and ADOPTED by the City Council and signed by the Mayor and attested by the Acting City Clerk this 3rd day of May, 2023.

Helen Tran, Mayor
City of San Bernardino
Attest:

Genoveva Rocha, CMC, City Clerk
Approved as to form:

Sonia R. Carvalho, City Attorney
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CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF SAN BERNARDINO ) ss

CITY OF SAN BERNARDINO )
I, Genoveva Rocha, CMC, City Clerk, hereby certify that the attached is a true copy of Resolution No. 2023-062, adopted at a regular meeting held on the 3rd day of May, 2023 by the following vote:

Council Members: AYES NAYS ABSTAIN ABSENT
SANCHEZ ______ ______ _______ _______
IBARRA ______ ______ _______ _______
FIGUEROA ______ ______ _______ _______
SHORETT ______ ______ _______ _______
REYNOSO ______ ______ _______ _______
CALVIN ______ ______ _______ _______
ALEXANDER ______ ______ _______ _______
WITNESS my hand and official seal of the City of San Bernardino this 4th day of May 2023.
_____________________________
Genoveva Rocha, CMC, City Clerk
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EXHIBIT A

GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by the Municipal Advisor in consultation with the Underwriter.

Principal Amount. The Municipal Advisor has informed the City that, based on the financing plan and current market conditions, it’s good faith estimate of the aggregate principal amount of the Bonds to be sold is $2,855,000 (the “Estimated Principal Amount”), which excludes approximately $68,364.75 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of the bonds.

True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.895%.

Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $256,405.00.

Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City, on behalf of the District, for the sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $2,446,459.75.

Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the District will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $5,808,842.36 (excluding any offsets from reserves or capitalized interest).

The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than Packet Pg. 1751
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the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the financing plan or finance charges, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City, on behalf of the District, based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.

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___________________________________________________________________________

FISCAL AGENT AGREEMENT
by and between

THE CITY OF SAN BERNARDINO
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION
as Fiscal Agent
Dated as of __________ 1, 2023
Relating to
Community Facilities District No. 2018-2
(Verdemont Ranch)
of the City of San Bernardino,
County of San Bernardino
State of California
$___________
2023 Special Tax Bonds
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TABLE OF CONTENTS
Page
i
ARTICLE I AUTHORITY AND DEFINITIONS ...................................................................2 Section 1.01. Authority for this Agreement........................................................................2 Section 1.02. Agreement for Benefit of Owners ................................................................2 Section 1.03. Definitions ....................................................................................................2 ARTICLE II THE BONDS......................................................................................................13 Section 2.01. Principal Amount; Designation ..................................................................13 Section 2.02. Terms of Bonds...........................................................................................13 Section 2.03. Redemption.................................................................................................14 Section 2.04. Form of Bonds ............................................................................................17 Section 2.05. Execution of Bonds.....................................................................................17 Section 2.06. Transfer of Bonds .......................................................................................17 Section 2.07. Exchange of Bonds.....................................................................................18 Section 2.08. Bond Register .............................................................................................18 Section 2.09. Temporary Bonds .......................................................................................18 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ..............................................19 Section 2.11. Special Obligation ......................................................................................19 Section 2.12. Book-Entry .................................................................................................19 Section 2.13. Parity Bonds................................................................................................21 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; IMPROVEMENT FUND; SPECIAL TAX FUND; ADMINISTRATIVE
EXPENSE FUND; COSTS OF ISSUANCE FUND .........................................21 Section 3.01. Issuance and Delivery of Bonds .................................................................21 Section 3.02. Application of Proceeds of Sale of Bonds..................................................21 Section 3.03. Improvement Fund......................................................................................21 Section 3.04. Special Tax Fund. .......................................................................................22 Section 3.05. Administrative Expense Fund.....................................................................23 Section 3.06. Costs of Issuance Fund. ..............................................................................24 ARTICLE IV SPECIAL TAX REVENUES; BOND FUND; RESERVE FUND ...................24 Section 4.01. Pledge of Special Tax Revenues.................................................................24 Section 4.02. Bond Fund. .................................................................................................25 Section 4.03. Reserve Fund. .............................................................................................27 ARTICLE V OTHER COVENANTS OF THE CITY ............................................................28 Section 5.01. Punctual Payment .......................................................................................28 Section 5.02. Special Obligation ......................................................................................29 Section 5.03. Extension of Time for Payment..................................................................29 Section 5.04. Against Encumbrances ...............................................................................29 Section 5.05. Books and Accounts ...................................................................................29 Section 5.06. Protection of Security and Rights of Owners .............................................29 Section 5.07. Collection of Special Tax Revenues...........................................................29 Packet Pg. 1754
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TABLE OF CONTENTS
(continued)
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Section 5.08. Levy of Special Taxes for Administrative Expenses..................................30 Section 5.09. Further Assurances .....................................................................................31 Section 5.10. Tax Covenants ............................................................................................31 Section 5.11. Covenant to Foreclose ................................................................................31 Section 5.12. Prepayment of Special Taxes......................................................................32 Section 5.13. Calculation of Prepayments........................................................................32 Section 5.14. Continuing Disclosure ................................................................................32 Section 5.15. Accountability Measures ............................................................................32 ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY...............................................................................32 Section 6.01. Deposit and Investment of Moneys in Funds .............................................32 Section 6.02. Rebate Fund; Rebate to the United States ..................................................33 Section 6.03. Liability of City ..........................................................................................34 Section 6.04. Employment of Agents by City ..................................................................35 ARTICLE VII THE FISCAL AGENT.......................................................................................35 Section 7.01. Appointment of Fiscal Agent......................................................................35 Section 7.02. Liability of Fiscal Agent.............................................................................36 Section 7.03. Information .................................................................................................38 Section 7.04. Notice to Fiscal Agent ................................................................................38 Section 7.05. Compensation, Indemnification..................................................................38 Section 7.06. Books and Accounts ...................................................................................38 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT ...................39 Section 8.01. Amendments Permitted. .............................................................................39 Section 8.02. Owners’ Meetings.......................................................................................40 Section 8.03. Procedure for Amendment with Written Consent of Owners ....................40 Section 8.04. Disqualified Bonds .....................................................................................41 Section 8.05. Effect of Supplemental Agreement ............................................................41 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments ..........41 Section 8.07. Amendatory Endorsement of Bonds...........................................................41 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES.....................................................41 Section 9.01. Events of Default ........................................................................................41 Section 9.02. Remedies of Owners...................................................................................42 Section 9.03. Application of Special Taxes and Other Funds After Default....................42 Section 9.04. Restoration of Positions..............................................................................43 Section 9.05. Rights and Remedies Cumulative...............................................................43 Section 9.06. Delay or Omission Not Waiver ..................................................................43 ARTICLE X MISCELLANEOUS...........................................................................................43 Section 10.01. Benefits of Agreement Limited to Parties ................................................43 Packet Pg. 1755
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Section 10.02. Successor is Deemed Included in All References to Predecessor ............43 Section 10.03. Discharge of Agreement...........................................................................43 Section 10.04. Execution of Documents and Proof of Ownership by Owners.................44 Section 10.05. Waiver of Personal Liability.....................................................................45 Section 10.06. Notices to and Demands on City and Fiscal Agent ..................................45 Section 10.07. Partial Invalidity .......................................................................................45 Section 10.08. Unclaimed Moneys...................................................................................45 Section 10.09. Applicable Law.........................................................................................46 Section 10.10. Conflict with Act ......................................................................................46 Section 10.11. Conclusive Evidence of Regularity ..........................................................46 Section 10.12. Payment on Business Day ........................................................................46 Section 10.13. Counterparts..............................................................................................46 EXHIBIT A – FORM OF BOND ..............................................................................................A-1 Packet Pg. 1756
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1 FISCAL AGENT AGREEMENT
THIS FISCAL AGENT AGREEMENT (the “Agreement”) is made and entered into as of __________ 1, 2023, by and between the City of San Bernardino, a charter city duly established under its charter and the laws of the State of California (the “City”), for and on behalf of Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “District”), and U.S. Bank Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, as fiscal agent (the “Fiscal Agent”).

W I T N E S S E T H:

WHEREAS, the City Council of the City (the “City Council”) has established the District pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code (the “Act”); and
WHEREAS, the District is authorized to incur bonded indebtedness and issue bonds in the aggregate principal amount of $5,000,000 for the purpose of financing the construction and acquisition of certain public facilities and the City Council has determined that it is necessary that bonds of the District be issued and sold in the aggregate principal amount of $___________ for the purpose of financing the construction and acquisition of the public facilities which are hereinafter identified as the Project; and
WHEREAS, on __________, 2023, the City Council adopted Resolution No. 2023-___ (the “Resolution”) authorizing the issuance and sale of Bonds pursuant to this Agreement, designated “Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds” (the “Bonds”) for the purpose of financing the construction and acquisition of such public facilities, or to reimburse the costs thereof; and WHEREAS, it is in the public interest and for the benefit of the District, the City, the persons responsible for the payment of special taxes and the owners of the Bonds that the City enter into this Agreement to provide for the issuance of the Bonds, the disbursement of proceeds of the Bonds, the disposition of the special taxes securing the Bonds, and the administration and payment of the Bonds; and
WHEREAS, all things necessary to cause the Bonds, when executed by the City and authenticated by the Fiscal Agent for the District and issued as in the Act, the Resolution (as hereinafter defined) and this Agreement provided, to be legal, valid and binding special obligations of the District in accordance with their terms, and all things necessary to cause the authorization, execution and delivery of this Agreement and the authorization, execution, authentication and delivery of the Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

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2 ARTICLE I

AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act and the Resolution.

Section 1.02. Agreement for Benefit of Owners. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the City and/or the District shall be for the equal benefit, protection and security of the Owners. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. The Fiscal Agent may become the owner of any of the Bonds with the same rights it would have if it were not Fiscal Agent.

Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code.
“Administrative Expenses” means any or all of the following: the fees and expenses of the Fiscal Agent (including any fees or expenses of its counsel), the expenses of the City in carrying out its duties hereunder (including, but not limited to, the levying and collection of the Special Taxes) including the fees and expenses of its counsel, an allocable share of the salaries of City staff directly related thereto and a proportionate amount of City general administrative overhead related thereto, any amounts paid by the City from its general funds pursuant to Section 6.02 hereof, the fees and expenses of the Municipal Advisor, and the Special Tax Consultant, the costs of the District, the City or any designee of either thereof of complying with the arbitrage rebate requirements; the costs to the District, the City or any designee of either thereof of complying with the District, City or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the District, or City, or any designee of either thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the District’s annual administration fee and third party expenses; and all other costs and expenses of the City or the Fiscal Agent incurred in connection with the discharge of their respective duties hereunder and, in the case of the City, in any way related to the administration of the District. “Administrative Expense Fund” means the fund by that name established by Section 3.05(A) hereof.

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3 “Agreement” means this Fiscal Agent Agreement, as it may be amended or supplemented form time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. “Annual Debt Service” means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds scheduled to be paid. “Appraisal” means the appraisal of the estimated market values of the properties within the District prepared by Kitty Siino & Associates, Inc. dated April 5, 2023. “Auditor” means the Auditor-Controller of the County of San Bernardino. “Authorized Officer” means the Mayor, the Mayor Pro Tem, the City Manager or the Director of Administrative Services or any officer or employee of the City authorized by the City Council or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer.
“Bond Counsel” means any attorney or firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities.
“Bond Fund” means the fund by that name established by Section 4.02(A) hereof. “Bond Year” means the period beginning on the Closing Date and ending on September 1, 2023 and thereafter the period beginning on each September 2 and ending on the following September 1.
“Bonds” means, unless otherwise expressly provided, the Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds authorized by and at any time Outstanding pursuant to the Act and this Agreement. “Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of California or in any state in which the Fiscal Agent has its Principal Office are authorized or obligated by law or executive order to be closed. “Capitalized Interest Sub-Account” means the sub-account by that name within the Interest Account of the Bond Fund established pursuant to Section 4.02 (A). “City” means the City of San Bernardino.
“City Council” means the City Council of the City.
“Closing Date” means the date upon which there is an exchange of the Bonds for the proceeds representing payment of the purchase price of the Bonds by the Original Purchaser. “Code” means the Internal Revenue Code of 1986, as amended.

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4 “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate of the City, dated as of __________ 1, 2023, as originally executed by the City and as it may be amended from time to time in accordance with the terms thereof. “Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, including but not limited to the preliminary official statement and official statement regarding the Bonds, closing costs, filing and recording fees, premiums for any reserve fund, surety bond or bond insurance policy, initial fees and charges of the Fiscal Agent including its first annual administration fee and the fees of its counsel, expenses incurred by the City in connection with the issuance of the Bonds and the establishment of the District, Bond (underwriter’s) discount, legal fees and charges, including the fees of Bond Counsel and counsel to the Underwriter, Municipal Advisor’s fees, charges for authentication, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing. “Costs of Issuance Fund” means the fund by that name established by Section 3.06(A) hereof.
“Debt Service” means the amount of interest and principal payable on the Bonds scheduled to be paid during the period of computation, excluding amounts payable during such period which relate to principal of the Bonds which are scheduled to be retired and paid before the beginning of such period.
“Defeasance Securities” means, for purposes of Section 10.03(C) hereof, the following:
(i) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series - “SLGs”);
(ii) Direct obligations of the United States Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities;
(iii) Resolution Funding Corporation (REFCORP) obligations; provided that only the interest component of REFCORP strips which have been stripped by request of the Federal Reserve Bank of New York in book-entry form are acceptable; (iv) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s; provided, however, that if the issue is only rated by Standard & Poor’s (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre-refunded with cash, direct United States or United States guaranteed obligations, or “AAA” rated pre-refunded municipal bonds; and
(v) Obligations issued by the following agencies which are backed by the full faith and credit of the United States of America:
(a) U.S. Export-Import Bank
Direct obligations or fully guaranteed certificates of beneficial ownership Packet Pg. 1760
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5 (b) Farmers Home Administration
Certificates of beneficial ownership
(c) Federal Financing Bank
(d) General Services Administration
Participation certificates
(e) United States Maritime Administration
Guaranteed Title XI financing
(f) United States Department of Housing and Urban Development Project notes
Local Authority Bonds
New Communities Debentures - United States government
guaranteed debentures
United States Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds.
“District” means Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California. “Event of Default” shall mean any one or more of the events described in Section 9.1 hereof.
“Federal Securities” means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein:
(i) Cash; and
(ii) Direct general obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America and CATS and TIGRS), or obligations, the payment of principal of and interest on which is unconditionally guaranteed by the United States of America.
“Fiscal Agent” means U.S. Bank Trust Company, National Association, the Fiscal Agent appointed by the City, acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01 hereof. “Fiscal Year” means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive.
“Improvement Fund” means the fund by that name established by Section 3.03(A) hereof.

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6 “Independent Financial Consultant” means a firm of certified public accountants, a financial consulting firm, a consulting engineering firm or engineer which is not an employee of, or otherwise controlled by, the City.

Information Services” means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org) or such service or services as the City may designate in a certificate delivered to the Fiscal Agent. “Interest Account” means the account by that name established in the Bond Fund by Section 4.02 (A).
“Interest Payment Dates” means March 1 and September 1 of each year, commencing [September 1, 2023], until the maturity or redemption of all Outstanding Bonds. “Investment Earnings” means all interest earned and any gains and losses on the investment of moneys in any fund or account created by this Agreement, excluding interest earned and gains and losses on the investment of moneys in the Rebate Fund. “Maximum Annual Debt Service” means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. “Moody’s” shall mean Moody’s Investors Service, a national rating service with offices in New York, New York.
“Municipal Advisor” means an independent financial consulting firm appointed by the City to advise the City as to financial matters relating to the Bonds. “Officer’s Certificate” means a written certificate of the City signed by an Authorized Officer of the City.
“Ordinance” means any ordinance of the City or resolution of the City Council levying the Special Taxes.
“Original Purchaser” means the first purchaser of the Bonds from the City. “Outstanding,” when used as of any particular time with reference to the Bonds, means (subject to the provisions of Section 8.04 hereof) all Bonds except:
(i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation;
(ii) Bonds called for redemption which, for the reasons specified in Section 2.03 (F) hereof, are no longer entitled to any benefit under this Agreement other than the right to receive payment of the redemption price therefor;
(iii) Bonds paid or deemed to have been paid within the meaning of Section 10.03 hereof; and
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7 (iv) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City and authenticated by the Fiscal Agent pursuant to this Agreement or any Supplemental Agreement.
“Owner” means any person who shall be the registered owner of any Outstanding Bond. “Parity Bonds” means bonds issued by the District for the purpose of accomplishing the defeasance and redemption of all or a portion of the Outstanding Bonds pursuant to Section 2.13 hereof.
“Permitted Investments” means:
(i) Federal Securities;
(ii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):
(a) U.S. Export-Import Bank
Direct obligations or fully guaranteed certificates of beneficial ownership (b) Farmers Home Administration
Certificates of beneficial ownership
(c) Federal Financing Bank
(d) Federal Housing Administration Debentures
(e) General Services Administration
Participation certificates
(f) Government National Mortgage Association (GNMA)
GNMA - guaranteed mortgage-backed bonds
GNMA - guaranteed pass-through obligations
(g) U.S. Maritime Administration
Guaranteed Title XI financing
(h) U.S. Department of Housing and Urban Development
Project Notes
Local Authority Bonds
New Communities Debentures - United States government guaranteed debentures
U.S. Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds;
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8 (iii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies (stripped securities are only permitted if they have been stripped by the agency itself):
(a) Federal Home Loan Bank System
Senior debt obligations
(b) Federal Home Loan Mortgage Corporation
Participation Certificates
Senior debt obligations
(c) Federal National Mortgage Association
Mortgage-backed securities and senior debt obligations
(d) Student Loan Marketing Association
Senior debt obligations
(e) Resolution Funding Corporation
(REFCORP) obligations
(f) Farm Credit System
Consolidated systemwide bonds and notes;
(iv) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by Standard & Poor’s of “AAAm-G,” “AAA-m” or “AA-m” and, if rated by Moody’s, rated “Aaa,” “Aa1” or “Aa2” by Moody’s, including funds for which the Fiscal Agent, its parent holding company, if any, or any affiliates or subsidiaries of the Fiscal Agent or such holding company receive and retain a fee for services provided to the fund whether as a custodian, transfer agent, investment advisor or otherwise;
(v) Certificates of deposit secured at all times by collateral described in clauses (i) and/or (ii) above. Such certificates must be issued by commercial banks, including the Fiscal Agent and its affiliates, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Fiscal Agent on behalf of the Owners of the Bonds must have a perfected first security interest in the collateral;
(vi) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF including those that may be issued or provided by the Fiscal Agent and its affiliates; (vii) Investment agreements with domestic or foreign banks, insurance companies or corporations the long-term debt or claims paying ability of which or, in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a monoline financial guaranty insurance company, the claims paying ability or financial strength, of the guarantor is rated in at least the double A category by Standard & Poor’s and Moody’s; provided that, by the terms of the investment agreement:

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9 (a) interest payments are to be made to the Fiscal Agent at times and in amounts as necessary to pay Debt Service on the Bonds (if the funds invested pursuant to the investment agreement are from the Reserve Fund);
(b) the investment agreement shall provide that the invested funds are available for withdrawal without penalty or premium at any time upon not more than seven (7) days’ prior notice (The City and the Fiscal Agent shall give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium payable.);
(c) the investment agreement shall provide that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof; (d) the City and the Fiscal Agent receive the opinion of domestic counsel (which opinion shall be addressed to the City and the Fiscal Agent) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable, and addressed to, the City and the Fiscal Agent;
(e) the investment agreement shall provide that if during its term (1) the provider’s (or its guarantor’s) rating by either Standard & Poor’s or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within ten (10) days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with the applicable state and federal laws (other than by means of entries on the provider’s books) to the City, the Fiscal Agent or a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral free and clear of any third-party liens or claims, the market value of which collateral is maintained at one hundred four percent (104%) of securities identified in clauses (i) and (ii) of this definition; or (ii) assign the investment agreement and all of its obligations thereunder to a financial institution mutually acceptable to the provider, the City and the Fiscal Agent which is rated either in the first or second highest category by Standard & Poor’s and Moody’s; and
(2) the provider’s (or its guarantor’s) rating by either Standard & Poor’s or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the City or the Fiscal Agent, within ten (10) days of receipt of such direction, repay the principal of and accrued but unpaid interest on the invested funds, in either case with no penalty or premium to the City or the Fiscal Agent; and (f) the investment agreement shall provide and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this shall mean the Holder of the Collateral is in possession of such collateral); and
(g) the investment agreement shall provide that if during its term Packet Pg. 1765
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10 (1) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the City or the Fiscal Agent, be accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate; and
(2) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate; (viii) Commercial paper rated, at the time of purchase, “Prime - 1” by Moody’s and “A-1” or better by Standard & Poor’s;
(ix) Bonds or notes issued by any state or municipality which are rated by Moody’s and/or Standard & Poor’s in one of the two highest rating categories assigned by them; (x) Federal funds or bankers acceptances with a maximum term of one year of any bank or deposit accounts, including the Fiscal Agent and its affiliates, which has an unsecured, uninsured and unguaranteed obligation rating of “Prime - 1” or better by Moody’s and “A-1” or better by Standard & Poor’s;
(xi) Repurchase agreements which satisfy the following criteria:
(a) Repurchase agreements must be between the City or the Fiscal Agent and an entity which is:
(1) A primary dealer on the Federal Reserve reporting dealer list which is rated “A” or better by Standard & Poor’s and Moody’s, or (2) A bank rated “A” or above by Standard & Poor’s and Moody’s; or (3) A corporation the long-term debt or claims paying ability of which, or in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a monoline financial guaranty insurance company, the claims paying ability or financial strength of the guarantor, is rated in at least the double A category by Standard & Poor’s and Moody’s. (b) The written agreement must include the following:
(1) Securities which are acceptable for transfer are:
(A) direct obligations of the United States government, or (B) obligations of federal agencies backed by the full faith and credit of the United States of America (or the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)),
(2) The collateral must be delivered to the City or the Fiscal Agent (if the Fiscal Agent is not supplying the collateral) or a third party acting as agent for the Fiscal Agent Packet Pg. 1766
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11 (if the Fiscal Agent is supplying the collateral) before or simultaneous with payment (perfection by possession of certificated securities),
(3) (A) The securities must be valued weekly, marked-to-market at current market price plus accrued interest, and
(B) The value of the collateral must be at least equal to one hundred four percent (104%) of the amount of money transferred by the Fiscal Agent to the dealer, bank or corporation under the agreement plus accrued interest. If the value of the securities held as collateral is reduced below one hundred four percent (104%) of the value of the amount of money transferred by the Fiscal Agent, then additional acceptable securities and/or cash must be provided as collateral to bring the value of the collateral to one hundred four percent (104%); provided, however, that if the securities used as collateral are those of FNMA or FHLMC, then the value of the collateral must equal to one hundred five percent (105%) of the amount of money transferred by the Fiscal Agent; and
(xii) the Local Agency Investment Fund in the State Treasury of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code.
“Principal Account” means the account by that name established in the Bond Fund by Section 4.02 (A).
“Principal Office” means the principal corporate trust office of the Fiscal Agent in Los Angeles, California or such other addresses may be specified in writing by the Fiscal Agent; provided, however, that for purposes of the transfer, registration, exchange, payment and surrender of Bonds “Principal Office” means the office or agency of the Fiscal Agent at which, at any time, its corporate trust agency business shall be conducted or such other office or address as may be specified in writing by the Fiscal Agent.
“Proceeds,” when used with reference to the Bonds, means the aggregate principal amount of the Bonds, plus accrued interest and premium, if any, less original issue discount, if any, less Original Purchaser’s discount.
“Project” means the public facilities which are to be financed with the proceeds of the sale of the bonds of the District, as described in Resolution No. 2018-266 adopted by the City Council on September 19, 2018.
“Rate and Method of Apportionment” means the rate and method of apportionment of special taxes originally authorized to be levied on property within the District as approved at a special election held within the District on September 19, 2018, and as it may be modified from time to time in accordance with the Act.
“Rebate Certificate” means the certificate delivered by the City upon the delivery of the Bonds relating to Section 148 of the Code, or any functionally similar replacement certificate. “Rebate Fund” means the fund by that name established by Section 6.02 hereof.

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12 “Record Date” means the fifteenth (15th) day of the month next preceding the applicable Interest Payment Date whether or not such day is a Business Day. “Regulations” means the temporary and permanent regulations of the United States Department of the Treasury promulgated under the Code.
“Representation Letter” means the representation letter which the City has delivered to The Depository Trust Company (“DTC”) with respect to the utilization of the book-entry system maintained by DTC for the issuance and registration of bonds. “Reserve Fund” means the fund by that name established by Section 4.03(A) hereof. “Reserve Requirement” means, as of the Closing Date, the lesser of (i) ten percent (10%) of the original issue price of the Bonds calculated in accordance with Treasury Regulations Section

1.148-2(f)(1), (ii) Maximum Annual Debt Service on the Bonds or (iii) 125 percent (125%) of average Annual Debt Service on the Bonds.
“Resolution” means Resolution No. 2023-___, adopted by the City Council on __________, 2023.
“Securities Depositories” means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York, 10041-0099, Call Notification Department, Fax (212) 855-7232, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent.
“Special Taxes” or “Special Tax” means Special Tax A (as defined in the Rate and Method of Apportionment) levied by the City Council on parcels of taxable property within the District pursuant to the Act and this Agreement.
“Special Tax Fund” means the fund by that name established by Section 3.04(A) hereof. “Special Tax Prepayments” means amounts received by the City as prepayments of all or a portion of the Special Tax obligation of a parcel of property in the District. “Special Tax Prepayments Account” means the account by that name established by the Fiscal Agent in the Bond Fund pursuant to Section 4.02(A) hereof. “Special Tax Revenues” means the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon.
“Standard & Poor’s” shall mean S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, a national rating service with offices in New York, New York.

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13 “Tax Consultant” means an engineer or financial consultant or other such person or firm with expertise in the apportionment and levy of special taxes in community facilities districts which is employed by the City to assist the City in levying the Special Taxes.

ARTICLE II

THE BONDS
Section 2.01. Principal Amount; Designation. The Bonds in the aggregate principal amount of $___________ are hereby authorized to be issued by the City for the District under and subject to the terms of the Resolution, this Agreement, the Act and other applicable laws of the State of California. The Bonds shall be designated “Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds.” The Bonds shall be issued in the form attached hereto as Exhibit A.

Section 2.02. Terms of Bonds.
(A) The Bonds. The Bonds shall be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple thereof. The Bonds shall be lettered and numbered in a customary manner as determined by the Fiscal Agent. The Bonds shall be dated __________, 2023.
(B) Maturities. The Bonds shall mature and become payable on September 1 of each year, as follows:

Maturity Dates
(September 1)
Principal
Amounts
Interest
Rates
(C) Interest. The Bonds shall bear interest at the rates set forth in subsection (B) above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from __________, 2023; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon or from [September 1, 2023], if no interest has previously been paid or made available for payment thereon.
(D) Method of Payment. Interest on the Bonds is payable by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Packet Pg. 1769
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14 Payment Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Fiscal Agent prior to any Record Date, interest on such Bonds shall be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request. (E) CUSIP Identification Numbers. “CUSIP” identification numbers shall be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to the Owners shall not constitute an Event of Default or any violation of the City’s contract with the Owners and shall not impair the effectiveness of any such notice.

Section 2.03. Redemption.
(A) Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 20__, or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

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 any date thereafter 100
(B) Mandatory Redemption From Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

Redemption Dates Redemption Price
Any Interest Payment Date through September 1, 20__ 103% March 1, 20__ and September 1, 20__ 102
March 1, 20__ and September 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 (C) Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on September 1, 20__, September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, on September 1, 20__, September 1, 20__ and September 1, 20__, respectively and on each September 1 thereafter to maturity, by lot, at a redemption price equal to Packet Pg. 1770
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15 the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows:

Bonds Maturing on September 1, 20
Redemption Date
(September 1) Sinking Payment
Bonds Maturing on September 1, 20
Redemption Date
(September 1) Sinking Payment
Bonds Maturing on September 1, 20
Redemption Date
(September 1) Sinking Payments
The amounts in the foregoing schedules shall be reduced by the City pro rata among redemption dates, in order to maintain substantially level Debt Service, as a result of any prior or partial redemption of the Bonds pursuant to subsection (A) or subsection (B) above. The City shall provide the Fiscal Agent with a revised sinking fund schedule. (D) Purchase of Bonds. In lieu of payment at maturity or redemption under this Section 2.03, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. In such event, the City shall, as may be appropriate, provide to the Fiscal Agent a revised maturity schedule or a revised mandatory sinking fund schedule for the Bonds, or both. (E) Notice to Fiscal Agent. An Authorized Officer shall give the Fiscal Agent written notice of the City’s intention to redeem Bonds not less than forty-five (45) days prior to the applicable redemption date specifying the principal amounts and maturities of the Bonds to be redeemed. The provisions of this subsection (E) shall not apply to the redemption of the Bonds pursuant to Section 2.03(C) hereof.

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16 (F) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, or electronically submitted, to the Securities Depositories and to one or more Information Services selected by an Authorized Officer, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent at its Principal Office; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such Bonds. The Fiscal Agent shall also cause notice of any redemption to be mailed, in such manner and within such time, to the Underwriter.

Such notice shall state the date of such notice, the date of issue of the Bonds, the place or places of redemption, the redemption date, the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed, by giving the individual CUSIP number and Bond number of each Bond to be redeemed, or shall state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to any Bond called for redemption in part the portion of the principal of the Bond to be redeemed, shall require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such Bonds will not accrue from and after the redemption date. The cost of the mailing and publication of any such redemption notice shall be paid by the District.

Any notice of optional redemption of the Bonds delivered in accordance with this Section

2.03 may be conditional and if any condition stated in the notice of redemption shall not have been satisfied on or prior to the redemption date, said notice shall be of no force and effect and the District shall not be required to redeem such Bonds and the redemption shall not be made and the Fiscal Agent shall within a reasonable time thereafter give notice, to the persons and in the manner in which the notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled.

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

In the event of a mandatory redemption pursuant to Section 2.03(B) hereof, the City shall transfer or cause to be transferred to the Fiscal Agent for deposit in the Bond Fund moneys in an amount equal to the redemption price of the Bonds being redeemed on or before the fifteenth (15th) day of the month preceding the Interest Payment Date upon which such Bonds are to be redeemed.

If less than all the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

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17 Whenever provision is made in this Agreement for the redemption of less than all of the Bonds of a maturity or any given portion thereof, the Fiscal Agent shall select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot within a maturity in any manner which the Fiscal Agent in its sole discretion shall deem appropriate.

Upon surrender of Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.
(G) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds called for redemption shall have been deposited in the Bond Fund, such Bonds shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and interest shall cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption.

All Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section 2.03 shall be canceled by the Fiscal Agent.

Section 2.04. Form of Bonds. The Bonds, including the Fiscal Agent’s certificate of authentication and the assignment to appear thereon, shall be substantially in the form set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions as permitted or required by this Agreement.

Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the District by the facsimile signatures of the Mayor and City Clerk of the City, who are in office on the date of this Agreement or at any time thereafter. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bond to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bond to the Owner. Any Bond may be signed and attested on behalf of the District by such persons as at the actual date of the execution of such Bond shall be the proper officers of the City although at the nominal date of such Bond any such person shall not have been such officer of the City.

Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A hereto, as appropriate, manually executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that such Bonds have been duly authenticated, registered and delivered hereunder, and are entitled to the benefits of this Agreement.

Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 hereof, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office of the Fiscal Agent, accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Fiscal Packet Pg. 1773
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18 Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the District. The Fiscal Agent shall collect from the Owner requesting transfer of a Bond any tax or other governmental charge required to be paid with respect to such transfer.

Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of like aggregate principal amount.

No transfers of Bonds shall be required to be made (i) during the fifteen (15) days preceding the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to Bonds which have been selected for redemption.

Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent only for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity and interest rate. The cost for any services rendered or any expense incurred by the Fiscal Agent in connection with any such exchange shall be paid by the District. The Fiscal Agent shall collect from the Owner requesting exchange of a Bond any tax or other governmental charge required to be paid with respect to such exchange.

No exchanges of Bonds shall be required to be made (i) during the fifteen (15) days preceding the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to Bonds which have been selected for redemption.

Section 2.08. Bond Register. The Fiscal Agent shall keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds which books shall show the series, number, CUSIP identification number, date of issuance, amount, rate of interest and Owner of each Bond and shall at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided.

Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, and may contain such reference to any of the provisions of this Agreement as may be appropriate.

Every temporary Bond shall be executed by the City upon the same conditions and in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Agreement as definitive Bonds authenticated and delivered hereunder.

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19 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall authenticate and deliver, a replacement Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled and destroyed by the Fiscal Agent. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and indemnity satisfactory to it shall be given, the City, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a replacement Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The City or Fiscal Agent may require payment of a sum not exceeding the actual cost of preparing each replacement Bond delivered under this Section 2.10 and of the expenses which may be incurred by the City and the Fiscal Agent for the preparation, execution, authentication and delivery thereof.

Any Bond delivered under the provisions of this Section 2.10 in replacement of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation of the District whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement.

Section 2.11. Special Obligation. All obligations of the City and the District under this Agreement and the Bonds shall be special obligations of the City and the District, payable solely from the Special Tax Revenues and the funds pledged therefor pursuant hereto. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds.

Section 2.12. Book-Entry. The Bonds shall be initially issued in the form of a single, fully registered Bond for each maturity (which may be typewritten). Upon initial issuance, the ownership of such Bonds shall be registered in the name of the Nominee identified below as nominee of The Depository Trust Company, New York, New York and its successors and assigns (the “Depository” or “DTC”). Except as hereinafter provided, all of the Outstanding Bonds shall be registered in the name of the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to this Section 2.12 (the “Nominee”).

With respect to the Bonds registered in the name of the Nominee, neither the City nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as securities depository (the “Participant”) or to any person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, neither the City nor the Fiscal Agent shall have any responsibility, liability or obligation whatsoever with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person, other than an Owner of a Bond as shown in the registration books maintained by the Fiscal Agent pursuant to Section 2.08 hereof (the “Registration Books”), of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the City redeems the Bonds in part, or (iv) the payment to any Participant or any other person, other than an Owner of a Bond as shown Packet Pg. 1775
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20 in the Registration Books, of any amount with respect to principal of or interest on the Bonds. The City and the Fiscal Agent may treat and consider conclusively the person in whose name each Bond is registered as the holder and absolute Owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of giving notices of redemption, if applicable, and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The City shall pay all principal of and interest on the Bonds only to or upon the order of the respective Owner of a Bond, as shown in the Registration Books, or his or her attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City’s obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner of a Bond, as shown in the Registration Books, shall receive a Bond evidencing the obligation of the City to make payments of principal and interest pursuant to this Agreement. Upon delivery by the Depository to the Owners of the Bond, and the City of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Agreement shall refer to such nominee of the Depository.

In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the Depository shall no longer so act and gives notice to the City of such determination, then the City will discontinue the book-entry system with the Depository. If the City determines to replace the Depository with another qualified securities depository, the City shall prepare or direct the preparation of a new, single, separate, fully registered Bond, per maturity, registered in the name of such successor or substitute qualified securities depository or its nominee. If the City fails to identify another qualified securities depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names Owners of the Bonds transferring or exchanging Bonds shall designate, in accordance with the provisions of Sections 2.06 and 2.07 hereof, and the City shall prepare and deliver Bonds to the Fiscal Agent for authentication and delivery to the Owners thereof for such purpose.

In the event of a reduction in aggregate principal amount of Bonds Outstanding or an advance refunding of part of the Bonds Outstanding, the Depository, in its discretion, (a) may request the City to prepare and issue a new Bond or (b) may make an appropriate notation on a Bond indicating the date and amounts of such reduction in principal, but in such event the Registration Books maintained by the Fiscal shall be conclusive as to what amounts are Outstanding with respect to the Bond, except in the case of final maturity, in which case the Bond must be presented to the Fiscal Agent prior to payment.

Notwithstanding any other provision of this Agreement to the contrary, so long as any Bond is registered in the name of the Nominee, all payments of principal and interest with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository and acceptable to the City.

The initial Nominee shall be Cede & Co., as Nominee of DTC.

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21 Section 2.13. Parity Bonds. The District and the City covenant that except as provided below they will not issue any other obligations payable, as to principal or interest, from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues superior to or on a parity with the lien of the Bonds. Nothing in this Agreement shall, however, preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California, which shall be payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds.

ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS;
IMPROVEMENT FUND; SPECIAL TAX FUND; ADMINISTRATIVE EXPENSE FUND;

COSTS OF ISSUANCE FUND
Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of this Agreement, the City may issue the Bonds for the District in the aggregate principal amounts set forth in Section 2.01 hereof and deliver the Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to authorize the payment of Costs of Issuance by the Fiscal Agent from the proceeds of the Bonds, and to do and cause to be done any and all acts and things necessary or convenient for delivery of the Bonds to the Original Purchaser.

Section 3.02. Application of Proceeds of Sale of Bonds.

The Proceeds of the sale of the Bonds to the Original Purchaser shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such Proceeds on the Closing Date as follows:
(A) Deposit in the Reserve Fund the amount of $___________, which constitutes the Reserve Requirement on the Closing Date; (B) Deposit in the Improvement Fund the amount of $___________; (C) Deposit in the Costs of Issuance Fund the amount of $___________; and (D) Deposit in the Capitalized Interest Sub-Account of the Interest Account of the Bond Fund of $______.

Section 3.03. Improvement Fund.
(A) Establishment of Improvement Fund. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Improvement Fund.” Moneys in the Improvement Fund shall be held by the Fiscal Agent for the benefit of the City, and shall be disbursed, except Packet Pg. 1777
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22 as otherwise provided in subsection (D) of this Section 3.03, for the payment or reimbursement of the costs of the design, acquisition and construction of the Project. (B) Procedure for Disbursement. Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer’s Certificate which shall:
(i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid along with payment instructions; and
(ii) certify that no portion of the amount then being requested to be disbursed was set forth in any Officer’s Certificate previously filed with the Fiscal Agent requesting disbursement, and that the amount being requested is an appropriate disbursement from the Improvement Fund.
(C) Investment. Moneys in the Improvement Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings with respect to the Improvement Fund shall be retained by the Fiscal Agent in such fund to be used for the purposes of such fund.
(D) Closing of Fund. Upon the filing of an Officer’s Certificate stating that the construction and acquisition of the Project has been completed and that all costs of the Project have been paid or are not required to be paid from the Improvement Fund, and further stating that moneys on deposit in the Improvement Fund are not needed to complete the Project or reimburse the cost thereof, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund to the Principal Account of the Bond Fund to be used to pay the principal of the Bonds. (E) Officer’s Certificate. Upon receipt of an Officer’s Certificate delivered pursuant to this Section 3.03, the Fiscal Agent is authorized to act thereon without further inquiry and shall not be responsible for the accuracy of the statements made in such Officer’s Certificate or the application of the funds disbursed pursuant thereto, and shall be absolutely protected and incur no liability in relying on such Officer’s Certificate.

Section 3.04. Special Tax Fund.
(A) Establishment of Special Tax Fund. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Special Tax Fund” to the credit of which the City shall deposit, as hereinafter provided, not later than ten (10) Business Days after receipt, all Special Tax Revenues received by the City. Moneys in the Special Tax Fund, and all accounts therein, shall be held in trust by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds.

Notwithstanding the foregoing, any amounts received by the City which constitute Special Tax Prepayments shall be transferred by the City not later than ten (10) Business Days after receipt to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to Section 4.02(A) hereof.

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23 (B) Disbursements. As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than ten (10) Business Days after such receipt, the Fiscal Agent shall withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund an amount which is estimated by the City, in a written communication from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely) to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year (as determined by the City); provided, however, that the amount deposited in the Administrative Expense Fund prior to the deposits to the Interest Account and the Principal Account of the Bond Fund, as provided below, will not exceed $25,000 for each Fiscal Year. Thereafter, the Fiscal Agent shall deposit in the Interest Account and the Principal Account of the Bond Fund, as provided in Section 4.02(B). If, after such deposits are made to the Administrative Expense Fund, the Interest Account and the Principal Account, there are funds remaining on deposit in the Special Tax Fund, the City shall instruct the Fiscal Agent by an Officer’s Certificate (upon which the Fiscal Agent may conclusively rely) to transfer such amount from the Special Tax Fund to and deposit it in the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement.

On September 2 of each year the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Bond Fund (including the Principal Account therein but not including, however, the Interest Account or the Special Tax Prepayments Account), as determined by the City, shall not exceed the greater of (i) one year’s earnings on such amounts, or (ii) one-twelfth (1/12th) of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Bond Fund (other than such excluded amounts), exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys shall be transferred from the Special Tax Fund to the Administrative Expense Fund to pay any additional Administrative Expenses during the then current Fiscal Year, as directed in writing by the City. The Fiscal Agent shall have no obligation to monitor the City’s obligations as set forth in the foregoing sentence. Subject to the requirement described above, on each September 2, commencing September 2, 2024 any funds remaining in the Special Tax Fund which are not needed to pay principal of or interest on the Bonds then due and payable may be retained in the Special Tax Fund to reduce the Special Taxes levied in future years (subject to the limitations set forth in the Rate and Method of Apportionment). (C) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained in the Special Tax Fund to be used for the purposes of such fund.

Section 3.05. Administrative Expense Fund.
(A) Establishment of Administrative Expense Fund. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Administrative Expense Fund” to the credit of which deposits shall be made as required by Section 3.04(B) hereof. Moneys in the Administrative Expense Fund shall be held in trust by the Fiscal Agent for the benefit of the City, and shall be disbursed as provided below.

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24 (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent and paid to the City or its order upon receipt by the Fiscal Agent of an Officer’s Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense (or a Cost of Issuance) and the nature of such Administrative Expense (or Cost of Issuance).
(C) Investment. Subject to the provisions of subsection (B) above, moneys in the Administrative Expense Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained by the Fiscal Agent in the Administrative Expense Fund to be used for the purposes of such fund.

Section 3.06. Costs of Issuance Fund.
(A) Establishment of Costs of Issuance Fund. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Costs of Issuance Fund” to the credit of which a deposit shall be made as required by paragraph (B) of Section 3.02 hereof. Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs of Issuance. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by an Authorized Officer and delivered to the Fiscal Agent concurrently with the delivery of the Bonds. The Fiscal Agent shall pay all Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such requisition, or upon receipt of an Officer’s Certificate requesting payment of a Cost of Issuance not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date. Each such invoice or Officer’s Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of ninety (90) days from the Closing Date and shall then transfer and deposit any moneys remaining therein, including any Investment Earnings thereon, in the Improvement Fund.
(C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund.

ARTICLE IV
SPECIAL TAX REVENUES; BOND FUND; RESERVE FUND
Section 4.01. Pledge of Special Tax Revenues.

The Bonds shall be secured by a pledge of and lien upon (which shall be effected in the manner and to the extent herein provided) all of the Special Tax Revenues (except the amount which will be deposited in the Administrative Expense Fund for each Fiscal Year pursuant to Section 3.04(B) hereof) and all moneys deposited in the Bond Fund and all moneys deposited in the Reserve Fund. The Bonds shall be equally secured by a pledge of and lien upon the Special Packet Pg. 1780
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25 Tax Revenues and such moneys without priority for number, date of Bond, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premium upon the redemption of any thereof shall be and is secured by a pledge of and lien upon the Special Tax Revenues and such moneys. The Special Tax Revenues and all moneys deposited into such accounts are hereby dedicated in their entirety to the payment of the principal of the Bonds, and interest and any premium on, the Bonds, as provided herein and in the Act, until all of the Bonds have been paid and retired or until moneys or Defeasance Securities have been set aside irrevocably for that purpose in accordance with Section 10.03 hereof.

Section 4.02. Bond Fund.
(A) Deposits. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Bond Fund” to the credit of which deposits shall be made as required by Section 3.04(B) and Section 4.03(C) and (D) hereof and any other provision of this Agreement or the Act. There are hereby established in the Bond Fund, as separate accounts to be held by the Fiscal Agent, the “Interest Account” and within the Interest Account the “Capitalized Interest SubAccount” and the “Principal Account.” There is hereby also established in the Bond Fund, as a separate account to be held by the Fiscal Agent, the “Special Tax Prepayments Account” to the credit of which deposits shall be made as required by Section 3.04(A) hereof. Moneys in the Bond Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
(B) Disbursements. On or before each Interest Payment Date, the Fiscal Agent shall transfer from the Special Tax Fund and deposit into the following respective accounts in the Bond Fund, the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Special Tax Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:
(1) Interest Account. On or before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on the Bonds on such date. No deposit need be made into the Interest Account on any Interest Payment Date if the amount on deposit therein is at least equal to the interest becoming due and payable on the Bonds on such date. All moneys in the Interest Account, including the Capitalized Interest Sub-Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity). All funds in the Capitalized Interest SubAccount shall be used and withdrawn to pay interest on the Bonds prior to using any other funds on deposit in the Interest Account for such purpose. All amounts on deposit in the Interest Account on the first day of any Bond Year, to the extent not required to pay any interest then having become due and payable on the Outstanding Bonds shall be withdrawn therefrom by the Fiscal Agent and transferred to the Special Tax Fund.

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26 (2) Principal Account. On or before each Interest Payment Date which occurs on September 1, the Fiscal Agent shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds becoming due and payable on such date pursuant to Section 2.02 hereof, or the redemption price of the Bonds (consisting of the principal amount thereof and any applicable redemption premium) required to be redeemed on such date pursuant to any of the provisions of Section 2.03 hereof. All moneys in the Principal Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of (i) paying the principal of the Bonds at the maturity thereof, or (ii) paying the principal of and premium (if any) on any Bonds upon the redemption thereof pursuant to Section 2.03 hereof. All amounts on deposit in the Principal Account on the first day of any Bond Year, to the extent not required to pay the principal of any Outstanding Bonds then having become due and payable, shall be withdrawn therefrom by the Fiscal Agent and transferred to the Special Tax Fund.

In the event that moneys on deposit in the Special Tax Fund will be insufficient on any Interest Payment Date for the Fiscal Agent to deposit the required amounts in the Interest Account and the Principal Account, as provided above, the Fiscal Agent shall deposit the available funds first to the Interest Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount of interest becoming due and payable on the Bonds on the Interest Payment Date, and shall then deposit the remaining available funds in the Special Tax Fund to the Principal Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount, if any, of principal becoming due and payable on the Bonds on the Interest Payment Date. If, after making such deposits to the Interest Account and the Principal Account, and after transferring moneys from the Reserve Fund to such accounts, as provided in Section

4.03(B) hereof, the amount on deposit in the Principal Account is insufficient to pay the full amount of the principal of each of the Bonds which is due or is to be redeemed on the Interest Payment Date, the Fiscal Agent shall make a prorated payment of the principal of each of such Bonds as specified in an Officer’s Certificate provided to the Fiscal Agent. (C) Special Tax Prepayments Account Deposits and Disbursements. Within ten (10) Business Days after receiving a Special Tax Prepayment the City shall deliver the amount thereof to the Fiscal Agent, together with an Officer’s Certificate notifying the Fiscal Agent that the amount being delivered is a Special Tax Prepayment which is to be deposited in the Special Tax Prepayments Account. Upon receiving a Special Tax Prepayment from the City and such an Officer’s Certificate, the Fiscal Agent shall deposit the amount of the Special Tax Prepayment in the Special Tax Prepayments Account. Such an Officer’s Certificate may be combined with the Officer’s Certificate which the City is required to deliver to the Fiscal Agent pursuant to Section

4.03(F) hereof. Moneys on deposit in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Principal Account on the next date for which notice of the redemption of the Bonds can timely be given under Section 2.03(F) hereof and shall be used to redeem the Bonds on the redemption date selected in accordance with Section 2.03(B) hereof. Pending such transfer, the moneys on deposit in the Special Tax Prepayments Account shall be invested in Defeasance Securities, in accordance with Section 6.01 hereof, at such yield as, in the opinion of Bond Counsel, is necessary to preserve the exclusion of interest on the Bonds from gross income for purposes of federal income taxation. Investment earnings on the moneys on deposit in the Special Tax Prepayments Account shall be retained in such account. The City shall provide Packet Pg. 1782
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27 direction in writing to the Fiscal Agent which shall include an exhibit of the Bond Counsel’s determination.
(D) Investment. Except as provided in subsection (C) above, moneys in the Bond Fund, including all accounts therein, shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained in the Bond Fund, except to the extent they are required to be deposited by the Fiscal Agent in the Rebate Fund in accordance with Section 6.02 hereof.

Amounts in the Bond Fund, including all accounts therein, shall also be withdrawn and deposited in the Rebate Fund as provided in Section 6.02 hereof.

Section 4.03. Reserve Fund.
(A) Establishment of Fund. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Reserve Fund” to the credit of which a deposit shall be made as required by paragraph (A) of Section 3.02 hereof, which deposit is equal to the Reserve Requirement, and to which deposits shall be made as provided in Section 3.04(B) hereof. Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of the principal of and interest and any premium on the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Fund. Except as otherwise provided in this Section, (i) all amounts on deposit in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Interest Account and the Principal Account of the Bond Fund in the event of any deficiency at any time in either of such accounts of the amount then required for payment of the principal of and interest and any premium on the Bonds or, in accordance with the provisions of subsection (E) of this Section 4.03, for the purpose of redeeming Bonds. (C) Transfer Due to Deficiency in Interest and Principal Accounts. Whenever transfer is made from the Reserve Fund to the Interest Account or the Principal Account due to a deficiency in either such account, the Fiscal Agent shall provide written notice thereof to the City. (D) Transfer of Excess of Reserve Requirement. Whenever, on any September 2, the amount in the Reserve Fund, less Investment Earnings resulting from the investment of the funds therein which pursuant to Section 6.02 hereof must be rebated to the United States, as previously directed by the City, exceeds the Reserve Requirement, as calculated by the City, the Fiscal Agent shall provide written notice to the City of the amount of the excess.

Upon receiving written direction from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), the Fiscal Agent shall, subject to the requirements of Section 6.02 hereof, transfer an amount from the Reserve Fund which will reduce the amount on deposit therein to an amount equal to the Reserve Requirement to the Interest Account and the Principal Account, in the priority specified in Section 4.02(B)(1) and (2) hereof, to be used for the payment of the interest on and principal of the Bonds on the next succeeding Interest Payment Date in accordance with Section 4.02 hereof.

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28 (E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund is equal to or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall, upon receiving written direction from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), transfer the amount in the Reserve Fund to the Interest Account and the Principal Account, in the priority specified in Section

4.02(B)(1) and (2) hereof, to be applied, on the next succeeding Interest Payment Date, to the payment and redemption, in accordance with Section 2.03 and Section 4.02 hereof of all of the Outstanding Bonds. In the event that the amount available to be so transferred from the Reserve Fund to the Interest Account and the Principal Account exceeds the amount required to pay and redeem the Outstanding Bonds, the excess shall be transferred to the City to be used for any lawful purpose of the City.
(F) Transfers on Payment of Special Tax Obligations. Whenever the City receives a Special Tax Prepayment, the City shall by an Officer’s Certificate notify the Fiscal Agent thereof and of the amount by which the Reserve Fund is to be reduced and which is transferrable from the Reserve Fund to the Principal Account of the Bond Fund, which amount shall be specified in the Officer’s Certificate. Each such Officer’s Certificate shall be accompanied by a report of an Independent Financial Consultant verifying the accuracy of the calculation of the amount to be transferred from the Reserve Fund to the Principal Account (“Verification”). Upon receipt of each such Officer’s Certificate and Verification, upon which the Fiscal Agent may conclusively rely, the Fiscal Agent shall at such time as the amount of such Special Tax Prepayment will be used to redeem Bonds, as provided in Section 4.02(B)(2) hereof, transfer the amount specified in such Officer’s Certificate to the Principal Account and use such amount, together with the amount of such Special Tax Prepayment, to redeem Bonds, as provided in Section

4.02(B)(2) hereof. Notwithstanding the preceding provisions of this subsection, no amount shall be transferred from the Reserve Fund to the Principal Account if the amount on deposit in the Reserve Fund is, or as a result of such transfer would be, less than the Reserve Requirement following such redemption.
(G) Investment. Moneys on deposit in the Reserve Fund shall be invested in Permitted Investments which do not have maturities extending beyond five (5) years; provided, however, if the Reserve Fund is invested in an investment agreement (as defined in clause (vii) of the definition of Permitted Investments in Section 1.03 hereof) or a repurchase agreement (as defined in clause (xi) of such definition) such agreement may have a maturity longer than five (5) years if the Fiscal Agent is authorized by the provisions of such agreement to draw the full amount thereof, without penalty, if required for the purposes of the Reserve Fund. The City shall cause the Permitted Investments, other than such investment agreements, in which moneys on deposit in the Reserve Fund are invested to be valued at fair market value and at least once in each Fiscal Year. The Fiscal Agent’s pricing service, as reflected on its monthly statements, satisfies fair market value.

ARTICLE V

OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay or cause to be paid the principal of and interest and any premium on the Bonds when and as due in strict conformity with Packet Pg. 1784
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29 the terms of this Agreement and any Supplemental Agreement to the extent that the Special Tax Revenues are available therefor, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds.

Section 5.02. Special Obligation. The Bonds are special obligations of the City and the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund, the Reserve Fund and the Special Tax Fund.

Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded.

Section 5.04. Against Encumbrances. The City shall not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement.

Section 5.05. Books and Accounts. The City shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund. Such books of record and accounts shall at all times during business hours, upon reasonable notice, be subject to the inspection of the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

Section 5.06. Protection of Security and Rights of Owners. The City will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.

Section 5.07. Collection of Special Tax Revenues. The City shall comply with all requirements of the Act, including the enactment of necessary Ordinances, so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of the payment or collection of delinquent Special Taxes.

On or within five (5) Business Days of June 1 of each year, the Fiscal Agent shall provide the City with a notice stating the amount then on deposit in the Special Tax Fund, the Bond Fund and the Reserve Fund (including all accounts and sub-accounts therein), the monthly statements provided by the Fiscal Agent shall satisfy this notice requirement. The receipt of such notice by the City or the failure of the Fiscal Agent to give such notice shall in no way affect the obligations of the City under the following two paragraphs. The Fiscal Agent shall have no liability if it does Packet Pg. 1785
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30 not provide such notice to the City. Upon receipt of such notice, the City shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current Fiscal Year.

The City shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Act by August 10 of each year (or such later date as may be authorized by the Act or any amendment thereof) that the Bonds are Outstanding, such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the City shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the tax roll. Notwithstanding the preceding provisions of this paragraph, the City Council may elect, as permitted by the Act, to collect the Special Taxes to be levied for any Fiscal Year directly from the owners of the parcels of taxable property upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll; provided that, in such event, the City shall otherwise comply with the provisions of this Section 5.07.

The City shall fix and levy the amount of Special Taxes within the District required for the payment of the principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment of the Reserve Fund, and the amount estimated to be sufficient to pay the Administrative Expenses during such calendar year. The Special Taxes so levied shall not exceed the authorized amounts for the District as provided in the proceedings for the establishment of the District.

The Special Taxes shall be payable and be collected (except in the event of judicial foreclosure proceedings pursuant to Section 5.11 hereof) in the same manner and at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property.

The City will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53356.1 and 53356.5 of the California Government Code in any manner which would materially and adversely affect the interests of the Owners and, in particular, will not permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant certifying that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds and remaining Outstanding following such tender.

Section 5.08. Levy of Special Taxes for Administrative Expenses. The City covenants that, to the extent that it is legally permitted to do so, (a) it will levy the Special Taxes for the payment of the Administrative Expenses which are expected to be incurred in each Fiscal Year, and (b) it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates (the “Maximum Rates”) on then existing Developed Property in the District below the amounts which are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to one hundred ten percent (110%) Packet Pg. 1786
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31 of Maximum Annual Debt Service on the Outstanding Bonds. For purposes of this Section, “Developed Property” has the meaning set forth in the Rate and Method of Apportionment.

The City further covenants that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIII C of the California Constitution, which purports to reduce or otherwise alter the Maximum Rates, it will commence and pursue legal action seeking to preserve its ability to comply with its covenant contained in the preceding paragraph.

Section 5.09. Further Assurances. The City will adopt, make, execute and deliver any and all such further ordinances, resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Agreement.

Section 5.10. Tax Covenants. The City covenants that:
(A) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of the initial issuance and delivery of the Bonds, would have caused any of the Bonds to be “arbitrage bonds” within the meaning of Section 103(b) and Section 148 of the Code;
(B) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would result in loss of exclusion from gross income for purposes of federal income taxation under Section 103(a) of the Code of interest paid with respect to the Bonds; (C) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would have caused any of the Bonds to be “private activity bonds” within the meaning of Section 141 of the Code;
(D) It will comply with the Rebate Certificate as a source of guidance for achieving compliance with the Code; and
(E) In order to maintain the exclusion from gross income for purposes of federal income taxation of interest paid with respect to the Bonds, it will comply with each applicable requirement of Section 103 and Sections 141 through 150 of the Code.

The covenants of the City contained in this Section 5.10 shall survive the payment, redemption or defeasance of Bonds pursuant to Section 10.03 hereof.

Section 5.11. Covenant to Foreclose. Pursuant to Section 53356.1 of the California Government Code, the City covenants with and for the benefit of the Owners of the Bonds that:
(i) it will order, and cause to be commenced, judicial foreclosure proceedings against properties in the District with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) if the amount on deposit in the Reserve Fund is less than the Reserve Requirement it will commence judicial foreclosure proceedings against all properties in the District with delinquent Special Taxes by the October 1 Packet Pg. 1787
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32 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings.

Section 5.12. Prepayment of Special Taxes. The City shall cause all applications of owners of property in the District to prepay and satisfy the Special Tax obligation for their property to be reviewed by the Tax Consultant and shall not accept any such prepayment unless such consultant certifies in writing that following the acceptance of the proposed prepayment by the City and the redemption of Bonds with such prepayment, the maximum amount of the Special Taxes that may be levied on all Taxable Property (as defined in the Rate and Method of Apportionment) in the District following such prepayment will be at least 1.10 times Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption plus estimated Administrative Expenses.

Section 5.13. Calculation of Prepayments. The City will cause all Special Tax Prepayments to be calculated to include the amount of the premium on the Outstanding Bonds that will be redeemed with the Special Tax Prepayment and negative arbitrage on the investment of the Special Tax Prepayment from the date of receipt until the Interest Payment Date upon which the Special Tax Prepayment and the amount to be transferred from the Reserve Fund to the Principal Account pursuant to Section 4.03(F) hereof will be used to redeem Outstanding Bonds pursuant to Section 2.03(B) hereof. The City will not include in any calculation of the amount of any Special Tax Prepayment for any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement.

Section 5.14. Continuing Disclosure. The City hereby covenants and agrees that they will comply with and carry out all of the provisions of the Continuing Disclosure Certificate.

Section 5.15. Accountability Measures. The City shall comply with the requirements of Section 53410 of the California Government Code with respect to the deposit and expenditure of the Proceeds of the sale of the Bonds and shall cause the appropriate officer of the City to file a report with the City Council no later than January 31, 2024, and annually thereafter, which shall contain the information required by Section 53411 of the California Government Code with respect to the expenditure of the Proceeds.

ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;

LIABILITY OF THE CITY
Section 6.01. Deposit and Investment of Moneys in Funds. Subject in all respects to the provisions of Section 6.02 hereof, moneys in any fund or account created or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer’s Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer’s Certificate, the Fiscal Agent shall hold funds uninvested. The Fiscal Agent shall not have any responsibility for determining the legality of any Permitted Investments. The Fiscal Agent shall have no obligation to pay additional interest or maximize investment income on any Packet Pg. 1788
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33 funds held by it. Neither the City nor the Owners of the Bonds shall have any claim of any kind against the Fiscal Agent in connection with investments properly made pursuant to this Section 6.01. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of Investment Earnings in funds and accounts.

The Fiscal Agent and its affiliates may act as sponsor, advisor, depository, principal or agent in the holding, acquisition or disposition of any investment. The Fiscal Agent shall not incur any liability for losses arising from any investments made pursuant to this Section 6.01. For purposes of determining the amount on deposit in any fund or account held hereunder, all Permitted Investments or investments credited to such fund or account shall be valued at the cost thereof (excluding accrued interest and brokerage commissions, if any).

Subject in all respects to the provisions of Section 6.02 hereof, investments in any and all funds and accounts may be commingled in a single fund for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent hereunder, provided that the Fiscal Agent shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement.

The Fiscal Agent shall sell or present for redemption, any investment security whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such investment security is credited, and the Fiscal Agent shall not be liable or responsible for any loss resulting from the acquisition or disposition of any such investment security in accordance herewith.

The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City or the District the right to receive brokerage confirmations of securities transactions as they occur, the City for itself and the District specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent shall furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent hereunder.

The Fiscal Agent may make any investments hereunder through its own bond or investment department or trust investment department, or those of its parent or any affiliate.

Section 6.02. Rebate Fund; Rebate to the United States. There is hereby created, to be held by the Fiscal Agent, as a separate account distinct from all other funds and accounts held by the Fiscal Agent under this Agreement, the Rebate Fund. The Fiscal Agent shall, in accordance with written directions received from an Authorized Officer, deposit into the Rebate Fund moneys transferred by the City to the Fiscal Agent pursuant to the Rebate Certificate or moneys transferred by the Fiscal Agent from the Reserve Fund. The Rebate Fund shall be held either uninvested or invested only in Federal Securities at the written direction of the City. Moneys on deposit in the Rebate Fund shall be applied only to payments made to the United States, to the extent such payments are required by the Rebate Certificate. The Fiscal Agent shall, upon written request and direction of the City, make such payments to the United States.

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34 The Fiscal Agent may rely conclusively upon the City’s determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City’s calculations hereunder. The Fiscal Agent’s sole responsibilities under this Section 6.02 are to follow the written instructions of the City pertaining hereto. The City shall be responsible for any fees and expenses incurred by the Fiscal Agent pursuant to this Section 6.02.

The Fiscal Agent shall, upon written request and direction from the City, transfer to or upon the order of the City any moneys on deposit in the Rebate Fund in excess of the amount, if any, required to be maintained or held therein in accordance with the Rebate Certificate.

Section 6.03. Liability of City. The City shall not incur any responsibility in respect of the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The City shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds.

In the absence of bad faith, the City may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the City and conforming to the requirements of this Agreement. The City shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts.

No provision of this Agreement shall require the City to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of and of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

The City may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith.

Whenever in the administration of its duties under this Agreement the City shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the City, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, and such certificate shall be full warranty to the City for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the City may, in lieu thereof, Packet Pg. 1790
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35 accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

Section 6.04. Employment of Agents by City. In order to perform its duties and obligations hereunder, the City may employ such persons or entities as it deems necessary or advisable. The City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.

ARTICLE VII

THE FISCAL AGENT
Section 7.01. Appointment of Fiscal Agent. U.S. Bank Trust Company, National Association is hereby appointed Fiscal Agent, registrar and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent.

Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph of this Section 7.01, shall be the successor to the Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding.

The City may, upon a 30-day notice of removal, remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, national banking association, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. If such bank, national banking association, corporation or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

The Fiscal Agent may at any time resign by giving written notice to the City and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent.

If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section 7.01 within forty-five (45) days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent, at the expense of the City, or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may Packet Pg. 1791
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36 thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent.

Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City and the District, and the Fiscal Agent assumes no responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, nor shall the Fiscal Agent incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it.

The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds.

In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement. Except as provided above in this paragraph, the Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument.

The Fiscal Agent shall not be liable for any error of judgment made in good faith by the Fiscal Agent unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts.

No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers.

The Fiscal Agent shall not be responsible for accounting for, or paying to, any party to this Agreement, including, but not limited to the City and the Owners, any returns on or benefit from funds held for payment of unredeemed Bonds or outstanding checks and no calculation of the same shall affect, or result in any offset against, fees due to the Fiscal Agent under this Agreement.

The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent.

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37 All indemnification and releases from liability granted herein to the Fiscal Agent shall extend to the directors, officers and employees of the Fiscal Agent.

The Fiscal Agent shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means (“Electronic Means” shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Fiscal Agent, or another method or system specified by the Fiscal Agent as available for use in connection with its services hereunder); provided, however, that the City shall provide to the Fiscal Agent an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent Instructions using Electronic Means and the Fiscal Agent in its discretion elects to act upon such Instructions, the Fiscal Agent’s understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Fiscal Agent cannot determine the identity of the actual sender of such Instructions and that the Fiscal Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Fiscal Agent have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Fiscal Agent and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Fiscal Agent, including without limitation the risk of the Fiscal Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Fiscal Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Fiscal Agent immediately upon learning of any compromise or unauthorized use of the security procedures.

The permissive right of the Fiscal Agent to do things enumerated in this Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct.

The Fiscal Agent may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, affiliates, or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its duty hereunder, and the Fiscal Agent shall not be answerable for any willful misconduct or negligence on the part of any attorney, agent or receiver selected by it with reasonable care.

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38 Section 7.03. Information. The Fiscal Agent shall provide to the City such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the City shall reasonably request, including, but not limited to, quarterly statements reporting funds held and transactions by the Fiscal Agent.

Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent may consult with counsel, who may be counsel to the City, with regard to legal questions, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Fiscal Agent hereunder in good faith and in accordance therewith.

Whenever in the administration of its duties under this Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warranty to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

Section 7.05. Compensation, Indemnification. The City shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under this Agreement, and the Fiscal Agent shall have a first priority lien therefor on any funds at any time held by it in the Administrative Expense Fund, and the Fiscal Agent shall pay and reimburse all expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in connection therewith from the funds held by it in the Administrative Expense Fund. The City further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents, harmless against any liabilities, costs, claims, expenses or charges of any kind whatsoever (including fees and expenses of its attorneys) which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or willful misconduct. The obligation of the City under this Section 7.05 shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement.

Section 7.06. Books and Accounts. The Fiscal Agent shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions made by it to the expenditure of amounts disbursed from the Bond Fund, the Special Tax Fund, the Administrative Expense Fund, the Reserve Fund and the Costs of Issuance Fund. Such books of record and accounts shall, upon reasonable notice, at all times during business hours be subject to the inspection of the City and the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

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39 ARTICLE VIII

MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted.
(A) This Agreement and the rights and obligations of the District and the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of the Owners, or with the written consent, without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04 hereof.

No such modification or amendment shall (i) extend the maturity of any Bond or the time for paying interest thereon, or otherwise alter or impair the obligation of the City on behalf of the District to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation of any pledge of or lien upon the Special Tax Revenues, or the moneys on deposit in the Special Tax Fund, the Bond Fund or the Reserve Fund, superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of California and this Agreement), (iii) reduce the percentage of Bonds required for the amendment hereof, or (iv) reduce the principal amount of or redemption premium on any Bond or reduce the interest rate thereon. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. The Fiscal Agent shall be furnished an opinion of counsel that any such Supplemental Agreement entered into by the City and the Fiscal Agent complies with the provisions of this Section 8.01 and the Fiscal Agent may conclusively rely on such opinion. (B) This Agreement and the rights and obligations of the District and the City and the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:
(1) to add to the covenants and agreements of the City and the District in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the City and the District; (2) to make modifications not adversely affecting any Outstanding Bonds in any material respect;
(3) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provisions of this Agreement, or in regard to questions arising under this Agreement, as the City and the Fiscal Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners;
(4) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Code relating to required rebate of moneys to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the Bonds or to conform with the Regulations; or
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40 (5) to provide for the issuance of Parity Bonds to pay and discharge the indebtedness of a portion of the Outstanding Bonds pursuant to Section 2.13 and Section 10.03 hereof.

Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the Owners.

In such event, the City is authorized to fix the time and place of any such meeting and to provide for the giving of notice thereof and to fix and adopt rules and regulations for the conduct of the meeting.

Section 8.03. Procedure for Amendment with Written Consent of Owners. The City and the Fiscal Agent may at any time enter into a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01(A) hereof, to take effect when and as provided in this Section 8.03. A copy of the Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, postage prepaid, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of the Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided.

Such a Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 10.04 hereof. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed.

After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the documents required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article VIII) upon the City, the District and the Owners of all Bonds then Outstanding at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60)-day period.

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41 Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or participate in any action provided for in this Article VIII. Upon request of the Fiscal Agent, the City shall specify to the Fiscal Agent those Bonds disqualified pursuant to this Section and the Fiscal Agent may conclusively rely on such certificate.

Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Agreement of the City and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes.

Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The City may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and upon presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that new Bonds, so modified as in the opinion of the City is necessary to conform to such action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for like Bonds then Outstanding, upon surrender of such Bonds.

Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.

ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES
Section 9.01. Events of Default. Any one or more of the following events shall be an Event of Default:
(a) failure to pay any installment of principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise;
(b) failure to pay any installment of interest on any Bonds when and as the same shall become due and payable; or
(c) other than as referred to in subsection (a) or (b), failure by the City, for and on behalf of the District, to observe or perform any covenant, condition, agreement or provision in this Agreement on its part to be observed or performed for a period of thirty (30) days after Packet Pg. 1797
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42 written notice, specifying such failure and requesting that it be remedied, has been given to the City by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the Outstanding Bonds ; except that, if such failure can be remedied but not within such thirty (30) day period and if the City has taken all action reasonably possible to remedy such failure within such thirty (30) day period, such failure shall not become an Event of Default for so long as the City shall diligently proceed to remedy same.

Section 9.02. Remedies of Owners. Upon the occurrence and continuance of an Event of Default, the Owners shall have the right to exercise all remedies contemplated under this Agreement as follows:
(a) by mandamus or other action, suit, or proceeding at law or in equity to enforce the Owner's rights against the City, and its members, officers and employees, and to compel the City, and its members, officers and employees perform and carry out their duties under the Act and the agreements and covenants with the Owner contained herein; (b) by suit in equity to enjoin any acts or things that are unlawful or violate the rights of the Owners; or
(c) by suit, action or proceeding in any court of competent jurisdiction, to require the City and its officers and employees, acting for and on behalf of the District, to account as if it and they were the trustees of an express trust.

Section 9.03. Application of Special Taxes and Other Funds After Default. If an Event of Default shall occur and be continuing, all Special Taxes, including any penalties, costs, fees and other charges accruing under the Act, and any other funds then held or thereafter received by the Fiscal Agent under any of the provisions of this Agreement shall be applied by the Fiscal Agent as follows and in the following order:

First, to the payment of any expenses necessary in the opinion of the Fiscal Agent to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges, and expenses of the Fiscal Agent (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under this Agreement; Second, to the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of this Agreement, as follows:
(a) to the payment of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, without any discrimination or preference; and (b) to the payment of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the Packet Pg. 1798
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43 payment thereof ratably, according to the amounts of principal due on such date, without any discrimination or preference.

Section 9.04. Restoration of Positions. In case any proceedings taken by the Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Owners, then in every such case the City and the Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers, and duties of the City and the Owners shall continue as though no such proceedings had been taken.

Section 9.05. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 9.06. Delay or Omission Not Waiver. No delay or omission of any Owners to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Agreement or by law to the Owners of the Bonds may be exercised from time to time, and as often as may be deemed expedient, by the Owners.

ARTICLE X

MISCELLANEOUS
Section 10.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the City, the Fiscal Agent and the Owners, any right, remedy or claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent.

Section 10.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the City or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the City or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

Section 10.03. Discharge of Agreement.

If the City shall pay and discharge the indebtedness on all or a portion (a “Partial Discharge”) of the Outstanding Bonds in any one or more of the following ways:
(A) by well and truly paying or causing to be paid the principal of and interest and any premium on such Bonds, as and when the same become due and payable; Packet Pg. 1799
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44 (B) by depositing with the Fiscal Agent, in trust, at or before maturity, an amount of money which, together with the amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums, if any; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash or noncallable Defeasance Securities in such amount as the City shall determine, as confirmed by an Independent Financial Consultant, will, together with the interest to accrue thereon and amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City and confirmed by an Independent Financial Consultant, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any such Bonds shall not have been surrendered for payment, the pledge of the Special Tax Revenues and other funds provided for in this Agreement and all other obligations of the City and the District under this Agreement with respect to such Bonds shall cease and terminate, except the obligation of the City to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon, the obligation of the City to pay all amounts owing to the Fiscal Agent pursuant to Section 7.05 hereof, and the obligations of the City pursuant to the covenants contained in Section 5.10 hereof; and thereafter Special Taxes shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent. The satisfaction and discharge of this Agreement as to all of the Outstanding Bonds shall be without prejudice to the rights of the Fiscal Agent to charge and be reimbursed by the City for the expenses which it shall thereafter incur in connection herewith.

Any funds held by the Fiscal Agent to pay and discharge the indebtedness on such Bonds, upon payment of all fees and expenses of the Fiscal Agent, which are not required for such purpose, shall be paid over to the City.

Section 10.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing.

Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such a request, declaration or other instrument, or of a writing appointing such an attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such a notary public or other officer.

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45 Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registration books maintained by the Fiscal Agent pursuant to Section 2.08 hereof.

Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Fiscal Agent in good faith and in accordance therewith.

Section 10.05. Waiver of Personal Liability. No member, officer, agent or employee of the City or the District shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law.

Section 10.06. Notices to and Demands on City and Fiscal Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the City may be given or served by being deposited postage prepaid (first class, registered or certified) in a post office letter box addressed (until another address is filed by the City with the Fiscal Agent) as follows:

City of San Bernardino
290 North “D” Street
San Bernardino, CA 92401
Attn:

Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the City to or on the Fiscal Agent may be given or served by being deposited postage prepaid (first class, registered or certified) in a post office letter box addressed (until another address is filed by the Fiscal Agent with the City) as follows:

U.S. Bank Trust Company, National Association
Global Corporate Trust Services
633 West 5th Street, 24th Floor
Los Angeles, CA 90071
Reference: San Bernardino City CFD 2018-2
Section 10.07. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held by a court of competent jurisdiction to be illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The City hereby declares that it would have executed and delivered this Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Agreement may be held illegal, invalid or unenforceable.

Section 10.08. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become Packet Pg. 1801
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46 payable, if such moneys were held by the Fiscal Agent at such date, shall be paid by the Fiscal Agent to the City as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners of such Bonds shall look only to the City for the payment of the principal of, and interest and any premium on, their Bonds.

Section 10.09. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California.

Section 10.10. Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement.

Section 10.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes.

Section 10.12. Payment on Business Day. In any case where the date of the payment of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption is other than a Business Day, the payment of interest or principal (and premium, if any) need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required, and no interest shall accrue for the period from and after such date.

Section 10.13. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original.
(Signature page follows)
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S-1
IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name on behalf of the District, and the Fiscal Agent, in acknowledgment of its acceptance of the trusts created hereunder, has caused this Agreement to be executed in its name, all as of __________ 1, 2023.

CITY OF SAN BERNARDINO, for and on behalf
of COMMUNITY FACILITIES DISTRICT NO.
2018-2 (VERDEMONT RANCH) OF THE CITY

OF SAN BERNARDINO, COUNTY OF SAN

BERNARDINO, STATE OF CALIFORNIA
By:

Barbara Whitehorn
Agency Director of Administrative Services
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, as Fiscal Agent
By:

Authorized Officer
-Signature PageFiscal Agent Agreement
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A-1

EXHIBIT A

FORM OF BOND

UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE

DEPOSITORY (AS DEFINED IN THE FISCAL AGENT AGREEMENT) TO THE FISCAL

AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY

BOND AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED

REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED

REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE

HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No. $

UNITED STATES OF AMERICA

STATE OF CALIFORNIA

COUNTY OF SAN BERNARDINO
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO
2023 SPECIAL TAX BOND
INTEREST RATE MATURITY DATE DATED DATE CUSIP NO.
__________, 2023
REGISTERED OWNER: CEDE & CO.

PRINCIPAL AMOUNT: DOLLARS
The City of San Bernardino (the “City”), for and on behalf of Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “District”), for value received, hereby promises to pay, from the Special Taxes (as hereinafter defined) to be collected in the District or amounts in certain of the funds and accounts held under the Agreement (as hereinafter defined) to the registered owner named above, or registered assigns, on the maturity date specified above, the principal amount specified above, and to pay interest on such principal amount from [September 1, 2023], or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing [September 1, 2023] (“Interest Payment Dates”), at the interest rate specified above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable by check to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of U.S. Bank Trust Company, National Association (the “Fiscal Agent”). Interest on this Bond shall be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, Packet Pg. 1804
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on each Interest Payment Date to the registered owner hereof as of the close of business on the fifteenth (15th) day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such registered owner’s address as it appears on the registration books maintained by the Fiscal Agent; except that at the written request of the owner of at least $1,000,000 in aggregate principal amount of outstanding Bonds filed with the Fiscal Agent prior to the Record Date preceding any Interest Payment Date, interest on such Bonds shall be paid to such owner on such Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request.

This Bond is one of a duly authorized issue of bonds approved by the qualified electors of the District pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Chapter

2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code (the “Mello-Roos Act”), for the purpose, among others, of financing the construction and acquisition of certain public facilities within and for the District, and is one of the series of Bonds designated “Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”), in the aggregate principal amount of $___________. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City on __________, 2023 (the “Resolution”), and the Fiscal Agent Agreement, dated as of __________ 1, 2023, between the City and the Fiscal Agent (the “Agreement”), and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to the terms and conditions of the Resolution and the Agreement. The Resolution is adopted under, the Agreement is executed under, this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California.

Pursuant to the Mello-Roos Act, the Agreement and the Resolution, the principal of and interest on the Bonds are payable from the annual levy of Special Taxes authorized under the Mello-Roos Act to be collected within the District (the “Special Taxes”) and are secured by a pledge of and first lien upon the revenues derived therefrom and certain funds held by the Fiscal Agent pursuant to the Agreement.

Interest on this Bond shall be payable from the Interest Payment Date next preceding the date of its authentication, unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from __________, 2023; provided, however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment hereon, or from [September 1, 2023] if no interest has previously been paid or made available for payment hereon.

Any tax for the payment hereof shall be limited to the Special Taxes, except to the extent that provision for payment has been made by the City as may be permitted by law. The Bonds do not constitute obligations of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than as described hereinabove.

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The City has covenanted for the benefit of the owners of the Bonds that (i) it will order, and cause to be commenced, judicial foreclosure proceedings against properties in the District with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) if the amount on deposit in the Reserve Fund is less than the Reserve Requirement it will commence judicial foreclosure proceedings against all properties in the District with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings.

The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 2029, or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

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 any date thereafter 100
The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

Redemption Dates Redemption Price
Any Interest Payment Date through September 1, 20__ 103% March 1, 20__ and September 1, 20__ 102
March 1, 20__ and September 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100 The outstanding Bonds maturing on September 1, 20__, September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, without premium, on September 1, 20__, September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter to maturity as provided in the Agreement.

Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner and to the extent provided in the Agreement.

From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds selected for redemption shall have been deposited in the Bond Fund, such Bonds shall cease to be entitled to any benefit under the Agreement other than the right Packet Pg. 1806
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to receive payment of the redemption price, and interest shall cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption.

This Bond shall be registered in the name of the owner hereof, as to both principal and interest.

Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for that purpose and authenticated by the manual signature of an authorized signatory of the Fiscal Agent upon the certificate of authentication endorsed hereon.

No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner or his duly authorized attorney, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof and interest hereon shall be payable only to the registered owner or to such owner’s order.

The Fiscal Agent shall require the registered owner requesting transfer or exchange hereof to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange.

The Agreement and the rights and obligations of the City and the District thereunder may be modified or amended as set forth therein.

This Bond shall not become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been dated and manually signed on behalf of the Fiscal Agent.

IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law.

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IN WITNESS WHEREOF, the City of San Bernardino, for Community Facilities District No. 2018-2 (Verdemont Ranch) thereof, has caused this Bond to be dated __________, 2023, and to be signed by the facsimile signature of the Mayor of the City and countersigned by the facsimile signature of the City Clerk.

ATTEST:

CITY OF SAN BERNARDINO for and on
behalf of COMMUNITY FACILITIES
DISTRICT NO. 2018-2 (VERDEMONT

RANCH) OF THE CITY OF SAN

BERNARDINO, COUNTY OF SAN

BERNARDINO, STATE OF CALIFORNIA
City Clerk of the City of San Bernardino Mayor of the City of San Bernardino Packet Pg. 1808
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CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-defined Agreement.

Dated: ____________, 2023
U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION, Fiscal Agent
By:

Authorized Signatory
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ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto ______________________________________________________________________________ (Name, Address and Tax Identification or
_____________________________________________________________________________, Social Security Number of Assignee)
the within registered Bond and hereby irrevocably constitute(s) and appoint(s) _________________________________ attorney, to transfer said Bond on the books of the Fiscal Agent, with full power of substitution in the premises.

Dated: ____________________
NOTE: The signature(s) on this assignment
must correspond with the name(s) as written on
the face of the within Bond in every particular
without alteration or enlargement or any
change whatsoever.

Signature Guaranteed:

NOTE: Signature guarantee shall be made by
a guarantor institution participating in the
Securities Transfer Agents Medallion Program
or in such other guarantee program acceptable
to the Fiscal Agent.

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COMMUNITY FACILITIES DISTRICT NO. 2018-2

OF THE CITY OF SAN BERNARDINO (VERDEMONT RANCH)

FUNDING AGREEMENT
THIS AGREEMENT is made and entered into by and between CITY OF SAN BERNARDINO (the “City”), acting for and on behalf of itself and COMMUNITY FACILITIES DISTRICT NO. 2018- 2 OF THE CITY OF SAN BERNARDINO (VERDEMONT RANCH) (the “Community Facilities District” or “CFD”), SB17329, LLC, a Delaware limited liability company (“SB17329”), and VERDEMONT RANCH LLC, a Delaware limited liability company (“Verdemont”, together with “SB17329” referred to as the “Property Owners”), each individually a “Party” and collectively the “Parties.”
WHEREAS, the City has formed the CFD pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), authorized special taxes and issuance of bonded indebtedness to finance certain public improvements to be owned, operated or maintained by the City and Incidental Expenses in accordance with the Act; and WHEREAS, in order to proceed in a timely way with development of the property within the Community Facilities District, which is attached as Exhibit “A” (the “Property”), the Property Owners desire to fund through the Community Facilities District (i) improvements included in the City’s fee programs (the “City Improvements”), as more particularly set forth and described in the Description of Cost Estimates attached hereto as Exhibit “B” and (ii) if applicable, any improvements unrelated to the City Improvements described and governed by the terms contained in Exhibit “E” hereto (the “Miscellaneous Improvements”) (collectively the “Improvements”); and WHEREAS, the City is authorized by the Act to form the CFD and to issue bonds to fund the Improvements; and
WHEREAS, the City Council has adopted the City’s policies and procedures concerning the use of special district financing programs to finance City facilities (the “Policy”); and WHEREAS, the purpose of this Agreement is to constitute a formal understanding between the Property Owners and the City (pursuant to the requirements of Government Code Section 53313.51 and other provisions of the Act and the Policy) concerning financial and other obligations and responsibilities related to the Improvements to be financed by the Community Facilities District to the extent funds are available, and to set forth the conditions upon which (1) the Community Facilities District will fund the Improvements and (2) the Community Facilities District will also fund any Miscellaneous Improvements, if applicable, described in Exhibit “E.” NOW, THEREFORE, it is mutually agreed between the respective parties as follows:

SECTION 1. PROPERTY OWNERS’ DEPOSIT
At the request of the Property Owners, the City undertook proceedings to form the Community Facilities District. The Property Owners have advanced to the City $40,000 related to the costs of such formation proceedings, all of which shall be eligible for reimbursement from the CFD. The City will Packet Pg. 1811
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2 provide to the Property Owners on request a summary of how the advances have been spent and the unexpended balance remaining. The amounts advanced by the Property Owners and, to the extent determined reasonable and appropriate by the City, expenses incurred by the Property Owners for engineering consultant costs in connection with the formation proceedings of the Community Facilities District and the issuance of bonds, will be reimbursable to the Property Owners, without interest, from the proceeds of bonds (the “Bonds”) issued by the Community Facilities District. In the event that Bonds are not issued to provide a source of reimbursement to the Property Owners, the City shall not have any liability to the Property Owners to reimburse it for any of the amounts previously advanced by the Property Owners and expended by the City.

Prior to the issuance of the Bonds, the City will request a final advance for any unpaid expenses incurred during preparatory technical, financial and legal work; and following payment of such expenses, the City shall promptly release the balance, if any, of the advance to the Property Owners.

Should the City’s expenses exceed the remaining balance, the City will bill the Property Owners for the difference, which Property Owners agree to pay within 10 days following receipt of such billing, subject to the conditions of paragraph one of this section.

SECTION 2. SALE OF BONDS

2.1 City Policy and Requirements for the Issuance of Bonds. The City Council has adopted the Policy, setting forth the City’s policies and procedures concerning the use of special district financing programs to finance the City Improvements. Pursuant to the Policy, the total annual amount of the special taxes to be collected with respect to a parcel within the CFD and all other taxes and assessments which will be collected with respect to such parcel must not exceed two percent (2%) of the greater of the assessed value, appraised value, or actual closed home price of such parcel within the Community Facilities District upon the completion of all expected structural improvements to such parcel.

The parties hereby agree that, unless waived by the City, at the time of issuance of the Bonds, the following requirements shall be met: (1) the ratio of the value of all parcels of property for which the Bonds are being issued to the amount of outstanding community facilities district or assessment district bonds attributable to such parcels (the “Value-to-Lien Ratio”) may not be less than three-toone (3:1) and (2) at least 50% of the proposed residential units (i.e., 37 units) within the Community Facilities District shall have been completed and conveyed to individual homeowners. The fair market value of the property within the Community Facilities District for purposes of determining the foregoing ratio will be determined based on the assessed value of the property or the appraised value of the property based on the appraisal made by an appraiser selected by the City with a valuation date within three (3) months of the issuance of the Bonds. Subject to satisfaction of the Policy, the recommendations of the City’s appraiser, underwriter and municipal advisor, and the requirements of this Agreement, the City shall use its best efforts to issue and sell the Bonds in one or more series in an amount sufficient to fund the City Improvements in accordance with the schedule for development of the Property.

2.2 Security for Payment of Special Taxes.
(a) Concurrently with the issuance and sale of each series of the Bonds, the owner of any land within the Community Facilities District, together with land owned by any affiliate (collectively, an “Account Party”), for which the expected levy of the Special Tax (as defined in the Rate and Method of Apportionment of Special Tax for the Community Facilities District (the “Rate and Method)) in the Packet Pg. 1812
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3 fiscal year following the fiscal year in which the Bonds are issued are equal to or exceed 20% of the total expected Special Tax levy for such fiscal year, shall deliver to the City, a security deposit equal to the expected Special Tax levy of the Property Owners based on current ownership for Fiscal Year 2023-24 and Fiscal Year 2024-25 (the “Deposit”).

The Deposit shall be sent to the City and deposited into a special tax fund held by the City (the “Deposit Special Tax Fund”). The City shall use the Deposit if there is a delinquency on the Property Owners’ Special Tax levy payments. Upon the close of escrow of 65 homes to individual homeowners in the District, the City will release any remaining funds in the Deposit Special Tax Fund to the Property Owners.

2.3 Major Landowner Initial and Continuing Disclosure. An owner of land which is responsible for twenty percent (20%) or more of the Special Tax in the fiscal year in which the Bonds are issued or in the fiscal year following the fiscal year in which the Bonds are issued (a “Major Landowner”) will be required to provide all information regarding the development of its property, including the financing plan for such development, which is necessary to ensure that the official statement for such Bonds complies with the requirements of Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”) and all other applicable federal and state securities laws.

Additionally, the Property Owners acknowledges that, if they are a Major Landowner at the time of issuance of the Bonds, it will be necessary that the Property Owners deliver a continuing disclosure certificate (in the form attached to the Official Statement) to provide such continuing disclosure pertaining to the development of the land owned by the Property Owners within the Community Facilities District as necessary to assist the underwriter in complying with the continuing disclosure requirements of the Rule and/or to assist in the marketing of the Bonds.

2.4 Bond Issuance Parameters. The terms and conditions upon which each series of the Bonds shall be issued and sold, the method of sale of the Bonds and the pricing of the Bonds shall be determined solely by the City in its reasonable discretion in conformance with the requirements of Government Code Section 53313.5, the Act, the Policy, and this Agreement. The Bonds shall be issued with a term not to exceed 35 years and annual debt service on the Bonds shall be permitted to escalate by one percent (1%) per year consistent with the annual escalation of the Special Tax. The proceeds of the Bonds shall be used in the following priority to (1) fund a reserve fund for the payment of principal and interest with respect to the Bonds in an amount equal to the least of (i) ten percent (10%) of the total bond issue, (ii) maximum annual debt service on Bonds, or (iii) 125% of average annual debt service; (2) fund up to eighteen (18) months of capitalized interest; (3) pay for costs of issuance of the Bonds including, without limitation, underwriter’s discount, bond counsel and disclosure counsel fees, appraisal and special tax consultant fees, municipal advisor fees, printing, and fiscal agent fees; (4) pay for the costs of forming the Community Facilities District and any change proceedings for the Community Facilities District; and (5) pay for the actual costs of the City Improvements. The Community Facilities District shall maintain records relating to the disbursements of proceeds of the sale of the Bonds. The Indenture of Trust (hereinafter “Indenture”) for the Bonds shall establish an acquisition and construction fund or improvement fund (herein, the “Improvement Fund”) into which shall be deposited initially the proceeds of the Bonds net of the amount of proceeds required to fund items (1) through (4) in the second preceding sentence. The Indenture shall also establish separate accounts of the Improvement Fund designated the “City Improvements Account”, and any Miscellaneous Improvement Accounts described in Exhibit “E” if applicable, into which shall be deposited such portions of the Improvement Fund as directed by the City and in writing at or subsequent to the closing of the sale of the Bonds consistent with the following priorities:

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4 (a) An amount sufficient to fund the reasonable, current estimated cost of the City Improvements anticipated to be funded out of the Bonds being issued shall be deposited in the City Improvements Account;
(b) If applicable, an amount sufficient to fund the reasonable, current estimated cost of any Miscellaneous Improvements anticipated to be funded out of the Bonds being issued shall be deposited in the applicable Miscellaneous Account(s), if any, described in Exhibit “E” hereto.

The Indenture shall provide that amounts remaining in the Improvement Fund after funding all proposed Improvements or sooner, as specified by the City, shall be deposited in the special tax fund or bond service fund and be applied to pay debt service on the Bonds and/or to call Bonds in advance of maturity.

SECTION 3. ALLOCATION OF SPECIAL TAXES
Prior to the issuance of Bonds, the City Council of the City, acting as the legislative body of the Community Facilities District, shall levy Special Taxes at the assigned special tax rate on all parcels classified as Developed Property pursuant to the Rate and Method. Such Special Taxes collected by the City shall first be applied to fund annual administrative expenses of the Community Facilities District and then to fund Improvements in the same manner as the proceeds of Bonds as set forth in Section 5 and Section 6 below. Upon sale and delivery of the Bonds, the City shall annually levy the Special Tax as provided for in documents pursuant to which the Bonds were issued. Following the issuance of the Bonds, the City shall have no obligation to levy Special Taxes to reimburse the Property Owners for the costs of any Improvements not paid for from Bond proceeds. The entire amount of any Special Tax levied by the Community Facilities District to repay the Bonds and recover costs and expenses allowable pursuant to Government Code Section 53313.5, shall be allocated to the Community Facilities District.

SECTION 4. NOTICE OF SPECIAL TAX
The Property Owners, or Property Owners’ successors or assigns, shall provide written notice to all potential purchasers of lots advising of the special tax obligation applicable to the Property in the form required by Section 53341.5 of the Government Code. A sample copy as prepared by the Property Owners is attached as Exhibit “C.”
SECTION 5. CITY IMPROVEMENTS
The Property Owners may be required pursuant to the conditions of development or the fee ordinance to pay certain City fees (the “City Fees”) relating to the Improvements prior to the availability of proceeds of the Bonds to pay for such Improvements. In the event such City Fees are paid prior to the availability of Bond proceeds, the amounts paid to the City shall be deemed to be deposits (each a “Deposit”) that are subject to refund by the City to the Property Owners in accordance with this Agreement. The City shall place each Deposit in a capital facilities account(s). If the Property Owners have made any Deposits to the City, then following deposit of Bond proceeds in the City Improvements Account, the City shall return to the Property Owners, from the capital account in which the Deposits were deposited the Deposits not previously returned, without interest or other earnings thereon. The City shall be so obligated to return such Deposits only to the extent that an equivalent amount of the Deposits to be returned is deposited in the City Improvements Account from Bond proceeds.

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5 Bond proceeds used to finance Improvements which relate to the City Fees shall be allocated first for return of all Deposits prior to being allocated to the payment of City Fees not previously deposited by the Property Owners. Any Deposits that have not been returned to the Property Owners at the time it is determined that there will be no further Bond proceeds available (i.e. the final series of Bonds to finance the City Improvements have been issued) shall be retained by the City and may be used for the purposes for which the City Fee was required, and the unrefunded Deposits shall constitute full and final payment for such City Fees, without any increase of any kind.

Any City Fees paid (as Deposits) by the Property Owners shall be made with the understanding that such Deposits will be returned to the Property Owners if, and when, Bond proceeds have been deposited to the City Improvements Account. The City shall expend any amounts disbursed to it from the City Improvements Account on capital facilities. The payment of Deposits prior to the availability of the Bond proceeds shall not be construed as a dedication or gift of the City Fees, or a waiver of the return of the Deposits, it being the intention that the City Fees be paid by Bond proceeds to the extent of the Bond proceeds.

SECTION 6. MISCELLANEOUS IMPROVEMENTS.

Improvements unrelated to the City Improvements, if applicable, will be supplemented by the terms contained in an addendum which will appear as Exhibit “E” hereto. The amounts deposited in the applicable Miscellaneous Improvement Account(s), if any, will be disbursed for the acquisition or construction of Miscellaneous Improvements in accordance with the provisions in the applicable Joint Community Facilities Agreement(s), if any. Any amounts in the applicable Miscellaneous Improvement Account(s) shall be disbursed at the written direction of the City upon Property Owners’ submittal of an addendum which will appear as the applicable entity’s Certificate and the Disbursement Request Form provided for in the Joint Community Facilities Agreement(s). Upon receipt of the Disbursement Request Form, the City shall submit a written requisition for payment of the requested amount to trustee for the Bonds pay the amount requested to the applicable entity.

SECTION 7. INDEPENDENT CONTRACTOR
In performing this Agreement, the Property Owners are independent contractors and not the agent of the City. The City shall not have any responsibility for payment to any contractor or supplier of the Property Owners. It is not intended by the parties that this Agreement create a partnership or joint venture among them and this Agreement shall not otherwise be construed.

SECTION 8. INDEMNIFICATION
The Property Owners shall assume the defense of, indemnify and hold harmless, the City, its officers, employees and agents, and the Community Facilities District, its officers, employees and agents, from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subject or put, by reason of, or resulting from the Property Owners’ performance of its obligations under this Agreement, the issuance of the Bonds, the construction of the Improvements, the failure of the Property Owners to provide notice of the special tax to be levied by the Community Facilities District pursuant to Section 53341.5 of the Act (but only if the Property Owners are required by law to provide such notice), or arising out of any alleged misstatements of fact or alleged omission of a material fact made by the Property Owners, their officers, directors, employees or agents to the City, the Community Facilities District, the underwriter of the Bonds and its counsel, the appraiser, the special tax consultant, the market absorption consultant or bond counsel regarding Packet Pg. 1815
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6 the Property Owners, their proposed developments, its property ownership, and any contractual arrangement it may enter into in a disclosure document describing the Community Facilities District and the risks relating to the Bonds. No provision of this Agreement shall in any way limit the extent of the Property Owners’ responsibility for payment of damages resulting from the operations of the Property Owners and their contractors; provided, however that the Property Owners shall not be required to assume the defense or indemnify and hold harmless the City, its officers, employees or agents, or the Community Facilities District, its officers, employees or agents, as to actions, damages, claims, losses or expenses resulting from negligence or willful misconduct of such person or entity.

SECTION 9. CONFLICT WITH OTHER AGREEMENTS
Except as specifically provided herein, nothing contained herein shall be construed as releasing the Property Owners from any condition of development or requirement imposed by any other agreement with City. In the event of a conflicting provision, such other agreement shall prevail unless such conflicting provision is specifically waived or modified in writing by City.

SECTION 10. TERMINATION
The provisions of this Agreement related to the financing of the Improvements shall terminate and be of no further force or effect if the first series of Bonds are not sold within ten years from the date of this Agreement unless extended by agreement of all the parties. If the City is unable to sell the first series of Bonds after diligent, commercially reasonable efforts to do so, this Agreement shall terminate and be of no further force and effect.

SECTION 11. NOTICES
Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered or seventytwo (72) hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid. Any notice to the Community Facilities District or the City shall be addressed to City of San Bernardino, 290 North D Street, San Bernardino, CA 92401, Attention:

Director of Finance. Any notice to the Property Owners shall be sent to 434 North 2nd Avenue, Upland, CA 91786, Attention: Arlene Anaya.

Each party may change its address for delivery of notice by delivering written notice of such change of address to the other party hereto.

SECTION 12. GENERAL PROVISIONS
(a) Amendment. This Agreement may be amended at any time but only in writing signed by each party hereto.
(b) Entire Agreement. This Agreement, and the agreements referenced herein, contains the entire understanding and agreement between the parties with respect to the matters provided for herein and supersedes all prior agreements and negotiations between the parties with respect to the subject matter of this Agreement. There are no oral or written representations, understanding, undertakings or agreements which are not contained or expressly referred to herein, and any such representations, understandings or agreements are superseded by this Agreement. This Agreement shall be binding upon, and enforceable by and against the Community Facilities District.

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7 (c) Exhibits. All exhibits attached hereto are incorporated into this Agreement by reference.
(d) Severability. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible.
(e) Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other parties hereto, or the failure by a party to exercise its rights upon the default of another party, shall not constitute a waiver of such party’s right to insist and demand strict compliance by such other parties with the terms of this Agreement thereafter. (f) No Third Party Beneficiaries. Except as provided explicitly in this Agreement, no person or entity shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement (either express or implied) is intended to confer upon any person or entity, other than the City, the Community Facilities District, and the Property Owners (and their respective successors and assigns), any rights, remedies, obligations or liabilities under or by reason of this Agreement. (g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one instrument. (h) Assignment. The Property Owners may assign all or any of its rights pursuant to this Agreement to a purchaser of all or any portion of the Property. Such a purchaser and assignee shall, as a condition to taking an assignment of such rights, enter into an assignment and assumption agreement with the City and the Property Owners, in a form reasonably acceptable to the Property Owners and the City, whereby such rights assigned are specified and such purchaser agrees, except as may be otherwise specifically provided therein, to assume the obligations of the Property Owners pursuant to this Agreement and to be bound thereby.
(i) Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California. (j) Construction of Agreement. This Agreement has been reviewed by legal counsel for both the City and the Property Owners and shall be deemed for all purposes to have been jointly drafted by the City and the Property Owners. No presumption or rule that ambiguities shall be construed against the drafting party shall apply to the interpretation or enforcement of this Agreement. (k) Attorneys’ Fees. In the event of any action or proceeding, including an arbitration or a reference pursuant to Section 638, et seq., of the Code of Civil Procedure brought by any Party against any other under this Agreement, the prevailing Party shall be entitled to recover its actual attorneys’ fees and all fees, costs and expenses incurred for prosecution, defense, consultation, or advice in such action or proceeding. In addition to the foregoing, the prevailing Party shall be entitled to its actual attorneys’ fees and all fees, costs and expenses incurred in any post-judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Agreement into any judgment on this Agreement. (l) Venue and Forum. Any action at law or in equity arising under this Agreement brought by any Party hereto for the purpose of enforcing, construing or determining the validity of any provision of this Agreement shall be filed and tried in the Superior Court of the County of San Packet Pg. 1817
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8 Bernardino, State of California, and the Parties waive all provisions of law providing for the filing, removal or change of venue to any other Court.
(m) Entire Agreement. Except as provided in an addendum, which if applicable, will appear as Exhibit “E” hereto, this Agreement sets forth and contains the entire understanding and agreement of the parties. There are no oral or written representations, understandings, undertaking or agreements, which are not contained or expressly referred to herein, and any such representations, understandings or agreements are superseded by this Agreement. No evidence of any such representations, understandings or agreements shall be admissible in any proceeding of any kind or nature relating to the terms or conditions of this Agreement, its interpretation or breach. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written below.

Dated: _________, 2023 CITY OF SAN BERNARDINO, a political subdivision of the State of California
By:

Barbara Whitehorn
Agency Director of Administrative Services
ATTEST:

By:

Genoveva Rocha, City Clerk
APPROVED AS TO FORM:

CITY ATTORNEY OF THE CITY OF SAN BERNARDINO
By:

Sonia R. Carvalho, City Attorney
[SIGNATURES CONTINUED ON NEXT PAGE.]
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[SIGNATURE PAGE CONTINUED]
SB17329, LLC, a Delaware limited liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager VERDEMONT RANCH LLC, a Delaware limited liability company By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager Packet Pg. 1820
55600.00927\32657046.7

LIST OF EXHIBITS

EXHIBIT A - DESCRIPTION OF PROPERTY

EXHIBIT B - DESCRIPTION OF COST ESTIMATES
EXHIBIT C - NOTICE OF SPECIAL TAX (as prepared by the Property Owners)

EXHIBIT D - DISBURSEMENT REQUEST FORM

EXHIBIT E - ADDENDUM
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A-1

EXHIBIT A

DESCRIPTION OF PROPERTY

LEGAL DESCRIPTION
Real property in the City of San Bernardino, County of San Bernardino, State of California, described as follows:

Assessor Parcel Nos:
0261-771-01 through -028
0261-781-01 through -029
0261-791-01 through -017
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B-1

EXHIBIT B

DESCRIPTION OF COST ESTIMATES
The Improvements consist of the City Improvements, as described below. Any other types of Improvements will be described in an addendum to this Agreement appearing as Exhibit “E.” I. CITY IMPROVEMENTS.

City facilities included in the City’s development fee programs used to finance expansion projects, exclusive of in-tract facilities constructed by a property owner, but including and not limited to the following.

Estimated Cost of the City Improvements
Description Estimated Cost
Local Circulation Facilities $17,238
Regional Circulation Facilities 180,190
Storm Facilities 290,517
Law Facilities 47,291
Library Facilities 47,204
Aquatic Facilities 24,132
Public Meeting Facilities 80,626
Parkland and Open Space Facilities 704,322
Sewer Connection Facilities 157,920
Sewer Capacity Facilities 259,000
Water Facilities 424,020
Total Facilities $2,232,459
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C-1

EXHIBIT C

NOTICE OF SPECIAL TAX
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO

COUNTY OF SAN BERNARDINO, CALIFORNIA
TO: THE PROSPECTIVE PURCHASER OF THE REAL PROPERTY KNOWN AS:

TRACT NO. ______, LOT NO. ____

THIS IS A NOTIFICATION TO YOU PRIOR TO YOUR ENTERING INTO A CONTRACT TO PURCHASE THIS PROPERTY. THE SELLER IS REQUIRED TO GIVE YOU THIS NOTICE AND TO

OBTAIN A COPY SIGNED BY YOU TO INDICATE THAT YOU HAVE RECEIVED AND READ A COPY OF THIS NOTICE.
(1) This property is subject to a special tax, which is in addition to the regular property taxes and any other charges, fees, special taxes, and benefit assessments on the parcel. It is imposed on this property because it is a new development and may not be imposed generally upon property outside of this new development. If you fail to pay this tax when due each year, the property may be foreclosed upon and sold. The tax is used to provide public facilities or services that are likely to particularly benefit the property. YOU SHOULD TAKE THIS TAX AND

THE BENEFITS FROM THE FACILITIES FOR WHICH IT PAYS INTO ACCOUNT IN DECIDING WHETHER TO BUY THIS PROPERTY.
(2) The property you are purchasing (the “Property”) is within Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino (“CFD”) and is subject to an annual Special Tax levied pursuant to the Rate and Method of Apportionment of Special Tax for the CFD (the “RMA”). The annual Maximum Special Tax which may be levied against the Property by the CFD to pay for public facilities during any given Fiscal Year will depend on whether the Property is classified as “Undeveloped Property”, “Approved Property” or “Developed Property” during the Fiscal Year for which the Special Tax is being levied. Pursuant to the RMA, Approved Property is defined as “all Assessor’s Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before June 1st preceding the Fiscal Year in which the Special Tax is being levied”. Developed Property is defined, in pertinent parts, as “all Assessor’s Parcels of Taxable Property…(i) that are included in a Final Map that was recorded prior to January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) a Building Permit for new construction was issued on or before June 1st preceding the Fiscal Year in which the Special Tax is being levied”. In each Fiscal Year prior to the first Fiscal Year in which Taxable Property is classified as Developed Property or Approved Property, the Property will be classified as Undeveloped Property. All capitalized terms not defined herein shall have meanings set forth in the RMA.

Undeveloped Property
If the Property is classified as Undeveloped Property in any given Fiscal Year, the annual Maximum Special Tax authorized to be levied against the Property by the CFD to pay for public facilities during such Fiscal Year shall be $10,299.92 per “Acre” as defined in the RMA. On July 1, commencing July 1, 2023, the Maximum Special Tax rate for Undeveloped Property shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year.

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C-2
Approved Property
If the Property is classified as Approved Property in any given Fiscal Year, the annual Maximum Special Tax authorized to be levied against the Property by the CFD to pay for public facilities during such Fiscal Year shall be $10,299.92 per “Acre” as defined in the RMA. On July 1, commencing July 1, 2023, the Maximum Special Tax rate for Approved Property shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year.

Developed Property
Once the Property is classified as Developed Property, the annual Maximum Special Tax authorized to be levied against the Property by the CFD to pay for public facilities during any given Fiscal Year shall be the greater of (i) the applicable annual Assigned Special Tax, based on the “Building Square Footage” of the Property, as defined in the RMA, and as determined by reference to Table 1 of the RMA, which is reproduced, in pertinent parts on the following page, or (ii) the Backup Special Tax of $2,821.99 per Unit. [Table 1 on following page]
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C-3
TABLE 1
Assigned Special Taxes for Developed Property
Land Use Category Taxable
Unit Residential Floor Area Assigned Special Tax Per Taxable Unit

1. Single Family Property D/U Less than 2,500 sq. ft. $2,644.78

2. Single Family Property D/U 2,500 sq. ft. to 2,800 sq. ft. $2,790.06

3. Single Family Property D/U 2,801 sq. ft. to 3,100 sq. ft. $2,863.21

4. Single Family Property D/U Greater than 3,100 sq. ft. $2,979.63 On July 1, commencing July 1, 2023, the Assigned Special Tax rate for Developed Property and the Backup Special Tax shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year. Pursuant to the RMA, the Backup Special Tax shall only be levied against the Property, if necessary, to satisfy the “Special Tax Requirement”, as defined in the RMA, for the applicable Fiscal Year. For each Fiscal Year that any Bonds are outstanding the Special Tax shall be levied on all Assessor’s Parcels subject to the Special Tax. The Special Tax shall cease not later than the 2059-2060 Fiscal Year, however, the Special Tax 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 have been paid; (ii) all authorized facilities of the CFD have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes remain uncollected and (iv) all other obligations of the CFD have been satisfied.
(3) The authorized facilities which are being paid for by the Special Taxes, and the money received from the sale of Bonds which are being repaid by the Special Taxes, are (a) paying for the cost of the purchase, modification, expansion, rehabilitation and/or improvement of drainage, water, sewer, library, park, roadway and roadway improvements, aquatic facilities, and other public facilities of the City, including the foregoing public facilities which are included in the City’s fee programs with respect to such facilities and authorized to be financed under the Mello-Roos Community Facilities Act of 1982, as amended, and (b) to finance the incidental expenses to be incurred. These facilities may not yet have been all constructed or acquired and it is possible that some may never be constructed or acquired.

YOU MAY OBTAIN A COPY OF THE RESOLUTION OF FORMATION WHICH AUTHORIZED

CREATION OF THE CFD, AND WHICH SPECIFIES MORE PRECISELY HOW THE SPECIAL TAX IS

APPORTIONED AND HOW THE PROCEEDS OF THE TAX WILL BE USED, FROM CITY OF SAN BERNARDINO BY CALLING (909) 384-5242. THERE MAY BE A CHARGE FOR THIS DOCUMENT NOT TO EXCEED THE REASONABLE COST OF PROVIDING THE DOCUMENT.

I (WE) ACKNOWLEDGE THAT I (WE) HAVE READ THIS NOTICE AND RECEIVED A COPY OF

THIS NOTICE PRIOR TO ENTERING INTO A CONTRACT TO PURCHASE OR DEPOSIT RECEIPT WITH RESPECT TO THE ABOVE-REFERENCED PROPERTY. I (WE) UNDERSTAND THAT I (WE) MAY

TERMINATE THE CONTRACT TO PURCHASE OR DEPOSIT RECEIPT WITHIN THREE DAYS AFTER

RECEIVING THIS NOTICE IN PERSON OR WITHIN FIVE DAYS AFTER IT WAS DEPOSITED IN THE

MAIL BY GIVING WRITTEN NOTICE OF THAT TERMINATION TO THE OWNER, SUBDIVIDER, OR AGENT SELLING THE PROPERTY.

Dated: ___________ By: ____________________________________ Name: ____________________________________
Dated: ___________ By: ____________________________________ Name: ____________________________________
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D-1

EXHIBIT D
CFD NO. 2018-2 OF THE CITY OF SAN BERNARDINO (VERDEMONT RANCH)

DISBURSEMENT REQUEST FORM

1. Community Facilities District No. 2018-2 of the City of San Bernardino (Verdemont Ranch) of (the “CFD”) is hereby requested to pay from the ________________________ Account, or any applicable account or sub-account thereof, established by the CFD in connection with its 2023 Special Tax Bonds (the “Bonds”) to City of San Bernardino (the “City”) as payee, the sum set forth below :
$_____________________ (the Requested Amount”)

2. The Requested Amount represents the payment of City Fees for ___ lot(s) within the boundaries of the CFD (the “Property”).
(Tract No. __________, Lot Nos. ________________).

3. The Requested Amount is due and payable, has not formed the basis of any prior request or disbursement.

4. The Requested Amount shall be payable to _______________ (the “Property Owners”), pursuant to the wiring instructions attached hereto.

5. The Requested Amount is authorized and payable pursuant to the terms of the certain Funding Agreement (the “Agreement”) between the City, acting for and on behalf of itself and the CFD and the Property Owners.

6. Capitalized undefined terms used herein shall have the meaning ascribed to them in the Agreement.

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D-2
Dated: PROPERTY OWNERS:

SB17329, LLC, a Delaware limited liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC
Enterprises, Inc., Manager
VERDEMONT RANCH LLC, a Delaware limited
liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC
Enterprises, Inc., Manager
Dated: CITY OF SAN BERNARDINO
By:

Its:
[ATTACH WIRING INSTRUCTIONS]
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E-1

EXHIBIT E

ADDENDUM

DESCRIPTION AND COST ESTIMATES OF THE MISCELLANEOUS IMPROVEMENTS [Not Applicable]
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-1-

AGREEMENT PROVIDING FOR ADDITIONAL SECURITY FOR COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH) OF THE CITY OF SAN

BERNARDINO
THIS AGREEMENT (the “Agreement”) is entered into as of the __ day of ______, 2023 by and between THE CITY OF SAN BERNARDINO (the “City”), acting for and on behalf of itself and the COMMUNITY FACILITIES DISTRICT NO. 2018-2 OF THE CITY OF SAN BERNARDINO (VERDEMONT RANCH) (the “District”), SB17329, LLC, a Delaware limited liability company (“SB17329”), and VERDEMONT RANCH LLC, a Delaware limited liability company (“Verdemont”, together with “SB17329” are referred to as the “Property Owners”).

R E C I T A L S
A. City and the Property Owners have entered into that certain Funding Agreement (the “Funding Agreement”) dated as of ________, 2023, to finance the construction and acquisition of certain public facilities described therein. Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Funding Agreement.

B. The purpose of this Agreement is to provide for the advance of funds by the Property Owners of a cash deposit to the City in the event that the Property Owners fail to pay Special Taxes on the Property and cause a shortfall in proceeds of the Special Taxes for the parcels listed in Exhibit A, attached hereto (the “Parcels”).

IT IS AGREED AS FOLLOWS:

Section 1. Deposit and Payment of Costs.
(a) Delivery of Deposit. Prior to the posting of the preliminary official statement regarding the issuance of bonds for Community Facilities District No. 2018-2 (Verdemont Ranch) (“Bonds”), the Property Owners agree to deliver to the City a cash deposit of $133,797.00 (the “Deposit”) into a non-interest bearing special tax fund (the “Deposit Special Tax Fund”) held by the City. The Deposit was calculated to approximate the Special Tax levy of the Property Owners based on current and expected ownership at the time of bond approval for Fiscal Year 2023- 24 and Fiscal Year 2024-25.
(b) Use of Deposit. The Deposit will be applied to Special Tax payments of the Property Owners only if there is a delinquency in Property Owners’ payment of the Special Taxes applicable to the Parcels and for no other purpose. (c) Release of Deposit. Within 30 days following the close of escrow of 65 homes to individual homeowners in the District and delivery to the City of a report providing evidence of the property transfers, the City will release any remaining funds in the Deposit Special Tax Fund to the Property Owners.
(d) Reimbursement. All amounts drawn pursuant to this Agreement shall be reimbursed from the proceeds of Special Taxes received with respect to the Parcels, without interest in a manner consistent with the Fiscal Agent Agreement and the Packet Pg. 1830
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-2-
Funding Agreement. The City is obligated to make such reimbursements solely from the Special Taxes paid with respect to such Parcels and not from any other funds of the City nor the proceeds of any bonds issued by the District.

Section 2. Notices. Any written notice, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth in the Funding Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this agreement to be signed as of the date first above written.

Dated: SB17329, LLC, a Delaware limited liability company By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC
Enterprises, Inc., Manager
VERDEMONT RANCH LLC, a Delaware limited
liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC
Enterprises, Inc., Manager
Dated: CITY OF SAN BERNARDINO, a political
subdivision of the State of California
By:

Name: Barbara Whitehorn
Agency Director of Administrative
Services
ATTEST:

By:

Genoveva Rocha, City Clerk
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S-1
APPROVED AS TO FORM:

CITY ATTORNEY OF THE CITY OF

SAN BERNARDINO
By:

Sonia R. Carvalho, City Attorney
-Signature PageAgreement Providing for Additional Security Packet Pg. 1833
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B-1

EXHIBIT A

PARCELS
Real property in the City of San Bernardino, County of San Bernardino, State of California, described as follows:

Assessor Parcel Nos:
0261-771-01 through -028
0261-781-01 through -029
0261-791-01 through -017
Packet Pg. 1834
PRELIMINARY OFFICIAL STATEMENT DATED ________, 2023

NEW ISSUE - BOOK-ENTRY ONLY NO RATING
In the opinion of Best Best & Krieger, LLP, Riverside, California (“Bond Counsel”), subject to certain qualifications described in this Official Statement, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income tax. See “LEGAL MATTERS — Tax Exemption.” $2,855,000*
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO
2023 SPECIAL TAX BONDS
Dated: Date of Delivery Due: September 1, as shown on the inside front cover page The Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”) are being issued and delivered to (i) finance the construction and acquisition of public facilities to be owned and operated by the City of San Bernardino (the “City”), needed with respect to the development within Community Facilities District No. 2018-2 (Verdemont Ranch) of the City (the “District”), County of San Bernardino (“County”), State of California (the “State”), (ii) fund a reserve fund securing the Bonds, and (iii) pay costs of issuance of the Bonds. The District has been formed by the City and is located in the City and County.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State), and pursuant to a Fiscal Agent Agreement, dated as of _______ 1, 2023 (the “Fiscal Agent Agreement”), by and between the City, for and on behalf of the District, and U.S. Bank Trust Company, National Association as fiscal agent (the “Fiscal Agent”). The Bonds are special obligations of the City and the District and are payable solely from revenues derived from certain annual Special Taxes (as defined in this Official Statement) to be levied on and collected from the owners of certain taxable land within the District and from certain other funds pledged under the Fiscal Agent Agreement, all as further described in this Official Statement. The Special Taxes are to be levied according to the rate and method of apportionment for the District approved by the City Council of the City and the qualified electors within the District. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The City Council of the City is the legislative body of the District.

The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases may be made in integral multiples of $5,000 and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees.

The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described in this Official Statement. Interest on the Bonds will be payable semiannually on each March 1 and September 1, commencing September 1, 2023. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC participants who are obligated to remit such payments to the beneficial owners of the Bonds.

Additional bonds can be issued for refunding purposes only. See “THE BONDS — General Provisions,” “— Book-Entry Only System” and APPENDIX G — “INFORMATION CONCERNING DTC.”
Neither the faith and credit nor the taxing power of the City, the County, the State or any political subdivision of such entities is pledged to the payment of the Bonds. Except for the Special Tax Revenues (as defined herein), no other taxes are pledged to the payment of the Bonds. The Bonds are special obligations of the City and the District payable solely from Special Tax Revenues and certain other amounts held under the Fiscal Agent Agreement as more fully described in this Official Statement.

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

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue.

Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. ____________________

MATURITY SCHEDULE
(See Inside Cover Page)
____________________
The Bonds are offered when, as and if issued and accepted by Hilltop Securities Inc., the Underwriter, subject to approval as to their legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by the City Attorney and by Best Best & Krieger LLP, Riverside, California, as Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, as counsel to the Underwriter, and for the Fiscal Agent by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery to DTC in New York, New York, on or about ________, 2023. [UNDERWRITER LOGO]
Dated: ______, 2023
*
Preliminary, subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Packet Pg. 1835

MATURITY SCHEDULE
$2,855,000*
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO
2023 SPECIAL TAX BONDS
Base CUSIP No.† _______
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price CUSIP†©
$______ _____% Term Bonds due September 1, 20__ Yield: _____% Price: _____ CUSIP No.† ___ $______ _____% Term Bonds due September 1, 20__ Yield: ____% Price: _____ CUSIP No.† ____ $______ _____% Term Bonds due September 1, 20__ Yield: _____% Price: ____ CUSIP No.† ___ *
Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is owned by FactSet Research Systems Inc. (“FactSet”). FactSet will manage the CUSIP system on behalf of the American Bankers Association. This information is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City, the District or the Underwriter and are included solely for the convenience of the registered owners of the applicable Bonds. None of the City, the District or the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

Packet Pg. 1836

CITY OF SAN BERNARDINO
San Bernardino, California

MEMBERS
Helen Tran, Mayor
Theodore Sanchez; First Ward
Sandra Ibarra; Second Ward
Juan Figueroa; Third Ward, Mayor Pro Tem
Fred Shorett; Fourth Ward
Ben Reynoso; Fifth Ward
Kimberly Calvin; Sixth Ward
Damon L. Alexander; Seventh Ward
STAFF
Charles E. McNelly, Interim City Manager
Barbara Whitehorn, Agency Director of Administrative Services Genoveva Rocha, City Clerk
Sonia R. Carvalho, City Attorney

SPECIAL SERVICES
Bond and Disclosure Counsel
Best Best & Krieger LLP
Riverside, California
Fiscal Agent
U.S. Bank Trust Company, National Association
Los Angeles, California
Municipal Advisor
Columbia Capital Management, LLC
Carlsbad, California
Special Tax Consultant
Spicer Consulting Group, LLC
Temecula, California
Packet Pg. 1837
Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Fiscal Agent or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Fiscal Agent or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement, deemed final by the City and the District, is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact. This Official Statement, including any supplement or amendment to this Official Statement, is intended to be deposited with the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org.

The information set forth in this Official Statement which has been obtained from third party sources is believed to be reliable but is not guaranteed as to accuracy or completeness by the City or the District. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District or any other parties described in this Official Statement since the date of this Official Statement. All summaries of the Fiscal Agent Agreement or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is made by this Official Statement to such documents on file with the City for further information. While the City maintains an Internet website for various purposes, none of the information on that website is incorporated by reference in this Official Statement or intended to assist investors in making any investment decision or to provide any continuing information with respect to the Bonds or any other bonds or obligations of the City. Any such information that is inconsistent with the information set forth in this Official Statement should be disregarded.

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

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

Certain statements included or incorporated by reference in this Official Statement constitute “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption “THE DISTRICT.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH

FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND

OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED

TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO

ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR

EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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

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TABLE OF CONTENTS
-iINTRODUCTORY....................................................................1 General.................................................................................1 The District ..........................................................................1 Sources of Payment for the Bonds.......................................3 City CFD Administrative Policies and Practices.................4 Description of the Bonds .....................................................4 Redemption..........................................................................5 Issuance of Additional Bonds..............................................5 Tax Matters..........................................................................5 Professionals Involved in the Offering ................................5 Continuing Disclosure .........................................................5 Bond Owners’ Risks ............................................................6 Forward Looking Statements...............................................6 Other Information ................................................................6 THE FINANCING PLAN .........................................................7 Estimated Sources and Uses of Funds .................................7 THE BONDS .............................................................................7 General Provisions...............................................................7 Authority for Issuance .........................................................8 Redemption..........................................................................9 Registration, Transfer and Exchange.................................11 Book-Entry Only System...................................................12 Debt Service Schedule.......................................................12 SOURCES OF PAYMENT FOR THE BONDS.....................13 Limited Obligations ...........................................................13 Special Taxes .....................................................................13 Special Tax Fund ...............................................................18 Bond Fund .........................................................................19 Reserve Fund .....................................................................20 No Superior Obligations; No Parity Bonds
Except for Refunding...............................................21 THE DISTRICT.......................................................................21 General Description of the District....................................22 Description of Authorized Facilities..................................22 The Developer ...................................................................22 The Development...............................................................23 Overlapping Community Facilities Districts .....................26 Estimated Direct and Overlapping Indebtedness...............27 Expected Tax Burden ........................................................27 Appraisal Report................................................................28 Estimated Value-to-Lien Ratio ..........................................29 Delinquency History..........................................................32 City’s Collection Practices ................................................32 RISK FACTORS .....................................................................32 Risks of Real Estate Secured Investments
Generally..................................................................32 Limited Obligations ...........................................................32 Insufficiency of Special Taxes...........................................33 Special Tax Delinquencies ................................................34 Climate Change .................................................................35 Natural Disasters................................................................35 Drought ..............................................................................35 Wind 36
Hazardous Substances .......................................................36 Parity Taxes and Special Assessments ..............................37 Disclosures to Future Purchasers.......................................37 Non-Cash Payments of Special Taxes...............................38 Payment of the Special Tax Is Not a Personal
Obligation of the Owners.........................................38 Concentration of Ownership..............................................38 Land Values .......................................................................38 Increasing Mortgage Interest Rates ...................................39 Impact of Economic Conditions on the
Development in the District.....................................39 FDIC/Federal Government Interests in Properties ............39 Bankruptcy and Foreclosure ..............................................40 No Acceleration Provision.................................................42 Loss of Tax Exemption......................................................42 Limitations on Remedies ...................................................42 Limited Secondary Market ................................................42 Voter Initiatives .................................................................42 IRS Audit of Tax-Exempt Bond Issues .............................43 Ballot Initiatives.................................................................43 Recent Case Law Related to the Mello-Roos Act .............43 Potential Early Redemption of Bonds from
Prepayments or Assessment Bond Proceeds ...........44
Legal Requirements ...........................................................45 Cyber Security ...................................................................45 CONTINUING DISCLOSURE...............................................45 City Continuing Disclosure ...............................................45 Developer Continuing Disclosure......................................45 LEGAL MATTERS.................................................................46 Tax Exemption...................................................................46 Legal Opinion ....................................................................47 Litigation............................................................................47 No Rating...........................................................................47 Underwriting......................................................................47 Municipal Advisor .............................................................48 Financial Interests..............................................................48 Pending Legislation ...........................................................48 Additional Information ......................................................48

APPENDIX A - RATE AND METHOD OF
APPORTIONMENT OF SPECIAL TAX.....................A-1
APPENDIX B - APPRAISAL REPORT...............................B-1

APPENDIX C - SUPPLEMENTAL

INFORMATION CONCERNING CITY OF

SAN BERNARDINO AND COUNTY OF
SAN BERNARDINO ....................................................C-1

APPENDIX D - SUMMARY OF FISCAL
AGENT AGREEMENT ................................................D-1

APPENDIX E - FORM OF CONTINUING

DISCLOSURE CERTIFICATES OF THE
CITY AND THE PROPERTY OWNER.......................E-1

APPENDIX F - PROPOSED FORM OF BOND
COUNSEL OPINION ....................................................F-1

APPENDIX G - INFORMATION
CONCERNING DTC ....................................................G-1 Packet Pg. 1839
[DISTRICT LOCATION MAP]
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[AERIAL PHOTO]
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1 OFFICIAL STATEMENT
$2,855,000*
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO
2023 SPECIAL TAX BONDS

INTRODUCTORY
This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in APPENDIX D — “SUMMARY OF FISCAL AGENT AGREEMENT — DEFINITIONS” or APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”
General
The purpose of this Official Statement (the “Official Statement”) is to provide certain information concerning the issuance of the $2,855,000* Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”). The proceeds of the Bonds will be used to (i) finance the construction and acquisition of public facilities needed with respect to the development within Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “District”), (ii) fund a reserve fund securing the Bonds, and (iii) pay costs of issuance of the Bonds.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California (the “State”)) (the “Act”), and a Fiscal Agent Agreement dated as of _______ 1, 2023 (the “Fiscal Agent Agreement”) by and between the City of San Bernardino (the “City”), for and on behalf of the District, and U.S. Bank Trust Company, National Association (the “Fiscal Agent”). The Bonds are secured under the Fiscal Agent Agreement by a pledge of and lien upon Special Tax Revenues (as defined in this Official Statement), subject to transfers to the Administrative Expense Fund as described herein, and all moneys deposited in the Bond Fund and the Reserve Fund.

The District
The District contains approximately 30.66 gross acres and approximately 20.54 developable acres, located in the City, north of Meyers Road and Magnolia Avenue Intersection. The District encompasses Tract Map Nos. 17329-1, 17329-2, and 17329-3 (the “Property”) and is planned for 74 single family residential homes at buildout in a neighborhood being marketed as “Verdemont Ranch” (the “Project”).

The three contiguous tracts that are being developed into the Verdemont Ranch community is built and sold by JEC Enterprises, Inc., a California corporation (contractor and manager of property) under the marketed name of GFR Homes (the “Developer”). The builder-owned homes/lots within Tract 17329-1 are owned by SB17329, LLC (“SB17329”), while the builder-owned homes/lots within Tracts 17329-2 and 17329-3 are owned by Verdemont Ranch LLC (“Verdemont,” together with “SB17329” referred to as the “Property Owners”). Homes within the District are planned to consist of 74 single family homes with floor plans (including accessory dwelling unit (“ADU”) square footage) ranging in size from approximately 2,224 square feet (“S.F.”) to approximately 3,248 square feet.
*
Preliminary, subject to change.

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2 As of the February 21, 2023 date of value (the “Date of Value”) of the Appraisal Report (as defined below), 28 of the 74 planned single family residential homes had been completed and conveyed to individual homeowners. Of the remaining 46 residential lots, 15 lots were over 95% completed, including 3 model homes (not released for sale) and 12 production homes (8 of which are in escrow). There were an additional 13 lots under construction (5 of which are in escrow) and 18 remaining finished lots (none of which were in escrow or under construction), as of the Date of Value. As of March 27, 2023, an additional 2 homes closed escrow to individual homeowners, resulting in 30 homes conveyed to individual homeowners. Of the remaining 44 residential lots owned by the Property Owners, there are 3 completed model homes (0 of which were in escrow) and 23 production homes (14 of which are in escrow), and 18 finished lots without any home construction thereon (0 of which are in escrow). Homes under contract may not result in closed escrows as sales contracts are subject to cancellation by the homebuyers.

With respect to the levy of special taxes in Fiscal Year 2023-24, the Developer has obtained building permits for 57 residential lots within the District and these 57 lots have been classified as Developed Property under the Rate and Method (as defined below) for the Fiscal Year 2023-24 Special Tax levy. [The remaining 17 building permits are anticipated to be issued in April of 2023.] See “THE DISTRICT — General Description of the District” and APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” Formation Proceedings. The District was formed by the City pursuant to the Act. The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State of California (the “State”). Any local agency (as defined in the Act) may establish a community facilities district under the Act to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a district and may levy and collect a special tax within such district to repay such indebtedness.

Pursuant to the Act, the City Council of the City (the “City Council”), acting as the legislative body of the District, adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of Special Taxes (defined below) on taxable property within the boundaries of the District, and to have the District incur bonded indebtedness to fund the construction, purchase, modification, expansion, rehabilitation and/or improvement of drainage, water, sewer, library, park, roadway and roadway improvements, aquatic facilities, and other public facilities of the City (the “City Facilities”). Following public hearings conducted pursuant to the provisions of the Act, the City Council adopted resolutions establishing the District and calling special elections to submit the levy of the special taxes and the incurring of bonded indebtedness to the qualified voters of the District. On September 19, 2018, at a special election held pursuant to the Act, 17329, LLC, a Delaware limited liability company, as the sole landowner in the District at the time and therefore the only qualified voter of the District, authorized the District to incur bonded indebtedness within the District in an aggregate principal amount not to exceed $5,000,000 and the levy of Special Taxes (as defined below) to repay such bonded indebtedness in accordance with the Rate and Method of Apportionment for the District (the “Rate and Method”). The Rate and Method is attached hereto as APPENDIX A.

The Assigned Special Tax (as defined in the Rate and Method) is the special tax that will be levied to pay debt service on the Bonds. The Assigned Special Tax is referred to in this Official Statement as the “Special Tax” or the “Special Taxes.”
Appraisal Report. Kitty Siino & Associates, Inc. (the “Appraiser”) has conducted an appraisal of the land within the District subject to the Special Tax (the “Appraisal Report”) with a date of value of February 21, 2023. The Appraisal Report sets forth an estimate of the market value of the fee simple interest of the taxable land and improvements within the District. The Appraiser is of the opinion that, based upon the assumptions and conditions contained in the Appraisal Report, the aggregate value of the property within the District, as of the Date of Value, was $34,014,596. This estimate of value results in an overall District-wide appraised value-toPacket Pg. 1843 3 lien ratio of approximately 9.22* to 1 for the District based on the estimated amount of land secured debt allocated to parcels within the District. See “THE DISTRICT — Appraisal Report,” APPENDIX B — “APPRAISAL REPORT” and “RISK FACTORS — Parity Taxes and Special Assessments.” Sources of Payment for the Bonds
Special Taxes. The Special Tax is that tax which has been authorized to be levied against certain land within the District pursuant to the Act and in accordance with the Rate and Method to satisfy the Special Tax Requirement (as defined in the Rate and Method). “Special Tax Revenues” are defined in the Fiscal Agent Agreement to mean the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” Under the Fiscal Agent Agreement, the District has pledged to repay the Bonds from the Special Tax Revenues (subject to the deposit of certain amounts in the Administrative Expense Fund for each Fiscal Year) and amounts on deposit in the Bond Fund and the Reserve Fund established under the Fiscal Agent Agreement.

Reserve Fund. The Fiscal Agent Agreement establishes a Reserve Fund for the Bonds to be maintained at the Reserve Requirement. The Fiscal Agent Agreement provides that the Reserve Requirement shall, as of the date of calculation, equal the lesser of: (i) ten percent (10%) of the original issue price of the Bonds calculated in accordance with Treasury Regulations Section 1.148-2(f)(1), (ii) Maximum Annual Debt Service on the Bonds or (iii) 125 percent (125%) of average Annual Debt Service on the Bonds (the “Reserve Requirement”). The initial Reserve Requirement for the Bonds is an amount equal to $_______. The ability of the City Council to increase the annual Special Taxes levied in the District to replenish the Reserve Fund is subject to the maximum annual amounts of Special Taxes authorized for the District and certain limitations in the Act. The moneys in the Reserve Fund will be used only for payment of the principal of, and interest and any redemption premium on, the Bonds, and, at the direction of the City, for deposit in the Rebate Fund. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Fund.”
The Special Tax Revenues are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Fiscal Agent in the Bond Fund and the Reserve Fund, to the limited extent described in the Fiscal Agent Agreement. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Fund.” Foreclosure Proceeds. The City will covenant in the Fiscal Agent Agreement, for the benefit of the owners of the Bonds, that it will order, and cause to be commenced, judicial foreclosure proceedings against properties in the District with delinquent Special Taxes in excess of $5,000 by October 1 following the close of the Fiscal Year in which such Special Taxes were due, and if the amount on deposit in the Reserve Fund is less than the Reserve Requirement, it will commence judicial foreclosure proceedings against all properties in the District with delinquent Special Taxes by October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.”
There is no assurance that the property within the District can be sold for the appraised value or assessed values described in this Official Statement, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future property owners within the District. See “RISK FACTORS — Land Values” and APPENDIX B — “APPRAISAL REPORT.” *
Preliminary, subject to change.

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

BUT ARE SPECIAL OBLIGATIONS OF THE CITY AND THE DISTRICT PAYABLE SOLELY FROM

SPECIAL TAX REVENUES AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

No Superior Obligations; No Parity Bonds Except for Refunding. The District and the City covenant in the Fiscal Agent Agreement that they will not issue any other obligations payable, as to principal or interest, from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues superior to or on a parity with the lien of the Bonds, except with respect to the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State, which shall be payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds. See “SOURCES OF PAYMENT FOR THE BONDS — No Superior Obligations; No Parity Bonds Except for Refunding.”
Property Owners Deposit
As an additional source of payment of Special Taxes, the Property Owners deposited $133,797.00 (the “Deposit”) into a special tax fund held by the City. The deposit amount was calculated to approximate the Special Tax levy of the Property Owners based on current ownership for Fiscal Year 2023-24 and Fiscal Year 2024-25.

The deposit will be applied to Special Tax payments of the Property Owner, if there is a delinquency or until a total of 65 homes have been transferred to individual homeowners in the District. Upon the close of escrow of 65 homes to individual homeowners and delivery of a report to the City providing evidence of the property transfers, the City will release any remaining funds in the special tax fund to the Property Owners.

City CFD Administrative Policies and Practices
The City adopted its Local Goals and Policies for all community facilities districts of the City on December 20, 2017. These policies address, among other things, when community facilities district bonds can be issued by the City including the terms and conditions of the community facilities district bonds. Additionally, the City retains a third party community facilities districts administrator to monitor delinquencies and annually prepare the special tax rolls.

Description of the Bonds
The Bonds will be issued and delivered in the form of a single, fully registered Bonds for each maturity, registered in the name of The Depository Trust Company, New York, New York and its successors and assigns, as nominee (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in integral multiples of $5,000, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants. Beneficial Owners will not be entitled to receive physical delivery of the Bonds.

In the event that the book-entry only system described in this Official Statement is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Fiscal Agent Agreement. See APPENDIX G — “INFORMATION CONCERNING DTC.”
Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC, as the registered Owner of the Bonds. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, principal, interest and redemption premium, if any, shall be paid to the registered Owner thereof in accordance with the Fiscal Agent Agreement. See “THE BONDS — Book-Entry Only System” and see APPENDIX G — “INFORMATION CONCERNING DTC.”
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5 Redemption
The Bonds are subject to optional redemption, mandatory redemption prior to maturity from special tax prepayments and mandatory sinking fund redemption as described in this Official Statement. For a more complete description of the Bonds and the documentation pursuant to which they are being sold and delivered, see “THE BONDS” and APPENDIX D — “SUMMARY OF FISCAL AGENT AGREEMENT.” Issuance of Additional Bonds.

The maximum bond authorization within the District is $5,000,000. Following the issuance of the Bonds, no additional bonds can be issued on a parity basis with the Bonds, with the exception of refunding bonds.

Tax Matters
In the opinion of Bond Counsel, subject to certain qualifications described in this Official Statement, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose for computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income tax. For a more complete discussion of such opinion and certain other tax consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see “LEGAL MATTERS — Tax Exemption.”
Professionals Involved in the Offering
U.S. Bank Trust Company, National Association will act as Fiscal Agent under the Fiscal Agent Agreement. Hilltop Securities, Inc. is the Underwriter of the Bonds. Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Best Best & Krieger LLP, Riverside, California (“Bond Counsel”). Certain legal matters will be passed on for the City and the District by the City Attorney’s Office and by Best Best & Krieger LLP, Riverside, California (“Disclosure Counsel”), and for the Underwriter by Kutak Rock LLP, Irvine, California as Underwriter’s Counsel. Other professional services have been performed by Spicer Consulting Group, LLC, Temecula, California, as Special Tax Consultant, Columbia Capital Management, LLC, Carlsbad, California, as Municipal Advisor and Kitty Siino & Associates, Inc., Tustin, California, as Appraiser. At times, Bond Counsel and Disclosure Counsel represent the Underwriter in matters unrelated to the Bonds.

For information concerning the respects in which certain of the above-mentioned professionals, advisors, counsel and agents may have a financial or other interest in the offering of the Bonds, see “LEGAL MATTERS — Financial Interests.”
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the City (the “City Continuing Disclosure Certificate”), the City will agree to provide, or cause to be provided, on an annual basis, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board (the “MSRB”), which can be found at www.emma.msrb.org (“EMMA”), certain financial information and operating data. The City will further agree to provide notice to EMMA of certain enumerated events. These covenants are being made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the “Rule”) adopted by the Securities and Exchange Commission (the “SEC”).

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6 Although the Underwriter does not consider the Property Owners to be an obligated party under the Rule, the Property Owners will agree to provide or cause to be provided to EMMA, pursuant to a Continuing Disclosure Certificate to be executed by the Property Owners (the “Property Owner Continuing Disclosure Certificate”), certain semi-annual information with respect to itself and its development within the District and notice of certain listed events to assist the Underwriter in marketing the Bonds. The Property Owner’s obligations under the Property Owner Continuing Disclosure Certificate will terminate upon the earliest to occur of: (a) the legal defeasance, prior redemption or payment in full of all of the Bonds, or (b) the date on which the Property Owners and its Affiliates (as defined in the Property Owner Continuing Disclosure Certificate), collectively own all or a portion of the Property that represents less than 20% of the aggregate special tax obligation.

See “CONTINUING DISCLOSURE” and APPENDIX E for a description of the specific nature of the annual reports and notices of listed events to be filed by the City, on behalf of the District, under the City Continuing Disclosure Certificate, and semi-annual reports and notices of listed events to be provided by the Property Owners under the Property Owner Continuing Disclosure Certificate.

Bond Owners’ Risks
Certain events could affect the timely repayment of the principal of and interest on the Bonds when due.

See the section of this Official Statement entitled “RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency.

Forward Looking Statements
Certain statements included or incorporated by reference in this Official Statement constitute “forwardlooking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the caption “THE DISTRICT.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN

SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,

UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE

OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,

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

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

Brief descriptions of the Bonds and the Fiscal Agent Agreement are included in this Official Statement.

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

Copies of the Fiscal Agent Agreement, the City Continuing Disclosure Certificate and other documents and information referred to in this Official Statement are available for inspection and (upon request and payment Packet Pg. 1847
7 to the City of a charge for copying, mailing and handling) for delivery from the City at 290 North “D” Street, San Bernardino, CA 92401, Attention: City Manager.

THE FINANCING PLAN
A portion of the Bond proceeds will be used by the District to design, construct and/or acquire certain authorized City Facilities, which includes the upgrade of the City’s makeshift community center mobile unit in the Verdemont area. See “THE DISTRICT — Description of Authorized Facilities” for a description of the public facilities authorized to be financed with the proceeds of the Bonds.

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

Sources of Funds
Principal Amount of Bonds
Minus Net Original Issue Discount
Total Sources
Uses of Funds
Improvement Fund
Reserve Fund
Capitalized Interest Sub-Account
Costs of Issuance Fund(1)
Underwriter’s Discount
Total Uses
(1) Costs of Issuance include legal fees, printing costs, Appraisal Report costs, Municipal Advisor fees, Special Tax Consultant fees, and Fiscal Agent fees, in addition to other miscellaneous costs incidental to Bond issuance.

THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page, payable semiannually on each March 1 and September 1, commencing on September 1, 2023 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in integral multiples of $5,000. See “— Book-Entry Only System.”
Interest shall be calculated on the basis of a 360-day year composed of twelve 30 day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from [Closing Date]; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon or from September 1, 2023, if no interest has previously been paid or made available for payment thereon.

Interest on the Bonds is payable by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, to the registered Owner thereof at such registered Owner’s address as it appears Packet Pg. 1848
8 on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Fiscal Agent prior to any Record Date, interest on such Bonds shall be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request.

Authority for Issuance
The Bonds are issued pursuant to the Act and the Fiscal Agent Agreement. As required by the Act, the City Council has taken the following actions with respect to establishing the District and the Bonds:

Resolutions of Intention and Resolution of Necessity. On August 15, 2018, the City Council adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax therein, and a resolution declaring the necessity to have the District incur bonded indebtedness in an amount not to exceed $5,000,000.

Resolutions of Formation. Following a noticed public hearing conducted on September 19, 2018, the City Council adopted on September 19, 2018, resolutions which established the District, authorized the levy of a special tax within the District, and determined the necessity for the District to incur bonded indebtedness in a maximum aggregate principal amount of $5,000,000.

Resolution Calling Election. The resolutions adopted by the City Council on September 19, 2018, also called for a consolidated special election by the landowners in the District on the issues of the levy of the Special Tax, the incurring of bonded indebtedness within the District, and the establishment of an appropriations limit.

Landowner Election and Declaration of Results. On September 19, 2018, an election was held at which the landowners within the District approved ballot propositions authorizing the issuance of up to $5,000,000 of bonds to finance the construction, purchase, modification, expansion, rehabilitation and/or improvement of drainage, water, sewer, library, park, roadway and roadway improvements, aquatic facilities, and other public facilities of the City, and the establishment of an appropriations limit for the District. The landowners within the District approved ballot propositions authorizing the District to issue bonds in an aggregate principal amount not to exceed $5,000,000 for financing public facilities. On September 19, 2018, the City Council adopted a resolution approving the canvass of the votes and declaring the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness, and to have the established appropriations limit.

Special Tax Lien and Levy. The Notice of Special Tax Lien for the District was recorded in the Office of the County Recorder of the County on September 24, 2018 as Document No. 2018-0350385 reflecting a continuing lien against the taxable property within the District (the “Notice of Special Tax Lien”).

Ordinance Levying Special Taxes. On October 3, 2018, the City Council adopted Ordinance No. MC1507 (the “Ordinance”), which authorized the levy of Special Taxes within the District.

Resolution Authorizing Issuance of the Bonds. On [_______, 2023], the City Council adopted a resolution approving issuance of the Bonds.

Packet Pg. 1849
9 Redemption
Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 20__, or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

Redemption Dates Redemption Prices
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 any day thereafter 100
Mandatory Redemption From Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows:

Redemption Dates Redemption Prices
Any Interest Payment Date through September 1, 20__ 103% March 1, 20__ and September 1, 20__ 102
March 1, 20__ and September 1, 20__ 101
March 1, 20__ and any Interest Payment Date thereafter 100 See the caption “RISK FACTORS—Potential Early Redemption of Bonds from Prepayments or Assessment Bond Proceeds” for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes.

Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on September 1, 20__, September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, on September 1, 20__, September 1, 20__ and September 1, 20__, respectively and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows:

Bonds Maturing on September 1, 20__
Redemption Date
(September 1) Sinking Payments
(Maturity)
Packet Pg. 1850
10 Bonds Maturing on September 1, 20__
Redemption Date
(September 1) Sinking Payments
(Maturity)
Bonds Maturing on September 1, 20__
Redemption Date
(September 1) Sinking Payments
(Maturity)
The amounts in the foregoing schedules shall be reduced by the City pro rata among redemption dates, in order to maintain substantially level Debt Service, as a result of any prior or partial optional or mandatory redemption. The City shall provide the Fiscal Agent with a revised sinking fund schedule.

Purchase of Bonds. In lieu of payment at maturity or redemption under the Fiscal Agent Agreement, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. In such event, the City shall, as may be appropriate, provide to the Fiscal Agent a revised maturity schedule or a revised mandatory sinking fund schedule for the Bonds, or both.

Notice to Fiscal Agent. An Authorized Officer shall give the Fiscal Agent written notice of the City’s intention to redeem Bonds not less than 45 days prior to the applicable redemption date specifying the principal amounts and maturities of the Bonds to be redeemed. The requirement to provide such notice to the Fiscal Agent shall not apply to mandatory sinking fund redemption of the Bonds.

Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the date fixed for redemption, or electronically submitted, to the Securities Depositories and to one or more Information Services selected by an Authorized Officer, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent at its Principal Office; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such Bonds. The Fiscal Agent shall also cause notice of any redemption to be mailed, in such manner and within such time, to the Underwriter.

Such notice shall state the date of such notice, the date of issue of the Bonds, the place or places of redemption, the redemption date, the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed, by giving the individual CUSIP number and Bond number of each Bond to be redeemed, or shall state that all Bonds Packet Pg. 1851
11 between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to any Bond called for redemption in part the portion of the principal of the Bond to be redeemed, shall require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such Bonds will not accrue from and after the redemption date. The cost of the mailing and publication of any such redemption notice shall be paid by the District.

Any notice of optional redemption of the Bonds delivered in accordance with the Fiscal Agent Agreement may be conditional and if any condition stated in the notice of redemption shall not have been satisfied on or prior to the redemption date, said notice shall be of no force and effect and the District shall not be required to redeem such Bonds and the redemption shall not be made and the Fiscal Agent shall within a reasonable time thereafter give notice, to the persons and in the manner in which the notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled.

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

In the event of a mandatory redemption pursuant to the Fiscal Agent Agreement, the City shall transfer or cause to be transferred to the Fiscal Agent for deposit in the Bond Fund moneys in an amount equal to the redemption price of the Bonds being redeemed on or before the 15th day of the month preceding the Interest Payment Date upon which such Bonds are to be redeemed.

If less than all the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of a maturity or any given portion thereof, the Fiscal Agent shall select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot within a maturity in any manner which the Fiscal Agent in its sole discretion shall deem appropriate.

Upon surrender of Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.

Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds called for redemption shall have been deposited in the Bond Fund, such Bonds shall cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and interest shall cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption.

All Bonds redeemed and purchased by the Fiscal Agent pursuant to the Fiscal Agent Agreement shall be cancelled by the Fiscal Agent.

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

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

Transfer or Exchange. Whenever any Bond is surrendered for registration of transfer or exchange, the Fiscal Agent will authenticate and deliver a new Bond or Bonds of the same maturity, for a like aggregate principal Packet Pg. 1852
12 amount of authorized denominations; provided that the Fiscal Agent will not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to Bonds selected for redemption.

Book-Entry Only System
The Bonds will be issued in book-entry form, and The Depository Trust Company of New York, New York 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 Fiscal Agent directly to DTC for distribution to the beneficial owners of the Bonds in accordance with procedures adopted by DTC. See APPENDIX G — “INFORMATION CONCERNING DTC.”
Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming there are no optional redemptions or mandatory redemptions from Special Tax Prepayments pursuant to the Rate and Method. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and “THE BONDS — Redemption.”

ANNUAL DEBT SERVICE SCHEDULE
Bond Year Ending
September 1 Principal Interest
Total Annual
Debt Service
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
Packet Pg. 1853
13 Total
Source: Underwriter.

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

The Special Tax Revenues are the primary security for the repayment of the Bonds. Under the Fiscal Agent Agreement, the City and the District have pledged to repay the Bonds from the Special Tax Revenues (which are the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon) (subject to the deposit of certain amounts in the Administrative Expense Fund for each Fiscal Year) and all moneys deposited in the Bond Fund and the Reserve Fund.

In the event that the Special Tax Revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Fiscal Agent in the Bond Fund and the Reserve Fund for the exclusive benefit of the Owners of the Bonds.

Neither the faith and credit nor the taxing power of the City, the County, the State or any political subdivision thereof is pledged to the payment of the Bonds. Except for the Special Tax Revenues, no other taxes are pledged to the payment of the Bonds. The Bonds are not general obligations of the City or the District, but are special obligations of the City and the District payable solely from Special Taxes and amounts held under the Fiscal Agent Agreement as more fully described in this Official Statement.

Special Taxes
Authorization and Pledge. In accordance with the provisions of the Act, the City Council established the District on September 19, 2018, for the purpose of financing the City Facilities. At a special election held on September 19, 2018, the owner of the property within the District authorized the District to incur indebtedness in an amount not to exceed $5,000,000 and approved the Rate and Method which authorizes the Special Tax to be levied to repay District indebtedness, including the Bonds. On October 3, 2018, the Board adopted Ordinance No. MC-1507, which authorized the levy of Special Taxes in the District.

The District will covenant in the Fiscal Agent Agreement that each year it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds, to replenish the Reserve Fund and to pay the estimated Administrative Expenses. Notwithstanding the foregoing, pursuant to Section 53321(d) of the Act, under no circumstances will the Special Taxes levied against any Assessor’s Parcel used as a private residence be increased as a consequence of delinquency or default by the owner of any other Assessor’s Parcel or Assessor’s Parcels within the District by more than 10%.

The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See “RISK FACTORS — Insufficiency of Special Taxes.” Rate and Method of Apportionment of Special Tax. All capitalized terms used in this section shall have the meaning set forth in APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.”
Packet Pg. 1854
14 Under the Rate and Method, each Fiscal Year, each parcel in the District will be classified as Taxable Property or Exempt Property. In addition, each Assessor’s Parcel of Taxable Property will be classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property.

Assessor’s Parcels of Developed Property shall further 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.

The Maximum Special Tax for each Assessor’s Parcel of Single Family Residential Property in any Fiscal Year shall be the greater of (a) the Assigned Special Tax or (b) the Backup Special Tax. The Maximum Special Tax for each Assessor’s Parcel of Non-Residential Property and Multifamily Residential Property shall be the applicable Assigned Special Tax described in the Rate and Method.

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. In some instances an Assessor’s Parcel of Developed Property may contain more than one Land Use Type. The Maximum Special Tax levied on an Assessor’s Parcel shall be the sum of the Maximum Special Tax for each Taxable Unit for each Unit for all Land Use Categories located on the Assessor’s Parcel.

The Backup Special Tax for an Assessor’s Parcel within a Final Map classified or to be classified as Single Family Property shall be $2,739 per unit. In the event any portion of the Final Map is changed or modified, the Backup Special Tax for all Assessor’s Parcels within such changed or modified area shall be $9,997 per Acre.

The Backup Special Tax shall not apply to Multifamily Residential Property, or Non‐Residential Property. On each July 1, commencing July 1, 2020, the Backup Special Tax rate shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year.

The Maximum Special Tax for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Property shall be the Backup Special Tax computed pursuant to the Rate and Method of Apportionment. The Maximum Special Tax for each Assessor’s Parcel of Approved Property expected to be classified as Multifamily Residential Property or Non‐Residential Property shall be $9,997 per Acre. On each July 1, commencing July 1, 2020, the Maximum Special Tax rate for Approved Property shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year.

The Maximum Special Tax for each Assessor’s Parcel of Undeveloped Property and Provisional Undeveloped Property that is not Exempt Property shall be equal to the product of $9,997 multiplied by the Acreage of such Assessor’s Parcel. On each July 1, commencing July 1, 2020, the Maximum Special Tax rate for Undeveloped and Provisional Undeveloped Property shall be increased by one percent (1.00%) of the amount in effect in the prior Fiscal Year.

Commencing Fiscal Year 2019‐2020 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property in accordance with the following steps:

Step One: The Special Tax shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rates in the Rate and Method to satisfy the Special Tax Requirement.

Step Two: If additional moneys 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 Approved Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Annual Special Tax shall be levied Proportionately on each Assessor’s Parcel of Packet Pg. 1855
15 Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax on each Assessor's Parcel of Developed Property whose Maximum Special Tax is the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to 100% of the Backup Special Tax as needed to satisfy the Special Tax Requirement.

Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the first four steps have been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Notwithstanding the above, the City Council shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 22.53 Acres. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 22.53 Acres will be classified as Provisional Undeveloped Property, and will be subject to Special Tax pursuant to Step Five above.
“Special Tax 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 establish or replenish any reserve funds established in association with the Bonds, (v) an amount equal to any anticipated shortfall due to Special Tax delinquencies, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized by the District provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Undeveloped Property as set forth in Step Three above, less (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture.

However, pursuant to Section 53321(d) of the Act, notwithstanding the above, under no circumstances will the Special Tax levied against any taxable parcel of private residential property within the District be increased by more than 10% as a consequence of a delinquency or default by the owner of any other parcel within the District.

Packet Pg. 1856
16 The District intends to size the Bonds so that, assuming no delinquencies, Special Taxes, levied in accordance with the Rate and Method, will generate in each Fiscal Year beginning in Fiscal Year 2023-24 not less than 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year, plus Administrative Expenses. See Table 1 below. The Special Tax Levy for Fiscal Year 2023-24 will be 110% of the expected bond debt service for Fiscal Year 2023-24. Surplus Special Tax collection in Fiscal Year 2023-24 will be applied to unfunded projects costs or other costs allowable under the Ordinance. In future years the City intends to levy Special Taxes sufficient to only cover bond debt service and administrative costs. In the event of delinquencies, future special tax levies can then be increased up to 10% to cover delinquencies.

TABLE 1

CITY OF SAN BERNARDINO
COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH) SPECIAL TAX RATES FOR FISCAL YEAR 2023-24
Land Use Type
Taxable
Unit
Residential
Floor Area
(S.F..)
Assigned/Maximum
Tax Rates Fiscal
Year
2023-24(1)
Special Tax
Levy Rates
Fiscal Year
2023-24
Percent of
Maximum/
Assigned Rate
No. of
Units
Aggregate
Estimated
Special Taxes
Fiscal Year
2023-24(2)(3)
Percent of
Total
Single Family Residential Property RU Less than 2,500 $2,671.23 $2,671.23 100.00% 7 $18,698.61 9.7% Single Family Residential Property RU 2,500 - 2,800 2,817.96 2,817.96 100.00 22 61,995.02 32.2 Single Family Residential Property RU 2,801 - 3,100 2,891.84 2,891.84 100.00 20 57,836.77 30.0 Single Family Residential Property RU Greater than 3,100 3,009.43 3,009.43 100.00 8 24,075.41 12.5 Approved Property RU N/A 2,850.21 1,758.48 61.70 17 29,894.18 15.5 Multifamily Property Acre N/A 10,402.92 0.00 0.0 0 0.00 0.0 Non-Residential Property Acre N/A 10,402.92 0.00 0.0 0 0.00 0.0 Total 74 $192,500.00 100.0%
(1) Maximum Special Tax Rate for Land Use Type Approved Property and Undeveloped Property. (2) Includes estimated administrative expenses of $25,000. (3) Estimated Special Tax may include rounding.

Source: Spicer Consulting Group, LLC.

Packet Pg. 1857
17 Prepayment of Special Taxes. The City Council may allow property owners to fully or partially prepay the obligation of parcels of Taxable Property to pay the Special Taxes with respect to the Special Tax Requirement.

Additionally, the City will covenant in the Fiscal Agent Agreement that the City shall cause all applications of owners of property in the District to prepay and satisfy the Special Tax obligation for their property to be reviewed by the Tax Consultant and shall not accept any such prepayment unless such consultant certifies in writing that following the acceptance of the proposed prepayment by the City and the redemption of Bonds with such prepayment, the maximum amount of the Special Taxes that may be levied on all Taxable Property in the District following such prepayment will be at least 1.10 times Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption plus estimated Administrative Expenses. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” and “THE BONDS — Redemption — Mandatory Redemption from Special Tax Prepayments.” Collection and Application of Special Taxes. The Special Taxes are collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. The District may, however, collect the Special Taxes at a different time or in a different manner if necessary to meet its financial obligations.

Covenants to Protect Special Tax Rates. The City will make certain covenants in the Fiscal Agent Agreement for the purpose of ensuring that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative Expenses when due. The City will covenant that it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates (the “Maximum Rates”) on then existing Developed Property in the District below the amounts which are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds. For purposes of such calculation, “Developed Property” has the meaning set forth in the Rate and Method. See “RISK FACTORS — Voter Initiatives.” The City will further covenant that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIII C of the California Constitution, which purports to reduce or otherwise alter the Maximum Rates, it will commence and pursue legal action seeking to preserve its ability to comply with the covenant described above.

The City will covenant not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant certifying that accepting such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Outstanding Bonds following such tender. See “RISK FACTORS — Non-Cash Payments of Special Taxes.” Although the Special Taxes constitute liens on taxable parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in the District. See “RISK FACTORS — Parity Taxes and Special Assessments.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described in the section of this Official Statement entitled “RISK FACTORS.” Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of land within the District resulting from a landowner’s failure to pay the Special Taxes when due are included within the Special Tax Revenues pledged to the payment of principal of and interest on the Bonds under the Fiscal Agent Agreement.

Pursuant to Section 53356.1 of the Government Code, the City will covenant in the Fiscal Agent Agreement with and for the benefit of the Owners of the Bonds that (i) it will order, and cause to be commenced, Packet Pg. 1858
18 judicial foreclosure proceedings against properties in the District with delinquent Special Taxes in excess of $5,000 by October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) if the amount on deposit in the Reserve Fund is less than the Reserve Requirement it will commence judicial foreclosure proceedings against all properties in the District with delinquent Special Taxes by October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount, which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings. See APPENDIX D — “SUMMARY OF FISCAL AGENT AGREEMENT.”
If foreclosure is necessary and other funds (including amounts in the Reserve Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See “RISK FACTORS — Bankruptcy and Foreclosure.” Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See “RISK FACTORS — Land Values.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.

No Teeter Plan. Although the County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and Tax Sale Proceeds (the “Teeter Plan”), which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments.

Special Tax Fund
Pursuant to the Fiscal Agent Agreement, there will be established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Special Tax Fund” (the “Special Tax Fund”) to the credit of which the City will deposit, not later than 10 Business Days after receipt, all Special Tax Revenues received by the City.

Moneys in the Special Tax Fund and all accounts therein will be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, will be disbursed as provided below and, pending disbursement, will be subject to a lien in favor of the Owners of the Bonds. Notwithstanding the foregoing, any amounts received by the City which constitute Special Tax Prepayments will be transferred by the City not later than 10 business days after receipt to the Fiscal Agent for deposit by the Fiscal Agent in the “Special Tax Prepayments Account” established pursuant to the Fiscal Agent Agreement.

As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than 10 Business Days after such receipt, the Fiscal Agent will withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund, an amount which is estimated by the City, in a written communication from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely) to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year; provided, however, that the amount deposited in the Administrative Expense Fund prior to the deposits to the Interest Account and the Principal Account of the Bond Fund, as provided below, will not exceed $25,000 for each Fiscal Year. Thereafter, the Fiscal Agent shall deposit in the Interest Account and the Principal Account of the Bond Fund the amounts required by the Fiscal Agent Agreement, as described under “— Bond Fund” below. If after such deposits are made to the Administrative Expense Fund, the Interest Account and the Principal Account there are funds remaining on deposit in the Special Packet Pg. 1859
19 Tax Fund, the City shall instruct the Fiscal Agent by an Officer’s Certificate (upon which the Fiscal Agent may conclusively rely) to transfer such amount from the Special Tax Fund to the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement.

On September 2 of each year, the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Bond Fund (including the Principal Account therein but excluding the Interest Account and the Special Tax Prepayments Account), as determined by the City, shall not exceed the greater of (i) one year’s earnings on such amounts, or (ii) 1/12th of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Bond Fund (other than such excluded amounts), exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys shall be transferred from the Special Tax Fund to the Administrative Expense Fund to pay any additional Administrative Expenses during the then current Fiscal Year, as directed in writing by the City. The Fiscal Agent shall have no obligation to monitor the City’s obligations as set forth in the foregoing sentence. Subject to the requirement described above, on each September 2, commencing September 2, 2024, any funds remaining in the Special Tax Fund which are not needed to pay principal and/or interest on the Bonds then due and payable may be retained in the Special Tax Fund to reduce the Special Taxes levied in future years (subject to the limitations set forth in the Rate and Method).

Moneys in the Special Tax Fund will be invested and deposited in accordance with the Fiscal Agent Agreement. Investment Earnings will be retained in the Special Tax Fund to be used for the purposes of such fund to the extent set forth in the Fiscal Agent Agreement. See APPENDIX D — “SUMMARY OF FISCAL AGENT AGREEMENT.”
Bond Fund
Pursuant to the Fiscal Agent Agreement, there will be established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2018-2 of the City of San Bernardino 2023 Special Tax Bonds Bond Fund” (the “Bond Fund”) and within the Bond Fund, an Interest Account, a Principal Account and a Special Tax Prepayments Account. Moneys in the Bond Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.

On or before each Interest Payment Date, the Fiscal Agent shall transfer from the Special Tax Fund and deposit into the following respective accounts in the Bond Fund, the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Special Tax Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:

Interest Account. On or before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on the Bonds on such date. No deposit need be made into the Interest Account on any Interest Payment Date if the amount on deposit therein is at least equal to the interest becoming due and payable on the Bonds on such date. All moneys in the Interest Account, including the Capitalized Interest Sub-Account, shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity). All funds in the Capitalized Interest Sub-Account shall be used and withdrawn to pay interest on the Bonds prior to using any other funds on deposit in the Interest Account for such purpose. All amounts on deposit in the Interest Account on the first day of any Bond Year, to the extent not required to pay any interest then having become due and payable on the Outstanding Bonds, shall be withdrawn therefrom by the Fiscal Agent and transferred to the Special Tax Fund.

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20 Principal Account. On or before each Interest Payment Date which occurs on September 1, the Fiscal Agent shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds becoming due and payable on such date, or the redemption price of the Bonds (consisting of the principal amount thereof and any applicable redemption premium) required to be redeemed on such date pursuant to the Fiscal Agent Agreement. All moneys in the Principal Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of (i) paying the principal of the Bonds at the maturity thereof, or (ii) paying the principal of and premium (if any) on any Bonds upon the redemption thereof pursuant to the Fiscal Agent Agreement. All amounts on deposit in the Principal Account on the first day of any Bond Year, to the extent not required to pay the principal of any Outstanding Bonds then having become due and payable, shall be withdrawn therefrom by the Fiscal Agent and transferred to the Special Tax Fund.

In the event that moneys on deposit in the Special Tax Fund will be insufficient on any Interest Payment Date for the Fiscal Agent to deposit the required amounts in the Interest Account and the Principal Account, as provided above, the Fiscal Agent shall deposit the available funds first to the Interest Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount of interest becoming due and payable on the Bonds on the Interest Payment Date, and shall then deposit the remaining available funds in the Special Tax Fund to the Principal Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount, if any, of principal becoming due and payable on the Bonds on the Interest Payment Date. If, after making such deposits to the Interest Account and the Principal Account, and after transferring moneys from the Reserve Fund to such accounts, as provided in the Fiscal Agent Agreement, the amount on deposit in the Principal Account is insufficient to pay the full amount of the principal of each of the Bonds which is due or is to be redeemed on the Interest Payment Date, the Fiscal Agent shall make a prorated payment of the principal of each of such Bonds as specified in an Officer’s Certificate provided to the Fiscal Agent.

Reserve Fund
In order to secure further the payment of principal of and interest on the Bonds, the District will, upon delivery of the Bonds, deposit in the Reserve Fund and thereafter to maintain in the Reserve Fund an amount equal to the Reserve Requirement. The Fiscal Agent Agreement provides that the amount in the Reserve Fund shall equal the lesser of: (i) 10% of the original issue price of the Bonds calculated in accordance with Treasury Regulations Section 1.148-2(f)(1); (ii) Maximum Annual Debt Service on the Bonds; or (iii) 125% of average Annual Debt Service on the Bonds. Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of the principal of and interest and any premium on the Bonds and shall be subject to a lien in favor of the Owners of the Bonds.

Subject to the limits on the maximum annual Special Tax which may be levied within the District, as described in the Rate and Method, the City will covenant to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Fund at the Reserve Requirement. The ability of the legislative body of the District to increase the annual Special Taxes levied in the District to replenish the Reserve Fund is additionally subject to certain additional limitations under the Act restricting the amount by which Special Taxes on taxable parcels can be increased due to delinquencies of other taxable parcels.

Except as otherwise provided in the Fiscal Agent Agreement, all amounts on deposit in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Interest Account and the Principal Account of the Bond Fund in the event of any deficiency at any time in either of such accounts of the amount then required for payment of the principal of and interest and any premium on the Bonds or, in accordance with the provisions of the Fiscal Agent Agreement for the purpose of redeeming Bonds as described below.

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21 Whenever, on any September 2, the amount in the Reserve Fund, less Investment Earnings resulting from the investment of the funds therein which pursuant to the Fiscal Agent Agreement must be rebated to the United States, as previously directed by the City, exceeds the Reserve Requirement, as calculated by the City, the Fiscal Agent shall provide written notice to the City of the amount of the excess. Upon receiving written direction from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), the Fiscal Agent shall, subject to the requirements of the Fiscal Agent Agreement, transfer an amount from the Reserve Fund which will reduce the amount on deposit therein to an amount equal to the Reserve Requirement to the Interest Account and the Principal Account, in such order, to be used for the payment of the interest on and principal of the Bonds on the next succeeding Interest Payment Date in accordance with the Fiscal Agent Agreement.

Whenever the balance in the Reserve Fund is equal to or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall, upon receiving written direction from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), transfer the amount in the Reserve Fund to the Interest Account and the Principal Account, in the priority specified in the Fiscal Agent Agreement, to be applied, on the next succeeding Interest Payment Date, to the payment and redemption, in accordance with the Fiscal Agent Agreement, of all of the Outstanding Bonds. In the event that the amount available to be so transferred from the Reserve Fund to the Interest Account and the Principal Account exceeds the amount required to pay and redeem the Outstanding Bonds, the excess shall be transferred to the City to be used for any lawful purpose of the City.

In the event of a prepayment of Special Taxes, under certain circumstances, a portion of the Reserve Fund will be credited to the amount being prepaid and be applied to redeem Bonds. See APPENDIX D — “SUMMARY OF FISCAL AGENT AGREEMENT.”
No Superior Obligations; No Parity Bonds Except for Refunding The District and the City covenant in the Fiscal Agent Agreement that they will not issue any other obligations payable, as to principal or interest, from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues superior to or on a parity with the lien of the Bonds, except with respect to the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State, which shall be payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds.

THE DISTRICT
The information about the Property Owners and Developer contained in this section of the Official Statement entitled “THE DISTRICT” has been provided by representatives of the Developer and Property Owners and has not been independently confirmed or verified by the Underwriter, the City or the District. None of the Underwriter, the City or the District makes any representation as to the accuracy or adequacy of the information contained in this section. There may be material adverse changes to this information after the date of this Official Statement.

No assurance can be given that the proposed development within the District will occur as described below. As the proposed development progresses and homes 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 within the District will occur in a timely manner or in the configuration described herein, or that any property owner described herein will obtain or retain ownership of any of the land within the District. The Bonds and the Special Taxes are not personal obligations of any property owners, including the Property Owners and, in the event that a property owner defaults in the payment of the Special Taxes, the City may proceed with judicial foreclosure but has no direct recourse to the assets of any property owner. As a result, other than as provided herein, no financial statements or information is, or will be, provided about the Property Owners or any other property owner. The Packet Pg. 1862
22 Bonds are secured solely by the Special Tax Revenues and other amounts pledged under the Fiscal Agent Agreement. See “SOURCES OF PAYMENT FOR THE BONDS” and “RISK FACTORS.” The information under this of the Official Statement includes forward-looking statements. See the cautionary information regarding forward-looking statements in this Official Statement on the page immediately preceding the Table of Contents. As previously discussed, such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which only speak as of the date of this Official Statement.

General Description of the District
The District contains approximately 30.66 gross acres and 20.54 developable acres, located in the City, north of the Meyers Road and Magnolia Avenue Intersection. The District is included within Tract Maps Nos. 17329-1, 17329-2, and 17329-3 and is planned for 74 single-family residential homes at buildout in a neighborhood being marketed as “Verdemont Ranch”.

SB17329 acquired the property in the District in 2013 and transferred Tract Nos. 17329-2 and 17329-3 to Verdemont on October 13, 2021. The Developer plans to construct 74 single-family residential homes with floor plans (including ADU square footage) ranging in size from approximately 2,224 square feet to approximately 3,248 square feet.

The following table summarizes the ownership and development status within the District as of March 27, 2023.

Property Owner
Completed
Homes
Under
Construction
Finished
Lots
Individual Owner 30 0 0
Property Owners 26 0 18
TOTAL: 56 0 18
Source: The Property Owner.

Description of Authorized Facilities
The City Facilities authorized to be financed from Bond proceeds consist of construction, purchase, modification, expansion, rehabilitation and/or improvement of drainage, water, sewer, library, park, roadway and roadway improvements, aquatic facilities, and other public facilities of the City, which includes the upgrade of the City’s makeshift community center mobile unit in the Verdemont area.

The Developer
As previously defined in this Official Statement as the “Developer,” JEC Enterprises, Inc., a California corporation doing business as GFR Homes is 100% owned by Felizardo Robles, Jr., who is President of the company. The Developer is a privately held land and real estate development company, which identifies acquisitions, performs due diligence, navigates the entitlement process, and performs construction and project management.

The Developer’s principals include:

Felizardo Robles, Jr. is the Developer’s founder and President. In 1976, Mr. Robles acquired his Real Estate License and in 1982 created Golden West Investments, a real estate brokerage company, followed in 1988 by Golden Pacific Industries, a real estate development company. In 1995, Mr. Robles founded the Developer.

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23 Mr. Felizardo Robles is a 1976 graduate of California Polytechnic University, Pomona and holds Real Estate Broker and General Contractor licenses.

Arlene Anaya is in charge of managing all projects for the Developer and its finances. Prior to joining GFR Homes, Ms. Anaya was with National Community Renaissance as their Senior Vice President of Property Management and Compliance, where she worked in the fields of finance, operations, and real estate development.

Ms. Anaya is a graduate of California State University - Los Angeles with a Bachelor of Science Degree in Business Administration, with an emphasis in Accounting. Ms. Anaya is a current member of the National Association of Women in Construction and is also a Notary of California.

Jonathon Siemsen is the Developer’s project manager. Mr. Siemsen has worked in the Inland Empire residential development market for 30 years. After graduating from Cal Poly Pomona with a Bachelor of Science degree in Urban and Regional Planning, he started his career as a Forward Planner and Land Acquisition associate.

The Development
The property within the District is expected to be developed with 74 single-family detached homes in a neighborhood being marketed as “Verdemont Ranch” with floor plans (including ADU square footage) ranging in size from approximately 2,224 square feet to approximately 3,248 square feet. Infrastructure within the District has been completed. Construction on Tract Nos. 17329-1, 17329-2 and 17329-3 are complete.

As of the Date of Value, 28 of the 74 planned single family residential homes had been completed and conveyed to individual homeowners. Of the remaining 46 residential lots, 15 were lots over 95% completed, including 3 model homes (not released for sale) and 12 production homes (8 of which are in escrow). There were an additional 13 lots under construction (5 of which are in escrow) and 18 remaining finished lots (none of which are in escrow or under construction). As of March 27, 2023, an additional 2 homes closed escrow to individual homeowners, resulting in 30 homes conveyed to individual homeowners. Of the remaining 44 residential lots owned by the Property Owners, there are 3 completed model homes (0 of which were in escrow), 23 production homes (14 of which are in escrow), and 18 finished lots without any home construction thereon 0 of which are in escrow). Homes under contract may not result in closed escrows as sales contracts are subject to cancellation by the homebuyers.

With respect to the levy of special taxes in Fiscal Year 2023-24, the Developer obtained building permits for 57 lots within the District and these 57 lots have been classified as Developed Property under the Rate and Method for the Fiscal Year 2023-24 Special Tax levy. [The remaining 17 building permits are anticipated to be issued in April of 2023.] See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX. The Developer expects to complete home construction by September 2023.

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24 A summary of the proposed development status for the Project, including estimated square footage and estimated base sales prices for the property being developed by the Developer within the District, as of March 27, 2023, is set forth below:

TABLE 2
Verdemont Ranch – Development Status
(as of March 27, 2023)
Expected
Number of
Homes at
Buildout
Estimated
Square
Footage
Closed to
Individual
Homeowners
Completed
Homes Owned
by Developer
Homes
Under
Construction
Owned by
Developer
Finished Lots
Owned by
Property
Owner(1)
Estimated
Base Sales
Price
1 w/ Det. ADU 8 2,224 4 3 0 1 $745,900
2 w/ Det. ADU 19 2,595 7 5 0 7 800,900
3 w/ Det, ADU 15 2,864 7 2 0 6 830,900
3a w/ Att, ADU 11 2,679 4 6 0 1 795,900
4 w/ Det. ADU 9 3,248 4 4 0 1 855,900
4a w/ Att. ADU 12 3,063 4 6 0 2 819,900
Total 74 30 26 0 18
(1) Lot 20 of Tract Map No. 17329-1 is a finished lot (model parking) and completed ADU (sales office). Lot 20 is counted as a finished lot only above. All other models counted as completed homes owned by the Property Owner.

Source: The Developer.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Official Statement. The original development schedule was delayed in late 2022 and in early 2023 due to weather related and construction financing issues. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. The Developer continuously evaluates its product lines and prices in light of the then current market conditions. See “RISK FACTORS” herein for a discussion of risk factors.

Status of Entitlement Approvals. The Developer believes all discretionary approvals required for the development of the Project have been obtained.

Environmental Review. The Project as currently planned has undergone all required environmental and biological review and the necessary environmental approvals for the development of the entire property have been obtained. A Geotechnical Investigation was prepared for the Tract No. 17329 property by CHJ Incorporated on May 6, 2004. An updated Geotechnical Report was subsequently prepared by John R. Byerly in 2018. GeoTek, Inc. issued a Supplemental Geotechnical Evaluation on June 13, 2019. A Phase 1 Environmental Site Assessment was conducted on the Property in September 2018. The reports concluded that development of the site was feasible however mitigation measures were recommended. The Developer has addressed the mitigation measures included in the reports.

Increasing Mortgage Interest Rates.

Most of the purchasers of the 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 the Developer’s 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 Developer’s rate of home order cancellations. An increase in the level of such cancellations could Packet Pg. 1865
25 similarly have a negative impact on the estimated absorption rates of Developer’s planned for-sale homes in the District.

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 the Developer can complete the remaining future 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 Project in the District and the real estate market in general cannot be predicted.

Financing Plan. Through March 27, 2023, the Developer had expended approximately $14 million on the Project. The Developer expects to incur approximately $1.1 million on remaining improvements, between March 27, 2023, and the full buildout of the Project by September 2023.

The Developer obtained a loan from Homestreet Bank on March 2, 2021 for Tract No. 17329-1, which has been paid in full as of December 2022. The Developer obtained a loan from Banner Bank on October 22, 2021 and the current balance of the loan as of March 28, 2023 is $653,194. The Developer believes that it will have sufficient funds available to complete its planned development as described in this Official Statement.

The following table is a summary of the Developer’s estimated sources and uses of funds for its project in the District.

COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO

DEVELOPER PROJECTED SOURCES AND USES OF FUNDS
Expended Costs as of
March 28, 2023 Remaining Costs Total
Sources of Funds:

Developer Equity $ 6,417,796.22 $ 0.00 $ 6,417,796.22
Homestreet Bank 3,295,000.00 0.00 3,295,000.00
Banner Bank 4,651,643.78 1,148,356.22 5,800,000.00
Total: $14,364,440.00 $1,148,356.22 $15,512,796.22
Uses of Funds:

Engineering, Architects, Consulting $ 1,343,602.00 $ 0.00 $ 1,343,602.00 Site Development 8,896,501.00 0.00 8,896,501.00
Common Area and Landscaping 436,094.00 13,929.00 450,023.00 Permits Fees 3,688,243.00 0.00 3,688,243.00
Streets 0.00 159,638.22 159,638.22
Sidewalks & Approaches 0.00 90,277.00 90,277.00
Dry Utilities 0.00 534,512.00 534,512.00
Retaining and Interior Walls 0.00 350,000.00 350,000.00 Total: $14,364,440.00 $1,148,356.22 $15,512,796.22
Source: The Developer.

Although the Developer expects to have sufficient funds available to complete its development in the District, commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs within the District will be available to the Developer when needed. While the Developer has made such internal funding available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future.

Neither the Developer, nor any other entity or person is under any legal obligation of any kind to expend funds Packet Pg. 1866
26 for the development of and construction of homes on the Property Owner’s property in the District or the payment of ad valorem property taxes or the Special Taxes. Any contributions by the Developer or any other entity or person to fund the costs of such development are entirely voluntary.

If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by the Developer within the District and other financing by the Developer is not put into place, there could be a shortfall in the funds required to complete the proposed development by the Developer in the District and the remaining portions of the project in the District may not be completed. There is no legal obligation to Bond holders to make any such funds available for land development, construction, or the payment of ad valorem property taxes or the Special Taxes. See “RISK FACTORS” herein for a discussion of risk factors.

Overlapping Community Facilities Districts
The principal of and interest on the Bonds are payable from the Special Tax authorized to be collected within the District, and payment of the Special Tax is secured by a lien on certain real property within the District.

Such lien is co-equal to and independent of the lien for general taxes and any other liens imposed under the Act, regardless of when they are imposed on the property in the District. The imposition of additional special taxes, assessments and general property taxes will increase the amount of independent and co-equal liens which must be satisfied in foreclosure. The City, the County and certain other public agencies are authorized by the Act to form and have formed other community facilities districts and improvement areas and, under other provisions of State law, to form special assessment districts, either or both of which could include all or a portion of the land within the District. See “-Estimated Direct and Overlapping Indebtedness.” The City has two overlapping community facilities districts for annual public safety and maintenance expenses.

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27 Estimated Direct and Overlapping Indebtedness
Within the boundaries of the District are other overlapping local agencies providing public services. The approximate amount of the direct and overlapping debt on the parcels within the District as of March 1, 2023, is shown in Table 3 below.

TABLE 3
COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO

DIRECT AND OVERLAPPING DEBT
As of March 1, 2023
I. Appraisal Value(1) $34,014,596
II. Land Secured Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt
Type Issued Outstanding % Applicable
Amount
Applicable
CITY OF SAN BERNARDINO CFD NO. 2018-2, SERIES 2023 CFD $2,855,000 $2,855,000 100.000% $2,855,000 TOTAL LAND SECURED BONDED DEBT $2,855,000
III. General Obligation Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt
Type Issued Outstanding % Applicable
Amount
Applicable
SAN BERNARDINO UNIFIED SCHOOL DISTRICT GO $372,980,000 $319,828,323 0.161% $ 514,304 SAN BERNARDINO COMMUNITY COLLEGE GO 989,999,797 857,585,469 0.037 319,293 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT $ 833,598 Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued % Applicable(2) Applicable SAN BERNARDINO UNIFIED SCHOOL DISTRICT GO $440,000,000 $67,020,000 0.161% $ 107,772 SAN BERNARDINO COMMUNITY COLLEGE GO 1,160,000,000 170,000,203 0.037 63,294 CITY OF SAN BERNARDINO CFD NO. 2018-2, SERIES 2023(3) CFD 5,000,000 0 100.000 0 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS $ 171,066 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $1,004,664 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $3,688,598 TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT OVERLAPPING INDEBTEDNESS $3,859,664 IV. Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 11.91:1
Total Outstanding Bonded Debt 9.22:1
(1) Represents the appraised value as set forth in the Appraisal Report, as of the Date of Value. (2) Calculated by dividing the appraised value by the total assessed value for Fiscal Year 2023-24. (3) Following the issuance of the Bonds, no additional bonds can be issued on a parity basis with the Bonds, with the exception of refunding bonds.

Source: San Bernardino County Assessor’s Office, Spicer Consulting Group, LLC.

Expected Tax Burden
Based on the appraised values within the District set forth in the Appraisal Report, the projected debt service on the Bonds, and estimated District Administrative Expenses of $25,000 for Fiscal Year 2023-24, the City expects that, in Fiscal Year 2023-24, the projected effective tax rates levied on taxable property in the District, will range from approximately 1.80% to 1.86% of average appraised value of homes within each Land Use Category (as defined in the Rate and Method). Subject to the limitations established by the Rate and Method and the provisions of the Act, the City Council will covenant in the Fiscal Agent Agreement to levy Special Taxes on parcels of taxable property in the District in each Fiscal Year in an amount sufficient to pay debt service on the outstanding Bonds.

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28 Table 4 below describes the estimated Fiscal Year 2023-24 effective tax burden for sample units of Developed Property within the District. The estimated tax rates and amounts presented in this Official Statement are based on currently available information. The actual amounts charged may vary and may increase in future years depending on the amount of Bonds, and the number of delinquencies in the District, among other factors.

TABLE 4
COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO
PROJECTED FISCAL YEAR 2023-24 EFFECTIVE TAX OBLIGATION

FOR SAMPLE DEVELOPED PROPERTY
Tract 17329
Plain Type 1 Det. ADU 2 Det. ADU 3 Att. ADU 3 Det. ADU 4 Att. ADU 4 Det. ADU CFD Tax Category Less than 2,500 to 2,500 to 2,801 to 2,801 to Greater than 2,500 S.F. 2,800 S.F. 2,800 S.F. 3,100 S.F. 3,100 S.F. 3,100 S.F.

Home Size 2,224 2,595 2,679 2,864 3,063 3,248
Appraisal Value(1) $633,840 $700,650 $709,935 $730,320 $719,805 $763,280 Ad Valorem Property Taxes:

General Purpose $6,338 $7,007 $7,099 $7,303 $7,198 $7,633 San Bernardino Unified School (0.08780%) 557 615 623 641 632 670 San Bernardino Community College (0.0450%) 285 315 319 329 324 343 San Bernardino Valley Municipal Water District
(0.1300%) 824 911 923 949 936 992
Total General Property Taxes $8,004 $8,848 $8,965 $9,222 $9,090 $9,639 Assessment, Special Taxes & Parcel Charges: (3)
County Fire Protection District Services Zone FP-5 $167 $167 $167 $167 $167 $167 San Bernardino Vector Control District 6 6 6 6 6 6
City of San Bernardino CFD 2018-1 Safety Services 385 385 385 385 385 385 City of San Bernardino CFD 2019-1 Maintenance
Services 550 550 550 550 550 550
City of San Bernardino CFD 2018-2 (Verdemont
Ranch)(2) 2,671 2,818 2,818 2,892 2,892 3,009
Total Assessments & Special Taxes $3,779 $3,926 $3,926 $4,000 $4,000 $4,117 Projected Total Property Tax $11,783 $12,773 $12,891 $13,222 $13,089 $13,756 Projected Effective Tax Rate 1.86% 1.82% 1.82% 1.81% 1.82% 1.80% (1) Reflects the appraised value based as of the Date of Value and ownership. (2) Reflects estimated Fiscal Year 2023-24 Special Tax levy based on development as of March 1, 2023 and includes priority Administrative Expenses in the amount of $25,000.
(3) Reflects estimated Fiscal Year 2023-24 Special Tax rates for tax bill items.

Source: San Bernardino County Assessor’s Office; Spicer Consulting Group, LLC.

Appraisal Report
In order to provide information with respect to the value of the property within the District, the County engaged Kitty Siino & Associates, Inc., the Appraiser, to prepare the Appraisal Report. The Appraiser has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City or the owners of the land within the District other than the relationship represented by the engagement to prepare the Appraisal Report. The City instructed the Appraiser to prepare its analysis and report in conformity with the Uniform Standards of Professional Appraisal Practice and the appraisal standards of the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as APPENDIX B — “APPRAISAL REPORT” to this Official Statement.

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29 The purpose of the Appraisal Report was to estimate the market value of the fee simple interest of the property within the District subject to the Special Tax levy. The estimate of market value assumes that all improvements and benefits to the subject properties, which are to be funded with the proceeds of the Bonds are completed and in place.

Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of the Date of Value, the appraised value of the property within the District subject to the Special Tax lien was $34,014,596. The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in APPENDIX B. The City makes no representation as to the accuracy of the Appraisal Report. See APPENDIX B — “APPRAISAL REPORT.” There is no assurance that the property within the District can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “RISK FACTORS — Land Values” and APPENDIX B — “APPRAISAL REPORT.” Estimated Value-to-Lien Ratio
The appraised value of the property within the District as of the Date of Value is $34,014,596. Dividing the appraised value by the principal amount of the Bonds results in value to lien ratio of 11.91* to 1 for the District.

The ratio for total outstanding bonded debt including overlapping debt is 9.22* to 1 for the District. However, additional land-secured special tax or assessment debt could be applicable to the parcels within the District in the future. See “RISK FACTORS — Parity Taxes and Special Assessments.” *
Preliminary, subject to change.

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30 Table 5 below reflects the values assigned to parcels in the Appraisal Report, the estimated principal amount of the Bonds and the estimated appraised value-to-lien ratios in the District, based on the estimated Fiscal Year 2023-24 Special Tax levy, categorized by property ownership. The Property Owner, as owner of 46 of the 74 lots within the District (29 of which will be classified as Developed Property under the Rate and Method, as of March 1, 2023 for purposes of the Fiscal Year 2023-24 Special Tax levy), is responsible for the payment of 58.50% of the Fiscal Year 2023-24 Special Tax levy.

See “RISK FACTORS - Concentration of Ownership.” [As of May 1, 2023, additional units were sold to individual property owners and the Property Owners own ___ of the 74 lots within the District and is responsible for the payment of ___% of the Fiscal Year 2023-24 Special Tax levy.] TABLE 5
COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO
ESTIMATED VALUE-TO-LIEN RATIOS FOR FISCAL YEAR 2023-24

ALLOCATED BY PROPERTY OWNERSHIP
(As of March 1, 2023)
Property Owner
No. of
Units
Appraised
Property Value(2)
Percentage of
Appraised Value
Maximum
Special Tax
Percentage of
Maximum
Special
Tax Levy
Estimated
Fiscal Year
2023-24 Levy(3)
Percentage of
Estimated
Fiscal Year
2023-24 Levy
CFD 2018-2
Proposed
2023 Bonds(4)
All Other
Overlapping
Debt Issued
Appraised
Value-toLien Ratio
Developed Individually Owned 28 $19,922,930 58.57% $ 80,901 37.98% $ 79,894 41.50% $1,184,928 $346,653 13.01:1 Developed – SB17329 Owned(1) 6 2,919,069 8.58 17,185 8.07 16,909 8.78 250,777 73,365 9.01:1 Developed – Verdemont Owned(2) 23 7,696,731 22.63 66,483 31.21 65,803 34.18 975,929 285,510 6.10:1 Subtotal Developed 57 $30,538,730 89.78% $164,568 77.25% $162,606 84.47% $2,411,634 $705,528 9.80:1 Approved – Verdemont Owned(3) 17 3,475,866 10.22% 48,454 22.75% 29,894 15.53% 443,366 129,707 6.07:1 Subtotal Property Owner Owned 17 $ 3,475,866 10.22% $ 48,454 22.75% $ 29,894 15.53% $ 443,366 $129,707 6.07:1 Total 74 $34,014,596 100.00% $213,022 100.00% $192,500 100.00% $2,855,000 $835,236 9.22:1 (1) Reflects appraised value for 4 model homes, 12 lots over 95% complete, 13 homes under construction owned by the SB17329, which have building permits issued and are therefore considered developed according the Rate and Method.
(2) Reflects the appraised value, as of the Date of Value. (3) Estimated Fiscal Year 2023-24 Special Tax Levy based upon development status as of March 1, 2023 and preliminary debt service with administration of $25,000. (4) Includes the principal amount of the Bonds. Responsibility of the principal amount of the Bonds has been allocated based on the projected Fiscal Year 2023-24 Special Tax levy based on development status as of March 1, 2023.

Source: San Bernardino County Assessor’s Office; Spicer Consulting Group, LLC.

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31 Table 6 below sets forth the appraised value-to-lien ratios for the parcels of Taxable Property in the District by value-to-lien ranges based on the projected Fiscal Year 2023-24 Special Tax levy and development status as of the Date of Value. Since the Date of Value, the Property Owners have conveyed additional homes to individual homeowners and has commenced construction of additional homes within the District. See “THE DISTRICT – The Development.”
TABLE 6
COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH)

OF THE CITY OF SAN BERNARDINO

VALUE-TO-LIEN STRATIFICATION FOR DEVELOPED PROPERTY ONLY Value-to Lien Category No. of Units
Percentage
of Units
Appraised
Value(1)
Percentage of
Appraised
Value
CFD 2018-2
Estimated
Fiscal Year
2023-24 Levy
Percent Share
of Estimated
Fiscal Year
2023-24 Levy
CFD 2018-2
Proposed
2023 Bonds(2)
Percent Share
of Proposed
2023 Bonds
All Other
Overlappi
ng Debt
Aggregate
Value-to-Lien
Less than 3.00:1(3) 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 N/A Between 3.01:1 to 6.00:1 14 18.92 2,862,478 8.42 40,352 20.96 598,460 20.96 175,081 3.70:1 Between 6.01:1 to 9.00:1 20 27.03 4,840,774 14.23 37,908 19.69 562,218 19.69 164,478 6.66:1 Between 9.01:1 to 12.00:1 11 14.86 5,718,374 16.81 31,454 16.34 466,505 16.34 136,477 9.48:1 Greater than 12.01:1(3) 29 39.19 20,592,970 60.54 82,786 43.01 1,227,817 43.01 359,200 12.98:1 Total 74 100.00% $34,014,596 100.00% $192,500 100.00% $2,855,000 100.00% $835,236 9.22:1 (1) Reflects the appraised value as of the Date of Value and ownership information. (2) Responsibility of the par amount has been allocated based on the estimated Fiscal Year 2023-24 Special Tax levy, with development status as of March 1, 2023 and preliminary bond sizing as provided by the Underwriter. (3) The minimum value to lien in the 3.00:1 to 6.00:1 category is 3.54:1. The maximum value to lien in the Greater than 12.00:1 category is 13.23:1.

Source: San Bernardino Assessor’s Office; Spicer Consulting Group, LLC.

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32 Delinquency History
There are no delinquencies on the parcels in the District for Fiscal Year 2022-23.

City’s Collection Practices
The staff of the City provides administrative and other support services for the community facilities districts that have been formed by the City. These services include, but are not limited to, attempting to collect delinquent special taxes prior to the commencement of foreclosure proceedings by sending demand letters to property owners whose special taxes are delinquent advising them of the consequences of failing to pay the applicable special taxes. The City expects to levy Special Taxes within the District and will covenant in the Fiscal Agent Agreement to commence foreclosure proceedings against parcels with delinquent Special Taxes under certain circumstances described in this Official Statement. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.”

RISK FACTORS
The purchase of the Bonds involves significant investment risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds.

The Bonds have not been rated by a rating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed in this section of this Official Statement could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed in this section of this Official Statement could adversely affect the value of the property in the District. See “— Land Values” and “— Limited Secondary Market” below.

Risks of Real Estate Secured Investments Generally
The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses.

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

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

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33 Insufficiency of Special Taxes
The annual amount of Special Tax to be levied on each taxable parcel in the District will generally be based on the land use class to which a parcel of Developed Property is assigned under the Rate and Method. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” and “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax.” The maximum Special Tax for each Assessor’s Parcel of Single Family Residential Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax or (ii) the Backup Special Tax. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” Notwithstanding that the maximum Special Taxes that may be levied in the District exceeds debt service due on the Bonds, the Special Taxes collected could be inadequate to make timely payment of debt service either because of nonpayment or because property becomes exempt from taxation as permitted in the Rate and Method.

In order to pay debt service on the Bonds, it is necessary that the Special Taxes be paid in a timely manner.

Should the Special Taxes not be paid on time, the City has established a Reserve Fund under the Fiscal Agent Agreement to pay debt service on the Bonds to the extent other funds are not available. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Fund.” The City will covenant in the Fiscal Agent Agreement to maintain in the Reserve Fund an amount equal to the Reserve Requirement subject, however, to the limitation that the City may not levy the Special Tax in the District in any Fiscal Year at a rate in excess of the maximum amounts permitted under the Rate and Method. In addition, under no circumstances may the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by owner of any other parcel or parcels within the District by more than 10% in any Fiscal Year. As a result, if a significant number of delinquencies occurs, the District could be unable to replenish the Reserve Fund to the Reserve Requirement. If such defaults were to continue in successive years, the Reserve Fund could be depleted and a default on the Bonds could occur.

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

In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds (if the Reserve Fund has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City on behalf of the District of the proceeds of sale. The City may adjust the future Special Tax levied on taxable parcels in the District, subject to the limitation on the maximum Special Tax, to provide an amount required to pay interest on, principal of, and redemption premiums, if any, on the Bonds, and the amount, if any, necessary to replenish the Reserve Fund to an amount equal to the Reserve Requirement and to pay all current expenses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the District will be at all times sufficient to pay the amounts required to be paid by the Fiscal Agent Agreement, even if the Special Tax is levied at the maximum Special Tax rates. See “Bankruptcy and Foreclosure” below for a discussion of potential delays in foreclosure actions.

The Rate and Method governing the levy of the Special Tax expressly exempts property owned by public agencies and other exempt entities in the District. See APPENDIX A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” If for any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, another public agency or a religious organization, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such Packet Pg. 1874
34 property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due.

The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within the District was to become owned by public agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Bonds when due and a default could occur with respect to the payment of such principal and interest.

Special Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.

See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales,” for a discussion of the provisions which apply, and procedures which the City is obligated to follow under the Fiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See “— FDIC/Federal Government Interests in Properties” below, for a discussion of the policy of the Federal Deposit Insurance Corporation (the “FDIC”) regarding the payment of special taxes and assessment and limitations on the City’s ability to foreclose on the lien of the Special Taxes in certain circumstances where property within the District is owned by the federal government, agencies of the federal government, or, possibly, government sponsored enterprises such as Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”).

The City has the authority and the obligation, subject to the Act and the maximum Special Tax rates set forth in the Rate and Method, to increase the levy of Special Taxes against non-delinquent property owners in the District in the event other owners in the District are delinquent. Pursuant to the Rate and Method and the Act, under no circumstances may the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by owner of any other parcel or parcels within the District by more than 10% in any Fiscal Year. Thus, the City may not be able to increase Special Tax levies in future Fiscal Years by enough to make up for delinquencies for prior Fiscal Years. This would result in draws on the Reserve Fund, and if delinquencies continue and in the aggregate exceed the Reserve Fund balance, defaults would occur in the payment of principal and interest on the Bonds.

Although the City will covenant in the Fiscal Agent Agreement to commence and diligently pursue foreclosure under the circumstances described under the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales,” foreclosure delays may occur under the circumstances described under the caption “RISK FACTORS — Bankruptcy and Foreclosure.” Delinquencies may result as a consequence of many factors. See “RISK FACTORS,” generally, for a discussion of certain potential causes of delinquencies.

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35 Climate Change
According to the California Climate Change Fourth Assessment for the Inland Desert Regions, which was published in 2018, the region covering the City, the region will continue to experience, among other things, (a) extremely high maximum temperatures, (b) increased energy needs for cooling to compensate for a rise in temperatures, and (c) increased water stress in an already water-limited region. Such climate change risks may exacerbate the impact of natural disasters listed above. See “— Natural Disasters.” Natural Disasters
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. On June 4, 2020, there was a 5.5 magnitude earthquake in the in Searless Valley, California in the County of San Bernardino. The City is located between several active fault zones including: the San Andreas Fault, the San Jacinto Fault, the Glen Helen Fault and the Loma Linda Fault. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event. The District is not located within an earthquake fault zone.

Per FEMA Map No. 06071C7930J, dated September 2, 2016, the District is located in Zone X, areas determined to be outside of the 0.2 percent annual chance floodplain.

In recent years, wildfires have caused extensive damage throughout the State, including within the City.

Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires that occurred in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events. In August 2021, there was a fire north of Glen Helen Parkway, east of Sierra Avenue and Lytle Creek Road, west of the 15 Freeway in San Bernardino County that burned 819 acres. In September of 2021, there was another fire in the City of San Bernardino near the I-215 Freeway and University Parkway that burned 71 acres. Sixty percent (60%) of the District is located in an area which the Department of Forestry and Fire Protection of the State has designated as a very high fire hazard severity zone. There is a risk of residential property within the District being destroyed by wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of the District. There may also be a risk that homeowners may not be able to obtain casualty loss insurance from commercial carriers and may need to obtain insurance from the California Insurance Pool Authority.

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

Drought
From time to time, areas of the State have experienced significant drought conditions that resulted in severe impacts to water supplies and restrictions on water use. On July 8, 2021, Governor Newsom issued Executive Order No. 10-21, which declared a drought state of emergency in 50 counties in northern and central California (including the County) and requested that all water users voluntarily reduce water use by fifteen percent (15%). On October 19, 2021, the Governor extended the declaration to include the remaining counties, such that the drought state of emergency is in effect Statewide. At the end of March 2022, following the driest first three months of a year in the state’s recorded history, Governor Newsom signed an executive order calling on local water suppliers to move to Level 2 of their Water Shortage Contingency Plans, which require locally-appropriate actions that will conserve water across all sectors, and directed the State Water Resources Control Board to consider a ban on the watering of decorative grass at businesses and institutions. The State Water Resources Control Board voted unanimously on May 24, 2022, to implement a statewide ban on watering of non-functional Packet Pg. 1876
36 turf in the commercial, industrial, and institutional sectors, as well as regulations requiring local agencies to implement water use restrictions amid the possibility that water supplies may be up to 20% lower due to extreme weather. In the last ten years, the per capita water use in the system has been reduced due to conservation measures. An increase in drought conditions could lead to wildfires which may cause damage within the District.

See “— Natural Disasters” above. The statewide regulations also require that all California water suppliers implement conservation actions under Level 2 of their Water Shortage Contingency Plans. The statewide regulations went into effect on June 10, 2022. On March 24, 2023, Governor Newsom rolled back some drought emergency provisions that were no longer needed due to increased rainfall in the region, while maintaining other measures that support regions and communities still facing water supply challenges and that continue building up long-term water resilience. The Executive Order ended the voluntary 15% water conservation target, while continuing to encourage that Californians make conservation a way of life, ended the requirement that local water agencies implement level 2 of their drought contingency plans, maintained the ban on wasteful water uses, such as watering ornamental grass on commercial properties, preserved all current emergency orders focused on groundwater supply, where the effects of the multi-year drought continue to be devastating, maintained orders focused on specific watersheds that have not benefited as much from recent rains, including the Klamath River and Colorado River basins, which both remain in drought, retained a state of emergency for all 58 counties to allow for drought response and recovery efforts to continue.

San Bernardino Municipal Water District is currently in Stage 3 of its Water Shortage Contingency Plan and customers may water their property only before 8 a.m. and after 6 p.m. on Mondays, Wednesdays, and Fridays. Watering of outdoor landscapes can only be conducted in manner that does not causes excessive runoff.

Furthermore, maximum sprinkler irrigation time is 15 minutes per station per irrigation day. Irrigation is prohibited for a full 48 hours after a significant precipitation event has occurred over the City of San Bernardino.

Wind
According to the Safety Element of the City’s General Plan, the City is subject to extremely high winds, which have resulted in significant property damage. For example, portions of roofs and block walls have been broken and blown away and public utility structures such as power lines and traffic signals have been damaged.

The most significant wind problems occur at the canyon mouths and valleys extending downslope from the San Bernardino Mountains. The highest velocities are associated with downslope canyon and Santa Ana winds (90- 100 mph). Santa Ana wind conditions are a reversal of the prevailing southwesterly winds and usually occur on a region-wide basis during late summer and early fall. Santa Ana winds are dry, warm winds that flow from the higher desert elevations in the north through the mountain passes and canyons. Of the major fires in the San Bernardino Mountains, all have occurred during periods of high winds. The high wind velocity and property damage potential have resulted in the northern half of the City adjacent to the mountains being classified by the City as a “High Wind Area.” In this area of the City, stringent conditions for the construction of buildings and public facilities are applied.

Hazardous Substances
The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel 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 taxed parcels 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.

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37 Further, it is possible that liabilities may arise in the future with respect to any of the parcels 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 that is realizable upon a delinquency and the willingness or ability of the owner of any parcel to pay the Special Tax Installments.

The value of the taxable property within the District, as set forth in the various tables in this Official Statement, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The City has not independently verified, but is not aware, that any owner (or operator) of any of the parcels within the District has such a current liability with respect to any such parcel. However, it is possible that such liabilities do currently exist and that the District is not aware of them.

Parity Taxes and Special Assessments
Property within the District is subject to taxes imposed by public agencies also having jurisdiction over the land within the District. See “THE DISTRICT — Estimated Direct and Overlapping Indebtedness.” The Special Taxes and any related penalties 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 taxes and special assessments levied by the City and other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation. See “RISK FACTORS — Bankruptcy and Foreclosure” below.

The City has no control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from all or a portion of the property within the District. In addition, the landowners within the District may, without the consent or knowledge of the City, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within the District described in this Official Statement. See “SOURCES OF PAYMENT FOR BONDS” and “THE DISTRICT — Estimated Direct and Overlapping Indebtedness.”
Disclosures to Future Purchasers
The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and the risk of such a levy, and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The City has caused the Notice of Special Tax Lien to be recorded in the Office of the Recorder for the County against each parcel. 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 property within the District or 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 Packet Pg. 1878
38 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.

Non-Cash Payments of Special Taxes
Under the Act, the City Council as the legislative body of the District may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond so tendered is to be accepted at par and credit is to be given for any interest accrued thereon to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes applicable thereto by tendering a Bond. Such a practice would decrease the cash flow available to the City to make payments with respect to other Bonds then outstanding; and, unless the practice was limited by the City, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds.

In order to provide some protection against the potential adverse impact on cash flows, which might be caused by the tender of Bonds in payment of Special Taxes, the Fiscal Agent Agreement includes a covenant pursuant to which the City will not authorize owners of taxable parcels to satisfy Special Tax obligations by the tender of Bonds unless the City shall have first obtained a report of an Independent Financial Consultant certifying that doing so would not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on all Outstanding Bonds when due.

Payment of the Special Tax Is Not a Personal Obligation of the Owners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the City has no recourse against the owner.

Concentration of Ownership
Based on development and ownership status as of the Date of Value, the Property Owners and individuals expected to be responsible for approximately 41.50% and 58.50%, respectively, of the projected Fiscal Year 2023- 24 Special Tax levy, respectively. See Table 5 herein.

The timely payment of principal of and interest on the Bonds depends upon the willingness and ability of the current and future property owners in the District to pay the Special Taxes prior to delinquency. General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pay such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within the District, a failure by the Property Owners or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the Bonds.

Land Values
The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s only remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, stricter land use regulations, delays in development or other events will adversely impact the Packet Pg. 1879
39 security underlying the Special Taxes. See “THE DISTRICT — Appraisal Report” and APPENDIX B — “APPRAISAL REPORT.”
The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in the Appraisal Report, that as of the Date of Value, the minimum market value of the property within the District was $34,014,596. See “THE DISTRICT — Appraisal Report.” The Appraisal Report indicates the Appraiser’s opinion as to the minimum market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future.

Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See APPENDIX B for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the District from the market value estimated by the Appraiser.

No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes.

See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” Increasing Mortgage Interest Rates
Between approximately November 2021 and April 2023, mortgage interest rates for 30-year mortgage loans have increased from approximately 3.1% to 6.2%. 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, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home. The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned for-sale homes within the District as described herein.

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 the Developer can complete future 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 Project in the District and the real estate market in general cannot be predicted.

FDIC/Federal Government Interests in Properties
The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the FDIC, the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.

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40 Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest.

The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

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

Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.

Bankruptcy and Foreclosure
The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. 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 Special Taxes to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings and could result in the possibility of delinquent Special Tax installments not being paid in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. To the extent that property in the District continues to be owned by a limited number of property owners, the chances are increased that the Reserve Fund could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes.

As a result, sufficient moneys would not be available in the Reserve Fund for transfer to the Debt Service Fund or the Redemption Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.

To the extent that bankruptcy or similar proceedings were to involve a large property owner, the chances would increase the likelihood that the Reserve Fund could be fully depleted during any resulting delay in receiving payment of delinquent Special Taxes. As a result, sufficient monies would not be available in the Reserve Fund for transfer to the Redemption Fund to make up any shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.

On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on that property. The court Packet Pg. 1881
41 upheld the priority of unpaid ad valorem property taxes imposed before the bankruptcy petition (the “pre-petition taxes”), but unpaid taxes imposed after the filing of the bankruptcy petition (“post-petition taxes”) were declared to be unsecured “administrative expenses” of the bankruptcy estate, and were therefore held to be payable from the bankruptcy estate only after payment of all secured creditors. As a result, the secured creditor of the property was able to foreclose on the property and retain all of the proceeds of the sale except for the amount of the prepetition taxes.

According to the court’s ruling, as administrative expenses, post-petition taxes would have to be paid, but only if the debtor had sufficient assets not subject to other perfected security interests to do so. In certain circumstances, payment of such administrative expenses may also be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time again become subject to and would secure liens for then current and future ad valorem property taxes.

Glasply was controlling precedent on bankruptcy courts in the State for several years subsequent to the date of the Ninth Circuit’s holding. Pursuant to state law, the lien date for general ad valorem property taxes levied in the State is the January 1 preceding the Fiscal Year for which the taxes are levied. Under the Glasply holding, a bankruptcy petition filing would have prevented the lien for general ad valorem property taxes levied in Fiscal Years subsequent to the filing of a bankruptcy petition from attaching and becoming a lien so long as the property was a part of the estate in bankruptcy. However, the Glasply holding was for the most part subsequently rendered inoperative with respect to the imposition of a lien for and the collection of ad valorem property taxes by amendments to the federal Bankruptcy Code (Title 11 U.S.C.) which were part of the Bankruptcy Reform Act of 1994 (the “Bankruptcy Reform Act”) passed by Congress during the latter part of 1994. The Bankruptcy Reform Act added a provision to the automatic stay section of the Bankruptcy Code which, pursuant to Section 362(b)(18) thereof, excepts from the Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for an ad valorem property tax imposed by . . . a political subdivision of a state, if such tax comes due after the filing of the petition” by a debtor in bankruptcy court. The effect of this provision is to continue the secured interest of ad valorem taxes on real property (i.e., post-petition taxes) in effect during the period following the filing of a bankruptcy petition, including during the period bankruptcy proceedings are pending.

Without further clarification by the courts or Congress, the original rationale of the Glasply holding could, however, still result in the treatment of post-petition special taxes as “administrative expenses,” rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings. This treatment might result from the fact that, although the lien of special taxes is of record from the date of the filing of a Notice of Special Tax Lien, the actual special tax is levied annually. As noted above, special taxes have a different lien date than the lien date for general ad valorem property taxes in the State noted above. The lien of a Mello-Roos special tax attaches upon recordation of the notice of the special tax lien, as provided for in Section 53328.3 of the Act, as opposed to the annual January 1 lien date for general ad valorem property taxes. Thus, in deciding whether the original Glasply ruling is applicable to a bankruptcy proceeding involving special taxes rather than general ad valorem property taxes, a court might consider the differences in the statutory provisions for creation of the applicable tax lien (general ad valorem or special tax) in determining whether there is a basis for post-petition special taxes to be entitled to a lien on the property during pending bankruptcy proceedings. If a court were to apply Glasply to eliminate the priority of the special tax lien as a secured claim against property with respect to post-petition levies of the Special Taxes made against property owners within the District who file for bankruptcy, collections of the Special Taxes from such property owners could be reduced as the result of being treated as “administrative expenses” of the bankruptcy estate. Also, and most importantly, is the fact that the original holding in Glasply and the mitigation of that holding by the Bankruptcy Reform Act of 1994 both appear to be applicable only to general ad valorem property taxes, and, therefore, the exemption from the automatic stay in Section 362(b)(18) discussed above may not be applicable to special taxes since they were not expressly mentioned or provided for in this section, nor defined to be included within the term “ad valorem property taxes.” Packet Pg. 1882
42 No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or in the event interest on the Bonds becomes included in gross income for federal income tax purposes.

See “— Limitations on Remedies” below.

Loss of Tax Exemption
As discussed under the caption “LEGAL MATTERS — Tax Exemption,” the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of a failure of the City to comply with certain provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Such an event of taxability would not in and of itself result in an early redemption of the Bonds and the Bonds will remain outstanding to maturity or until redeemed under the redemption provisions of the Fiscal Agent Agreement.

Limitations on Remedies
Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds.

Limited Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the City has committed to provide certain financial and operating information on an annual basis, there can be no assurance that such information will be available to Bond owners on a timely basis. See “CONTINUING DISCLOSURE.” The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Voter Initiatives
Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.

Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Bonds.

Packet Pg. 1883
43 Proposition 218 —Voter Approval for Local Government Taxes — Limitation on Fees, Assessments, and Charges — Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges.

On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote.

The Special Taxes and the issuance of special tax bonds of the City for the District were each authorized by not less than a two-thirds vote of the landowners within the District who constituted the qualified electors at the time of such voted authorization. The City believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Mello-Roos Act, Proposition 218 or Proposition 26.

Like their antecedents, Proposition 218 and Proposition 26 are likely to undergo both judicial and legislative scrutiny before the impact on the City and the District can be determined. Certain provisions of Proposition 218 and Proposition 26 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot be predicted.

IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds).

Ballot Initiatives
From time to time, initiative measures qualify for the State ballot pursuant to the State’s constitutional initiative process, and those measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the County or other local districts to increase revenues or to increase appropriations or on the ability of the landowners to complete the development of land in the District.

See “— Voter Initiatives.”
Recent Case Law Related to the Mello-Roos Act
On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego. The CCFD is a financing district established under its City of San Diego charter (the “Charter”) and was intended to function much like a community facilities district established under the Mello-Roos Act. The CCFD was comprised of all of the real property in the entire City of San Diego.

However, the CCFD special tax was to be levied only on properties in the CCFD that were improved with a hotel.

At the election to authorize the CCFD special tax, the CCFD proceedings limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel was located.

Registered voters in the City of San Diego were not permitted to vote. This definition of the qualified electors of the CCFD was based on Section 53326(c) of the Mello-Roos 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 Packet Pg. 1884
44 be by the landowners of the proposed community facilities district whose property would be subject to the special tax.

The San Diego Court held that the CCFD special tax election did not comply with the City of San Diego’s Charter and with applicable provisions of the California Constitution -- specifically Article XIIIA, section 4 (“Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district....”) and Article XIIIC, section 2(d) (“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.”) -- because the electors in the CCFD election should have been the registered voters residing within the CCFD (the boundaries of which were coterminous with the boundaries of the City of San Diego).

As to the District, there were no registered voters within the District at the time of the election to authorize the Special Taxes. Significantly, the San Diego Court expressly stated that it was not addressing the validity of a landowner election to impose special taxes on residential property pursuant to the Mello-Roos Act in situations where there are fewer than 12 registered voters. Therefore, by its terms, the San Diego Court’s holding does not apply to the special tax election in the District.

Moreover, Sections 53341 and 53359 of the Act establish a limited period of time in which special taxes levied under the Mello-Roos Act may be challenged by a third party:
53341. Any action or proceeding to attack, review, set aside, void, or annul the levy of a special tax or an increase in a special tax pursuant to [the Mello-Roos Act] shall be commenced within 30 days after the special tax is approved by the voters....
53359. An action to determine the validity of bonds issued pursuant to [the Mello-Roos Act] or the validity of any special taxes levied pursuant to [the Mello-Roos Act] ... shall .... be commenced within 30 days after the voters approve the issuance of the bonds or the special tax ...

Section 53326(b) of the Mello-Roos Act defines the authorized voters for an election in which the special taxes will be levied on residential property: “Except as otherwise provided in subdivision (c), if at least 12 persons, who need not necessarily be the same 12 persons, have been registered to vote within the territory of the proposed community facilities district for each of the 90 days preceding the close of the protest hearing, the vote shall be by the registered voters of the proposed district, with each voter having one vote. Otherwise, the vote shall be by the landowners of the proposed district and each person who is the owner of land at the close of the protest hearing, or the authorized representative thereof, shall have one vote for each acre or portion of an acre of land that he or she owns within the proposed community facilities district not exempt from the special tax....” Landowner voters approved the Special Taxes and the issuance of bonds for the District in compliance with all applicable requirements of the Mello-Roos Act in 2021. Therefore, pursuant to Sections 53341 and 53359 of the Mello-Roos Act, the statute of limitations period to challenge the validity of the special tax has expired.

Because the San Diego Court expressly stated that it did not consider the facts presented by the District and because the period for challenging the Special Taxes has passed, the City believes the Special Taxes are valid and cannot be challenged.

Potential Early Redemption of Bonds from Prepayments or Assessment Bond Proceeds Property owners within the District, including the Property Owners and any individual property owner, are permitted to prepay their Special Taxes at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Fiscal Agent Agreement following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds.

See the caption “THE BONDS — Redemption.”
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45 Legal Requirements
Other events that may affect the value of a parcel include changes in the law or application of the law.

Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures. Development in the District may also be adversely affected by the application of laws protecting endangered or threatened species.

Cyber Security
The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. To date, the City has not experienced a material threat to its computer operating system. However, no assurance can be given that the City’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City or the District, or the administration of the Bonds.

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

CONTINUING DISCLOSURE
City Continuing Disclosure
Pursuant to the City Continuing Disclosure Certificate, the City will agree to provide, or cause to be provided, to the EMMA system of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org, on an annual basis certain financial information and operating data concerning the District and to provide notices of the occurrence of certain listed events as required by the Rule. This covenant is being made by the City in order to assist the Underwriter in complying with the Rule.

The City and its related entities have previously entered into continuing disclosure undertakings under the Rule in connection with the issuance of municipal obligations. [In the last five years, with respect to the $55,800,000 San Bernardino Joint Powers Financing Authority Tax Allocation Revenue Refunding Bonds, Series 2005A, the City did not timely file audited financial statements for Fiscal Years 2017-18, 2018-19, 2019-20 and 2020-21 and the annual report for Fiscal Year 2020-21. The City has remedied and filed the necessary information and is current in its continuing disclosure obligations.] Developer Continuing Disclosure
Although the Property Owners are not considered to be an obligated person under the Rule, the Property Owners have agreed to enter into a Property Owner Continuing Disclosure Certificate in connection with the issuance of the Bonds, pursuant to which it will provide semi-annual reports containing updated information with respect to the development within the District. Pursuant to the Property Owner Continuing Disclosure Certificate, the Property Owners will provide semi-annual reports not later than April 1 and September 30 of each year beginning April 1, 2024, until satisfaction of certain conditions set forth in the Property Owner Continuing Disclosure Certificate. The semi-annual reports to be provided by the Property Owners will contain updates regarding the development within the District as outlined in Section 4 of the Property Owner Continuing Disclosure Certificate attached as APPENDIX E. In addition to its semi-annual reports, the Property Owners will agree to provide notices of certain events set forth in the Property Owner Continuing Disclosure Certificate.

Packet Pg. 1886
46 The Property Owner’s obligations under the Property Owner Continuing Disclosure Certificate will terminate upon the earliest to occur of: (a) the legal defeasance, prior redemption or payment in full of all of the Bonds, or (b) the date on which the Property Owners and its Affiliates (as defined in the Property Owner Continuing Disclosure Certificate), collectively own all or a portion of the Property that represents less than 20% of the aggregate special tax obligation.

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

Property Owner Continuing Disclosure Compliance. To the actual knowledge of the Property Owners, the Property Owners have not failed to comply in any material respects with its previous undertakings by it to provide periodic continuing disclosure reports or notices of listed events with respect to payment of special taxes and assessments with respect to community facilities districts or assessment districts in California within the past five years.

LEGAL MATTERS
Tax Exemption
In the opinion of Best Best & Krieger LLP, Riverside California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State personal income tax. Bond Counsel notes that interest on the Bonds is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations.

Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds is based upon certain representations of fact and certifications made by the City, on behalf of the District, the Underwriter and others and is subject to the condition that the City complies with all requirements of the Code and the regulations adopted pursuant to the Code (the “Treasury Regulations”) that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code and the Treasury Regulations might cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City will covenant in the Fiscal Agent Agreement and the Tax Certificate to be delivered in connection with the issuance of the Bonds to comply with all such requirements.

Should the interest on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption as a result of such occurrence and will remain outstanding until maturity or until otherwise redeemed in accordance with the Fiscal Agent Agreement.

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, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Bond Owners from realizing the full current benefit of the tax status of such interest. For example, legislative proposals are announced from time to time which generally would limit the exclusion from gross income of interest on obligations like the Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Bonds. The introduction or enactment of any such legislative proposals, clarification of the Packet Pg. 1887
47 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 any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Bond Counsel’s opinion may be affected by action taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such action or events are taken or do occur, or whether such actions or events may adversely affect the value or tax treatment of a Bond, and Bond Counsel expresses no opinion with respect thereto.

Although Bond Counsel will render an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes provided the City continues to comply with certain requirements of the Code, the accrual or receipt of interest on the Bonds may otherwise affect the tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient’s particular tax status and other items of income or deductions. Bond Counsel expresses no opinion regarding any such consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the Bonds.

A copy of the proposed form of Bond Counsel opinion is attached hereto as APPENDIX F.

Legal Opinion
The legal opinion of Bond Counsel, approving the validity of the Bonds in substantially the form set forth as APPENDIX F, will be made available to the original purchaser at the time of original delivery. A copy of the legal opinion for the Bonds will be provided with each definitive bond. Certain legal matters will be passed upon for the City and the District by the City Attorney’s Office, and by Best Best & Krieger LLP, Riverside, California, as Disclosure Counsel, and for the Underwriter by Kutak Rock LLP, Irvine, California, as counsel to the Underwriter.

Litigation
[No litigation is pending or threatened concerning the validity of the Bonds, the pledge of Special Tax Revenues to repay the Bonds, the powers or authority of the City with respect to the Bonds, or seeking to restrain or enjoin development of the land within the District and a certificate of the City to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds.] No Rating
The District has not made and does not contemplate making application to any rating agency for the assignment of a rating of the Bonds.

Underwriting
The Bonds are being purchased by Hilltop Securities Inc. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at a price of $_________ (being $______ aggregate principal amount thereof, less Underwriter’s discount of $_______ and minus the original issue discount of $______). The 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 is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions.

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

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48 Municipal Advisor
The District has retained Columbia Capital Management, LLC, Carlsbad, 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.

The Municipal Advisor, is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

Financial Interests
The fees being paid to the Municipal Advisor, the Underwriter and Underwriter’s Counsel are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter on matters unrelated to the Bonds.

Pending Legislation
The District is not aware of any significant pending legislation which would have material adverse consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when due.

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.

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

THE CITY OF SAN BERNARDINO
By:

Interim City Manager of the City of San Bernardino
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APPENDIX A

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
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APPENDIX B

APPRAISAL REPORT
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APPENDIX C

SUPPLEMENTAL INFORMATION CONCERNING

CITY OF SAN BERNARDINO AND COUNTY OF SAN BERNARDINO
The Bonds will not be secured by any pledge of ad valorem taxes or City General Fund revenues but will be payable solely from Special Taxes to levied on and collected from the owners of certain taxable land within the District. The information set forth below is included in the Official Statement for background purposes only.

General Description and Background
Incorporated in 1854, the City of San Bernardino (the “City”) is a charter city that functions under a Council-Manager form of government. The governance structure is comprised of an at-large elected Mayor and seven Council Members elected by constituents in the specific ward. Each elected official serves a four-year term.

San Bernardino County (the “County”), which encompasses 20,105 square miles, is the largest county in the contiguous United States. On April 26, 1853, the County was created from parts of Los Angeles, San Diego and Mariposa Counties. Located in the southeastern portion of California, the County is bordered on the south by Riverside County, on the east by the State of Arizona and Nevada, on the north by Inyo and Tulare Counties, and on the west by Los Angeles and Kern Counties. There are 24 incorporated cities in the County.

The County’s varying topology includes desert, valley and mountain areas as well as gently rolling terrain.

Three distinct geographical areas characterize the County: the valley region, the mountain region and the desert region. The valley region contains the majority of the County’s incorporated areas and is the most populous region. The mountain region is primarily comprised of public lands owned and managed by federal and state agencies. The desert region is the largest region and includes parts of the Mojave Desert.

Population
The following sets forth the City, the County and the State population estimates as of January 1, for the years 2018 to 2022:

CITY OF SAN BERNARDINO, SAN BERNARDINO COUNTY AND STATE OF CALIFORNIA Estimated Population
Year
(January 1)
City of
San Bernardino
San Bernardino
County
State of
California
2018 217,550 2,150,017 39,519,535
2019 217,701 2,165,876 39,605,361
2020 217,935 2,175,424 39,648,938
2021 222,024 2,182,343 39,303,157
2022 220,840 2,187,665 39,185,605
Source: State of California Department of Finance, Demographic Research Unit. March 2020 and 2010 Benchmark.

Commerce
A summary of historic taxable sales within the City for the years 2017 to 2021 is shown in the following table. Total taxable sales during calendar year 2021 in the City were reported to be $4,586,492,917, a 37.8% increase over the total taxable sales of $3,329,458,829 reported during calendar year 2020.

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CITY OF SAN BERNARDINO
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions Total Retail and Food Services Total All Outlets
Number of
Permits
Taxable
Transactions
Number of
Permits
Taxable
Transactions
2017 5,598 $2,573,088,941 7,313 $3,101,214,754
2018 5,635 2,677,251,960 7,625 3,261,802,303
2019 5,789 2,731,818,391 8,005 3,335,912,787
2020 6,288 2,774,471,134 8,823 3,329,458,829
2021 5,442 3,868,978,999 7,875 4,586,492,917
Source: California State Board of Equalization, Taxable Sales in California – Cities by Type of Business.

A summary of historic taxable sales within the County during for the years 2017 to 2021 is shown in the following table. Total taxable sales during calendar year 2021 in the County were reported to be $55,254,235,219, a 27.7% increase over the total taxable sales of $43,265,512,311 reported during calendar year 2020.

COUNTY OF SAN BERNARDINO
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions Total Retail and Food Service Total All Outlets
Number of
Permits
Taxable
Transactions
Number of
Permits
Taxable
Transactions
2017 39,067 $25,603,171,101 58,956 $38,399,372,700
2018 39,837 26,905,783,745 61,838 40,554,023,790
2019 40,964 27,585,905,470 64,771 41,768,747,848
2020 44,330 28,745,277,036 71,145 43,265,512,311
2021 40,801 38,261,479,465 66,585 55,254,235,219
Source: California State Board of Equalization, Taxable Sales in California – Counties by Types of Business.

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Employment and Industry
The City is included in the Riverside-San Bernardino-Ontario labor market area. The unemployment rate in the Riverside-San Bernardino-Ontario MSA was 4.5% in February 2023, up from a revised 4.4% in January 2023, and below the year-ago estimate of 4.7%. This compares with an unadjusted unemployment rate of 4.8% for California and 3.9% for the nation during the same period. The unemployment rate was 4.5% in Riverside County and 4.5% in San Bernardino County.

The following table shows the average annual estimated numbers of wage and salary workers by industry.

The table does not include proprietors, the self-employed, unpaid volunteers or family workers, domestic workers in households, and persons in labor management disputes.

RIVERSIDE-SAN BERNARDINO-ONTARIO METROPOLITAN STATISTICAL AREA (SAN BERNARDINO COUNTY)
Industry Employment & Labor Force
(Annual Averages)
2017 2018 2019 2020 2021
Civilian Labor Force 942,000 955,000 966,800 971,400 988,600 Civilian Employment 895,300 915,500 929,000 877,000 915,100 Civilian Unemployment 46,800 39,500 37,700 94,400 73,500 Civilian Unemployment Rate 5.0% 4.1% 3.9% 9.7% 7.4%
Total Farm 2,200 2,200 2,500 2,300 2,300
Total Nonfarm 748,800 770,500 798,500 773,100 809,200
Goods Producing 92,100 95,100 95,200 91,200 90,900
Mining and Logging 600 800 700 900 1,000
Construction 35,200 37,800 39,000 38,100 38,600
Manufacturing 56,300 56,600 55,400 52,200 51,300
Durable Goods 35,000 34,900 34,600 31,900 30,300
Nondurable Goods 21,400 21,700 20,800 20,300 21,000
Service Providing 656,700 675,400 703,300 681,900 718,300 Trade, Transportation and Utilities 206,600 216,000 224,800 233,700 255,300 Wholesale Trade 38,700 40,500 41,500 41,100 41,400
Retail Trade 88,200 88,300 87,000 81,800 86,300
Transportation, Warehousing and Utilities 79,600 87,100 96,300 110,800 127,600 Information 5,200 5,300 5,000 4,100 4,300
Financial Activities 22,400 21,700 23,400 23,100 23,800 Professional and Business Services 80,300 80,900 85,000 83,900 91,500 Educational and Health Services 119,700 124,500 135,000 129,100 129,300 Leisure and Hospitality 75,200 76,900 78,100 63,700 70,800 Other Services 22,800 23,000 22,900 20,300 21,500
Government 124,600 127,100 129,100 124,000 122,000
Total, All Industries 750,900 772,700 801,000 775,400 811,500 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 C. Numbers reflected in the table may not add up due to rounding.

Source: State of California, Employment Development Department, March 2021 Benchmark.

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Principal Employers
The table below shows the 10 principal employers in the City as of June 30, 2021.

CITY OF SAN BERNARDINO

LARGEST EMPLOYERS
(As of June 30, 2021)
Rank Employer
Number of
Employees
1 Stater Brothers 23,100
2 San Bernardino City Unified School District 7,700
3 County of San Bernardino 6,094
4 The Roman Catholic Bishop of San Bernardino 2,400
5 California State University, San Bernardino 2,300
6 San Bernardino Community College District 1,446
7 Community Hospital of San Bernardino 1,400
8 The San Bernardino Hilton 1,152
9 City of San Bernardino 1,140
10 Superior Court of California, County of San Bernardino 1,000 Source: City of San Bernardino, California Annual Comprehensive Financial Report for the year ending June 30, 2021.

The table below shows the 10 principal employers in the County as of June 30, 2021.

COUNTY OF SAN BERNARDINO

PRINCIPAL EMPLOYERS
(As of June 30, 2021)
Rank Name of Business Employees
Percentage of Total
Employment

1. San Bernardino County >10,000 1.11%

2. Loma Linda University Medical Center >10,000 1.11

3. Amazon 5,000-9,999 0.55-1.11

4. Ontario International Airport 5,000-9,999 0.55-1.11

5. Plaxicon Holding Corporation 5,000-9,999 0.55-1.11

6. California State University San Bernardino 5,000-9,999 0.55-1.11

7. James Jones Company 2,500-4,999 0.28-0.55

8. Barret Business Services Inc. 2,500-4,999 0.28-0.55

9. Damao Luggage International Inc. 2,500-4,999 0.28-0.55

10. San Manuel Indian Bingo and Casino 2,500-4,999 0.28-0.55 Source: San Bernardino County State of California Annual Comprehensive Financial Report for the year ending June 30, 2021.

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APPENDIX D

SUMMARY OF FISCAL AGENT AGREEMENT
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APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATES OF THE CITY AND THE PROPERTY OWNER

CONTINUING DISCLOSURE CERTIFICATE OF THE CITY
This Continuing Disclosure Certificate, dated as of ________ 1, 2023 (the “Disclosure Certificate”), is executed and delivered by the City of San Bernardino (the “City”) in connection with the issuance and delivery by the City of its $2,855,000* Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of ______ 1, 2023 (the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). The City covenants as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.

SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Annual Report Date” means the 1st of April after the end of the City’s fiscal year, commencing April 1, 2024.
“Beneficial Owner” shall mean any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income purposes.
“Disclosure Representative” shall mean the City Manager or the Agency Director of Administrative Services of the City, or their designee, or such other officer or employee as the City shall designate in writing from time to time.
“Dissemination Agent” shall mean, initially, the City, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the City and which has filed with the then current Dissemination Agent a written acceptance of such designation. “Fiscal Year” shall mean the period from July 1 to June 30, or any other period selected by the City as its fiscal year.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” shall mean the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. *
Preliminary, subject to change.

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“Official Statement” shall mean the final official statement executed by the City in connection with the issuance of the Bonds.
“Participating Underwriter” shall mean the original underwriter of the Bonds that is required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “State” shall mean the State of California.

SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing April 1, 2024, with the report for the 2022-23 Fiscal Year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate; provided, however, that the audited financial statements for Fiscal Year 2022-23 will be filed when available. The first Annual Report shall consist solely of the Official Statement. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall provide (or cause the Dissemination Agent to provide) in a timely manner to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A to this Disclosure Certificate.
(c) With respect to each Annual Report, the Dissemination Agent shall. (i) determine prior to each Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

SECTION 4. Content of Annual Report. The City’s Annual Report shall contain or include by reference the following:
(a) The City’s audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

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(b) The following information, unless otherwise specified, as of September 30 of the preceding year:
(i) Principal amount of all outstanding bonds.
(ii) Balance in the Improvement Fund, until such time as the fund is closed. (iii) Balance in the Reserve Fund, statement of the Reserve Requirement as of the immediately preceding April 1 and statement of projected draws on the Reserve Fund. (iv) Update of Table 1.
(v) Update of Table 5, using assessed values instead of appraised values (overlapping general obligation debt information needed not be included in the update). (vi) Update of Table 6, using assessed values instead of appraised values (overlapping general obligation debt information needed not be included in the update). (vii) A table showing the total dollar amount of delinquencies and number of delinquent parcels, if any, in the District.
(viii) Notwithstanding the September 30 reporting date, the following information shall be reported as of February 1 immediately preceding the date of the Annual Report rather than as of September 30:
(x) the identity of each delinquent taxpayer responsible for five percent (5%) or more of total Special Tax levied; (y) the assessor parcel number, assessed value of applicable properties, amount of Special Tax levied, amount delinquent by parcel number and status of foreclosure proceedings; and (z) if any foreclosure has been completed, a summary of results of foreclosure sales or transfers. (c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:
(i) Principal and interest payment delinquencies.
(ii) Non-payment related defaults, if material.
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or Packet Pg. 1900
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determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.
(vii) Modifications to rights of security holders, if material. (viii) Bond calls, if material, and tender offers.
(ix) Defeasances.
(x) Release, substitution, or sale of property securing repayment of the securities, if material. (xi) Rating changes.
(xii) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person.
(xiii) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (xiv) Appointment of a successor or additional fiscal agent or the change of name of the fiscal agent, if material.
(xv) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material (for the definition of “financial obligation,” see clause (e)). (xvi) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties (for the definition of “financial obligation,” see clause (e)).
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of a Listed Event described in subsection (a)(viii) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Fiscal Agent Agreement. (c) The City acknowledges that the events described in subparagraphs (a)(ii), (a)(vii), (a)(viii) (if the event is a bond call), (a)(x), (a)(xiii), (a)(xiv) and (a)(xv) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(xi) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. The Dissemination Agent shall not be responsible for determining whether an event is material.
(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(xii) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets Packet Pg. 1901
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or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.
(e) For purposes of Section 5(a)(xv) and (xvi), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

SECTION 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB pursuant to this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days’ written notice to the City.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to this Disclosure Certificate modifying the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles Packet Pg. 1902
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on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.

A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(b).

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 11. Default. If the City fails to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders, or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

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SECTION 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

CITY OF SAN BERNARDINO, for and on behalf of
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN

BERNARDINO, COUNTY OF SAN BERNARDINO,

STATE OF CALIFORNIA
By:

Agency Director of Administrative Services
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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of San Bernardino
Name of Bond Issue: $_______ Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds
Date of Issuance: _______, 2023
NOTICE IS HEREBY GIVEN that the City of San Bernardino (the “City”) on behalf of Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino has not provided an Annual Report with respect to the above-named Bonds as required by the Fiscal Agent Agreement dated as of ___________ 1, 2023, by and between the City and U.S. Bank Trust Company, National Association, as Fiscal Agent. The City anticipates that the Annual Report will be filed by __________, ,20__.

Dated:

CITY OF SAN BERNARDINO, for and on behalf of
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN

BERNARDINO, COUNTY OF SAN BERNARDINO,

STATE OF CALIFORNIA
By:

Agency Director of Administrative Services
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FORM OF CONTINUING DISCLOSURE CERTIFICATES OF THE CITY AND THE PROPERTY OWNER

CONTINUING DISCLOSURE CERTIFICATE OF THE PROPERTY OWNER This Continuing Disclosure Certificate of the Property Owner (this “Disclosure Certificate”), dated as of ________ 1, 2023, is executed and delivered by SB17329, LLC and Verdemont Ranch LLC (collectively referred to as the “Property Owners”), in connection with the issuance by the Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “Bonds”).

The Bonds are being issued pursuant to a Fiscal Agent Agreement dated _______ 1, 2023 (the “Fiscal Agent Agreement”) by and between the City of San Bernardino (the “City”) and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). The Property Owners covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owners for the benefit of the holders and beneficial owners of the Bonds.

SECTION 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings. “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) under managerial control of the Property Owners, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or to the Property Owners’ ability to pay the Special Taxes levied on the Property prior to delinquency).
“Assumption Agreement” means an undertaking of a Major Owner, for the benefit of the holders and beneficial owners of the Bonds, containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the property in the District acquired by the Major Owner), whereby such Major Owner agrees to provide semi-annual reports and notices of significant events, setting forth the information described in Sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and, at the option of the Property Owners or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 12 hereof.
“Dissemination Agent” means the Property Owner, or any successor Dissemination Agent designated in writing by the Property Owner, which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate, and which has filed with the Property Owner, the District and the Participating Underwriter, a written acceptance of such designation and acceptance. “District” means Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any date of determination, a Person that, together with the Person’s Affiliates, owns 20% or more of the property subject to the Special Tax. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information. “Official Statement” means the Official Statement dated _____, 2023, executed by the City in connection with the issuance of the Bonds.

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“Participating Underwriter” means Hilltop Securities Inc., the original underwriter of the Bonds. “Property” means (i) the property owned by the Property Owners or an Affiliate in the District and subject to the Special Taxes as of the date of determination, and (ii) the property in the District that the Property Owners or an Affiliate sold to a Major Owner who has not assumed the undertakings of this Disclosure Certificate under Section 7(b) that is owned by such Major Owner as of the date of determination. “Report Date” means (a) April 1 of each year, and (b) September 30 of each year. “Semi-Annual Report” means any Semi-Annual Report provided by the Property Owners pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Special Taxes” means the special taxes levied by the District on the Property.

SECTION 3. Provision of Semi-Annual Reports.
(a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owners shall, or upon written direction of the Property Owners the Dissemination Agent shall, not later than the Report Date, commencing April 1, 2024, provide to the MSRB, in an electronic format as prescribed by the MSRB, a SemiAnnual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 calendar days prior to the Report Date, the Property Owners shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Property Owners). The Property Owners shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent (if different from the Property Owners), to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent may conclusively rely upon such certification of the Property Owners and shall have no duty or obligation to review the SemiAnnual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.
(b) If the Dissemination Agent is not the Property Owners and it does not receive a Semi-Annual Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owners that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owners to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 7 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owners do not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the MSRB by the Report Date, as required in subsection (a) above, the Dissemination Agent shall send a notice in a timely manner to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the District and the Participating Underwriter.
(c) The Dissemination Agent shall:
(i) determine prior to each Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and (ii) to the extent the Semi-Annual Report has been furnished to it, file a report with the Property Owners (if the Dissemination Agent is other than the Property Owner), the District, and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided to and filed with the MSRB.

SECTION 4. Content of Semi-Annual Reports. Each Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents which are available to the public on the MSRB’s internet website or filed with the Securities and Packet Pg. 1907
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Exchange Commission. The Property Owners shall clearly identify each such other document so included by reference.

In addition to any of the information expressly required to be provided in Exhibit B, each Semi-Annual Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

SECTION 5. Reporting of Significant Events.
(a) Until such obligations are terminated pursuant to Section 7 herein, the Property Owners shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:
(i) bankruptcy or insolvency proceedings commenced by or against the Property Owners and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owners that is reasonably likely to have a significant impact on the Property Owners’ ability to develop the Property as described in the Official Statement or a more recently filed Semi-Annual Report or to pay Special Taxes due with respect to the Property (to the extent the responsibility of the Property Owner) prior to delinquency;
(ii) failure of the Property Owners to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date, to the extent such failure is not promptly cured by the Property Owners upon discovery thereof; (iii) filing of a lawsuit against the Property Owners or, if known, an Affiliate of the Property Owner, seeking damages which, if successful, could have a material and adverse impact on the Property Owner’s ability to develop the Property as described in the Official Statement or a more recently filed Semi-Annual Report or to pay Special Taxes due with respect to the Property (to the extent the responsibility of the Property Owners) prior to delinquency; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owners that continues to exist beyond any applicable notice and cure periods on any loan with respect to the construction of improvements on the Property that would have a material adverse effect on the Builder’ most recently disclosed development plan or financing with respect to the Property, or the ability of the Builder or any Relevant Entity to pay its Special Taxes prior to delinquency. (b) Whenever the Property Owners obtains knowledge of the occurrence of a Listed Event, the Property Owners shall as soon as possible determine if such event would be material under applicable Federal securities law.
(c) If the Property Owners determine that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owners shall, or shall cause the Dissemination Agent to, within 10 business days after obtaining knowledge of the Listed Event, file a notice of such occurrence of the Listed Event with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the District and the Participating Underwriter.

SECTION 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Duration of Reporting Obligation.

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(a) All of the Property Owners’ obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as (A) the Property Owners are no longer a Major Owner and (B) the Property Owners no longer have any obligations under this Disclosure Certificate with respect to any Major Owner as a result of such obligations having been assumed under one or more Assumption Agreements entered into pursuant to Section 7(b) below; or
(iii) the date on which the Property Owners and all Affiliates of the Property Owners, collectively own all or a portion of the Property that represents less than 20% of the aggregate special tax obligation; or
(iv) the date on which all of the Special Taxes attributable to the Property are paid in full.

The Property Owners shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property is conveyed to a person or entity that, upon such conveyance, will be a Major Owner, the obligations of the Property Owners hereunder with respect to the property conveyed to such Major Owner shall be assumed by such Major Owner, and if so assumed the Property Owners’ obligations hereunder with respect to the property conveyed will be terminated. In order to effect such assumption, such Major Owner shall enter into an Assumption Agreement in form and substance substantially similar to this Disclosure Certificate. However, a Major Owner shall not be required to enter into an Assumption Agreement if such Major Owner is already a party to a continuing disclosure certificate in form and substance similar to this Disclosure Certificate with respect to the Bonds, and under which the property conveyed to such Major Owner will become subject to future Semi-Annual Reports. If not so assumed, the Property Owners shall use commercially reasonable efforts to report the information, as applicable to the transferee, required herein so long as the transferee is a Major Owner.

SECTION 8. Dissemination Agent. The Property Owners may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owners in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent with or without appointing a successor Dissemination Agent.

The initial Dissemination Agent shall be the Property Owners. The Dissemination Agent may resign by providing 30 days’ written notice to the Property Owners.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owners may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):
(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, or change in law; and
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owners from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any SemiPacket Pg. 1909 E-13
Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owners choose to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owners shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.

SECTION 11. Default. In the event of a failure of the Property Owners to comply with any provision of this Disclosure Certificate, the Participating Underwriter, the District, and any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owners to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owners to comply with this Disclosure Certificate shall be an action to compel performance.

SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owners agree to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. If the Dissemination Agent is not the Property Owners, the Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Property Owners, the Participating Underwriter, the Bond owners, or any other party. The obligations of the Property Owners under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Notices. Any notice or communications to be among any of the parties to the Disclosure Certificate may be given by regular, overnight, or electronic mail as follows:

To the Issuer: City of San Bernardino
290 North “D” Street
San Bernardino, CA 92401
Attn: Barbara Whitehorn, Agency Director of
Administrative Services
Email: [email protected]
To the Participating Underwriter: Hilltop Securities Inc. 2533 South Coast Highway 101, Suite 250
Cardiff, CA 92007
Attn: Mike Cavanaugh, Managing Director
Email: [email protected]
To the Property Owner: ___________________
___________________
Attn: ______________
Email: _____________
With a copy to: Fennemore Craig, P.C.

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550 E. Hospitality Lane, Suite 350
San Bernardino, CA 92408
Attn: Kevin K. Randolph
Email: [email protected]
Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Property Owners (its successors and assigns), the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owners hereunder shall be assumed by any legal successor to the obligations of the Property Owners as a result of a sale, merger, consolidation or other reorganization. (Signature page follows)
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IN WITNESS WHEREOF, the Property Owners have executed this Disclosure Certificate as of the date first above written.

PROPERTY OWNERS:

SB17329, LLC, a Delaware limited liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager
VERDEMONT RANCH LLC, a Delaware limited liability
company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager
-Signature PageContinuing Disclosure Certificate
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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE PERIODIC REPORT Name of Issuer: Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California Name of Bond Issue: $______ Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, 2023 Special Tax Bonds
Date of Issuance: ______, 2023
NOTICE IS HEREBY GIVEN that SB17329, LLC, a Delaware limited liability company and VERDEMONT RANCH LLC, a Delaware limited liability company (together referred to as the “Property Owners”) have not provided a Semi-Annual Report with respect to the above-named Bonds as required by the Disclosure Certificate. The Property Owners anticipate that the applicable Semi-Annual Report will be filed by _____________, 20__.

Dated: _______________
Dissemination Agent
By: __________________________________
Its: __________________________________
cc: Property Owner
District
Participating Underwriter
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EXHIBIT B

SEMI-ANNUAL REPORT
APRIL 1, ____/ SEPTEMBER 30, ____
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO
OF 2023 SPECIAL TAX BONDS
This Semi-Annual Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate of the Property Owners (the “Disclosure Certificate”) dated as of _______ 1, 2023, executed by the undersigned (the “Property Owners”) in connection with the issuance by the City of San Bernardino (the “City”) of the bonds captioned above (the “Bonds”) for Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino (the “District”).

Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.

I. Property Ownership and Development
The information in this section is provided as of __________, 20__ (this date must be not more than 60 days before the Report Date of this Semi-Annual Report).

A. Description of the Property currently owned by the Property Owners in the District (the “Property”) in substance and form similar to such information in the Official Statement for the Bonds under the caption “THE DISTRICT—The Development” or the Semi-Annual Report last filed in accordance with the Disclosure Certificate.

B. Updated information regarding land development construction of backbone infrastructure and home construction activities with respect to the Property described in the Official Statement for the Bonds under the caption “THE DISTRICT—The Development” or the Semi-Annual Report last filed in accordance with the Disclosure Certificate.

C. Status of any building permits and material changes to the description of land use or development entitlements for the Property in the Official Statement for the Bonds under the caption “THE DISTRICT—The Development” or the Semi-Annual Report last filed in accordance with the Disclosure Certificate.

D. Status of any land purchase contracts with regard to the Property, whether acquisition of land in the District by the Property Owners or sales of land to other property owners (other than individual homeowners).

II. Legal and Financial Status of Property Owner
Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any material change in the legal structure of the Property Owners or the financial condition and financing plan of the Property Owners that would materially and adversely interfere with its ability to complete Packet Pg. 1914
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its development plan described in the Official Statement. To the extent that the ownership of the Property Owners have changed, describe all material terms of the new ownership structure.

III. Change in Development or Financing Plans
Unless such information has previously been included or incorporated by reference in a Semi-Annual Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement.

IV. Status of Tax Payments
Describe status of payment of taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property owned by the Property Owners and its Affiliates.

V. Other Material Information
In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Certification
On behalf of the Property Owners, the undersigned officer or representative, based on actual knowledge after reasonable inquiry of employees of Property Owners and its Affiliates, hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Property Owners under the Disclosure Certificate.

ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNERS, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OTHER

THAN STATEMENTS MADE BY THE PROPERTY OWNERS IN AN OFFICIAL RELEASE, OR FILED

WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNERS. THE PROPERTY OWNERS ARE NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.

THE PROPERTY OWNERS HAVE NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.

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Dated:

PROPERTY OWNER:

SB17329, LLC, a Delaware limited liability company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager
VERDEMONT RANCH LLC, a Delaware limited liability
company
By: JEC Enterprises, Inc.,
A California corporation
Its: Manager
By ___________________________________
Name: Felizardo Robles, Jr., President of JEC Enterprises, Inc., Manager
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APPENDIX F

PROPOSED FORM OF BOND COUNSEL OPINION
______, 2023
City Council
City of San Bernardino
290 North “D” Street
San Bernardino, CA 92401
Re: $______ Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds
Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the City of San Bernardino (the “City”) for and on behalf of Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino, County of San Bernardino, State of California (the “District”), of $_____ aggregate principal amount of the Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”). The Bonds are issued pursuant to the provisions of 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 (the “Act”), a resolution adopted by the City Council of the City on _______, 2023 (the “Resolution”), and a Fiscal Agent Agreement, dated as of _______ 1, 2023(the “Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).

We have examined the Act, the Resolution, the Agreement and certified copies of the proceedings taken for the issuance and sale of the Bonds. As to questions of fact which are material to our opinions, we have relied upon the representations of the City contained in the Agreement, and in certificates of its authorized officers which have been delivered to us for the purpose of supplying such facts, without having undertaken to verify the accuracy of any such representations by independent investigation.

Based upon such examination, we are of the opinion, as of the date hereof, that the proceedings referred to above have been taken in accordance with the laws and the Constitution of the State of California, and that the Bonds, having been issued in duly authorized form and executed by the proper officials and delivered to and paid for by the purchaser thereof, and the Agreement, having been duly authorized and executed by the proper officials, constitute the legally valid and binding obligations of the City and District enforceable in accordance with their terms subject to the qualifications specified below. Except where funds are otherwise available, as may be permitted by law, the Bonds are payable, as to both principal and interest, solely from certain special taxes to be levied and collected within the District and other funds available therefor held under the Agreement.

The Internal Revenue Code of 1986, as amended (the “Code”) sets forth certain investment, rebate and related requirements which must be met subsequent to the issuance and delivery of the Bonds for the interest on the Bonds to be and remain exempt from federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroactive to the date of issuance of the Bonds. Pursuant to the Agreement, the City has covenanted to comply with the requirements of the Code and applicable regulations promulgated thereunder.

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We are of the opinion that, under existing statutes, regulations, rulings and court decisions, and assuming compliance by the City with the aforementioned covenants, the interest on the Bonds is excluded from gross income for purposes of federal income taxation and is exempt from personal income taxation imposed by the State of California.

We are further of the opinion that interest on the Bonds is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, for tax years beginning after December 31, 2022, interest on the Bonds is taken into account in determining the annual adjusted financial statement income of certain corporations for the purpose of computing the alternative minimum tax imposed on certain corporations. Although interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these tax consequences will depend on the recipient’s particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.

The opinions expressed herein may be affected by actions which may be taken (or not taken) or events which may occur (or not occur) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur or are not taken or do not occur.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Agreement may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted, and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted,
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APPENDIX G

INFORMATION CONCERNING DTC
The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the City believes to be reliable, but the City 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 City which the City believes to be reliable, but the City and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

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

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized 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.

Packet Pg. 1919
G-2
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 other DTC nominee do not affect 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 City 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 City or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the City, 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 City or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Fiscal Agent, 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 Fiscal Agent. 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 bookentry credit of tendered Bonds to the Fiscal Agent’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 City or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

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G-3
The City 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 FISCAL AGENT, 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.

Packet Pg. 1921
1 $_____
COMMUNITY FACILITIES DISTRICT NO. 2018-2
(VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO
2023 SPECIAL TAX BONDS

BOND PURCHASE AGREEMENT
_______, 2023
City of San Bernardino
Community Facilities District No. 2018-2
(Verdemont Ranch) of the City of San Bernardino
290 North “D” Street
San Bernardino, CA 92401
Ladies and Gentlemen:

The undersigned, Hilltop Securities Inc., as underwriter (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with the City of San Bernardino (the “City”) for its Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the City. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the City satisfying all of the obligations imposed upon it under this Purchase Agreement. This offer is made subject to the City’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 p.m., California time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City. All capitalized terms used herein, which are not otherwise defined herein, shall have the respective meanings provided for such terms in a Fiscal Agent Agreement, dated as of ________ 1, 2023 (the “Fiscal Agent Agreement”) between the City, for and on behalf of the Community Facilities District, and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).

1. Purchase, Sale and Delivery of the Bonds.

Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the $______ aggregate principal amount of the Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto. The Bonds shall be subject to redemption as set forth in the Fiscal Agent Agreement. The purchase price for the Bonds shall be $______ (being 100% of the aggregate principal amount thereof less a net original issue discount of $______ and less an Underwriter’s discount of $______).

The Underwriter agrees to make a bona fide initial public offering of all of the Bonds in compliance with federal and state securities laws, at a price not in excess of the initial offering prices Packet Pg. 1922
2 (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the offering of the Bonds, without any requirement of prior notice, provided that the Underwriter shall not change the interest rates set forth in Exhibit A.

The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.

The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Special Tax Revenues and certain other amounts as provided in the Fiscal Agent Agreement and the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City pursuant to Resolution No. 2023-____ (the “Resolution”), adopted by its City Council of the City (the “City Council”), on _________, 2023.

The proceeds of the Bonds shall be used to: (i) finance the construction and acquisition of public facilities to be owned and operated by the City, needed with respect to the development within the Community Facilities District, (ii) fund a reserve fund securing the Bonds, and (iii) pay costs of issuance of the Bonds.

A. The City hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the City and the City shall take all action necessary to enforce its rights hereunder for the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that any representation, warranty or agreement made by the City herein is incorrect in any material respect.

The City acknowledges and agrees that: (i) the primary role of the Underwriter, as an underwriter, is to purchase securities for resale to investors in an arm’s-length commercial transaction between the City and the Underwriter and that the Underwriter has financial and other interests that differ from those of the City and the Community Facilities District; (ii) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City, or any other person or entity and has not assumed any advisory or fiduciary responsibility to the City with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City on other matters); (iii) the only obligations the Underwriter has to the City with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement, except as otherwise provided by applicable rules and regulations of the Securities and Exchange Commission or the rules of the Municipal Securities Rulemaking Board (the “MSRB”); and (iv) the City has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. The City acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB.

B. Pursuant to the authorization of the City, the Underwriter has distributed copies of the Preliminary Official Statement dated _______, 2023 relating to the Bonds, which, together with the cover page, inside cover page and appendices thereto and as supplemented is collectively herein called the “Preliminary Official Statement.” By its acceptance of this Purchase Agreement, the City hereby consents to and ratifies the use and distribution by the Underwriter of the Preliminary Official Statement, and the City agrees to execute a final official statement relating to the Bonds (the “Official Statement”) which will consist of the Preliminary Official Statement with such changes as Packet Pg. 1923
3 may be made thereto, with the approval of Best Best & Krieger LLP, Bond Counsel and Disclosure Counsel (herein called “Bond Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 2(T) hereof. The City hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto.

The City further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Fiscal Agent Agreement, this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. The Preliminary Official Statement and/or the Official Statement may be delivered and printed in a “designated electronic format” as defined in the MSRB’s Rule G-32 and as may be agreed to by the City and the Underwriter. The City confirms that it does not object to distribution of the Preliminary Official Statement or the Official Statement in electronic form. A copy of the most recent Preliminary Official Statement sent to a potential purchaser shall be sent by first class mail or electronically (or other equally prompt means) not later than the first business day following the day upon which each such request is received.

C. To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”), the City will undertake pursuant to the Continuing Disclosure Certificate, in the form attached to the Official Statement (the “Continuing Disclosure Certificate”), to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.

D. Except as the Underwriter and the City may otherwise agree, the City will deliver to the Underwriter, at the offices of Bond Counsel in Riverside, California, or at such other location as may be mutually agreed upon by the Underwriter and the City, the documents hereinafter mentioned on the Closing Date (defined below); and the City will deliver to the Underwriter through The Depository Trust Company’s (“DTC”) FAST delivery system, the Bonds, in definitive form (all Bonds bearing CUSIP® numbers printed thereon), duly executed by the City and authenticated by the Fiscal Agent in the manner provided for in the Fiscal Agent Agreement and the Community Facilities District Act at 8:00 a.m. California time, on _______, 2023 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Bonds, and the specimen Bonds will be made available for checking by the Underwriter not less than 2 days prior to the Closing.

2. Representations, Warranties and Covenants of the City. The City represents, warrants and covenants to the Underwriter that:

A. The City is a public body, corporate and politic, duly organized and validly existing pursuant to the Constitution and laws of the State of California (the “State”), and has duly authorized the formation of the Community Facilities District pursuant to resolutions duly adopted by the City Council (the “Community Facilities District Formation Resolutions” and, together with the Resolution, the “Community Facilities District Resolutions”) and the Act. The City Council, as Packet Pg. 1924
4 the legislative body of the Community Facilities District, has duly adopted the Community Facilities District Formation Resolutions, has duly adopted the Resolution and an ordinance levying the Special Taxes within the Community Facilities District (the “Ordinance”), and has caused to be recorded in the real property records of San Bernardino County, a notice of special tax lien (the “Notice of Special Tax Lien”) (the Community Facilities District Formation Resolution, the Ordinance, and the Notice of Special Tax Lien being collectively referred to herein as the “Formation Documents”), and the City Council has duly adopted the Resolution. Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State. The City has, and at the Closing Date will have, as the case may be, full legal right, power and authority: (i) to execute, deliver and perform its obligations under this Purchase Agreement and the Fiscal Agent Agreement and to carry out all transactions on its part contemplated by each of such agreements; (ii) to enter into the Continuing Disclosure Certificate; and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Fiscal Agent Agreement, this Purchase Agreement and the Official Statement.

This Purchase Agreement, the Fiscal Agent Agreement and the Continuing Disclosure Certificate are collectively referred to herein as the “City Documents.” B. By all necessary official action of the City, the City has duly authorized and approved the execution and delivery by the City of, and the performance by the City of, the obligations on its part contained in, the City Documents and has approved the use and distribution by the Underwriter of the Preliminary Official Statement and the execution, use and distribution by the Underwriter of the Official Statement, and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties thereto, the City Documents will constitute the legally valid and binding obligations of the City, on its own behalf and on behalf of the Communities Facilities District, enforceable upon the City and the Community Facilities District in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’ rights generally. To the City’s knowledge, the City has complied, and will at the Closing Date be in compliance in all respects, with the terms of the City Documents.

C. The information in the Preliminary Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) as of its date was and as of the date hereof is, and in the Official Statement (other than statements pertaining to the book-entry system as to which no view is expressed) as of its date is, true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, upon delivery and up to and including 25 days after the End of the Underwriting Period (as defined in paragraph (D) below), the Official Statement will be amended and supplemented so as to contain no misstatement of any material fact or material omission of any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading.

D. Up to and including 25 days after the End of the Underwriting Period (as defined below), the City will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the Packet Pg. 1925
5 consent of the Underwriter, which consent will not be unreasonably withheld. The City will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise materially affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. As used herein, the term “End of the Underwriting Period” means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives written notice to the contrary to the City, the End of the Underwriting Period shall be deemed to be the Closing Date.

Any notice delivered pursuant to this provision shall be delivered to the City at or prior to the Closing Date and shall specify a date (other than the Closing Date) to be deemed the “End of the Underwriting Period.” If in the opinion of the Underwriter any such event or proceedings requires the preparation and distribution of a supplement or amendment to the Official Statement, the City shall prepare and furnish to the Underwriter, at the Community Facilities District’s expense, such number of copies of the supplement or amendment to the Official Statement, in (i) a “designated electronic format” consistent with the requirements of the MSRB’s Rule G-32 and (ii) a printed format form in substance mutually agreed upon by the City and the Underwriter as the Underwriter may reasonably request. If such amendment or supplement to the Official Statement shall be made subsequent to the Closing Date, the City also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of any such supplement or amendment to the Official Statement.

E. As of the time of acceptance hereof and as of the Closing Date, the City and the Community Facilities District, as applicable, have each complied, and will at the Closing Date be in compliance in all material respects, with the Formation Documents and the City Documents, and any immaterial noncompliance by the City or the Community Facilities District, if any, will not impair the ability of the City or the Community Facilities District, as applicable, to carry out, give effect to or consummate the transactions on their part contemplated by the foregoing. From and after the date of issuance of its Bonds, the City will continue to comply with the covenants of the City contained in the City Documents and it shall cause the Community Facilities District to continue to comply with the covenants of the Community Facilities District contained in the City Documents.

F. Except as described in the Preliminary Official Statement, neither the City nor the Community Facilities District is, and as of the Closing Date, neither will be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, as the case may be, is a party or is otherwise subject or bound; and, to the City’s knowledge, no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have a materially adverse effect on the City’s ability to perform its obligations under the City Documents; and as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the City Documents and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative Packet Pg. 1926
6 decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the City of its obligations under the City Documents or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement. The City has received all licenses, permits or other regulatory approvals required, if any, for the pledge, collection and/or application by the Community Facilities District of the Special Taxes (as defined in the Fiscal Agent Agreement) and other moneys pledged to the payment of the principal of and interest on the Bonds under the Fiscal Agent Agreement.

G. Except as may be required under the “blue sky” or other securities laws of any jurisdiction, all approvals, consents, authorizations, elections and orders of, or filings or registrations with, any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the City of its obligations under the City Documents, and the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, have been or will be obtained at the Closing Date and are or will be in full force and effect at the Closing Date.

H. At the time of acceptance hereof there is and as of the Closing there will be no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body (collectively and individually, an “Action”) pending (notice of which has been served on the City) or to the knowledge of the City threatened, in which any such Action:
(i) in any way questions the powers of the City Council or the existence of the Community Facilities District or the titles of the officers of the City to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of the Bonds or the payment or collection of Special Taxes or any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contests or affects the validity of the City Documents or the consummation of the transactions on the part of the City contemplated thereby; (iii) contests the exclusion of interest on the Bonds from State income taxation or contests the powers of the City that result in any material adverse change relating to the financial condition of the City or the Community Facilities District; (iv) except as disclosed in the Official Statement, wherein an unfavorable decision, ruling or finding would materially adversely affect the financial position or condition of the City or the Community Facilities District or would result in any material adverse change in the ability of the City to pledge or apply the Special Tax Revenues or to pay debt service on the Bonds; or (v) contests the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserts that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no known basis for any Action of the nature described in clauses (i) through (v) of this sentence.

I. The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter and at the expense of the Underwriter as the Underwriter may reasonably request in order: (i) to qualify the Bonds for offer and sale under the “blue sky” or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate; and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City will not be required to execute a special or general consent to service of Packet Pg. 1927
7 process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction.

J. The City Documents conform as to form and tenor to the descriptions thereof contained in the Preliminary Official Statement. The City represents that the Bonds, when issued, executed and delivered in accordance with the Fiscal Agent Agreement and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the City, for and on behalf of the Community Facilities District, entitled to the benefits of the Fiscal Agent Agreement. The Fiscal Agent Agreement creates a valid pledge of, first lien upon and security interest in, the Special Tax Revenues, and in the moneys in the Special Tax Fund established pursuant to the Fiscal Agent Agreement, on the terms and conditions set forth in the Fiscal Agent Agreement. The Fiscal Agent Agreement creates a valid pledge of the moneys in certain funds and accounts established pursuant to the Fiscal Agent Agreement, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein.

K. Except as disclosed in the Preliminary Official Statement, there are, to the City’s knowledge, no entities with outstanding assessment liens against any of the properties within the Community Facilities District which are senior to or on a parity with the lien of the Special Taxes.

L. The issuance and sale of the Bonds is not subject to any transfer or other documentary stamp taxes of the State or any political subdivision thereof.

M. The City shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exclusion from gross income for federal income tax purposes, or the exemption from State of California personal income tax, of the interest on the Bonds. The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the City is a bond issuer whose arbitrage certifications may not be relied upon.

N. Any certificate signed by an authorized officer or employee of the City and delivered to the Underwriter in connection with the issuance of the Bonds shall be deemed a representation and covenant of the City to the Underwriter as to the statements made therein.

O. The City will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as described in the Official Statement.

P. At or prior to the Closing, the City will have duly authorized, executed and delivered the Continuing Disclosure Certificate in substantially the form under Appendix E to the Official Statement. Based on a review of its prior undertakings with respect to Rule 15c2-12, and except as disclosed in the Preliminary Official Statement and Official Statement, the City has not failed to comply in any material respect with a continuing disclosure undertaking under Rule 15c2-12 during the previous five years.

Q. Between the date of this Purchase Agreement and the date of Closing, the City will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter and the City shall not create, assume or guarantee any indebtedness payable from, or pledge or otherwise encumber, the Special Taxes or other assets, properties, funds or interests that will be pledged as security for the Bonds pursuant to the City Documents.

Packet Pg. 1928
8 R. Until such time as moneys have been set aside in an amount sufficient to pay or defease all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the City will faithfully perform and abide by all of the covenants, undertakings and provisions on its part contained in the Fiscal Agent Agreement.

S. The Preliminary Official Statement was deemed final by a duly authorized officer of the City prior to its delivery to the Underwriter, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The City hereby covenants and agrees that, within seven (7) business days from the date hereof, or upon reasonable written notice from the Underwriter within sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, the City shall cause a final electronic and/or printed form of the Official Statement as set forth in Section 1 above to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board.

T. The City hereby approves the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel and the Underwriter from time to time prior to the Closing Date.

U. The City hereby ratifies any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, this Purchase Agreement and all information contained herein, and all other documents, certificates and written statements furnished by the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.

V. The execution and delivery of this Purchase Agreement by the City shall constitute a representation by the City to the Underwriter that the representations and warranties contained in this Section 2 with respect to the City and the Community Facilities District are true as of the date hereof.

3. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the City and the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City and the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and, to the following additional conditions:

A. At the Closing Date, the Community Facilities District Resolutions, the Formation Documents, and the City Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.

B. At the Closing Date, except as was described in the Preliminary Official Statement, the City shall not be, in any respect material to the Bonds, the City Documents or the transactions Packet Pg. 1929
9 referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, and the performance by the City of its obligations under the Bonds, the City Documents, the Community Facilities District Resolutions, this Purchase Agreement and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America or of any department, division, agency or instrumentality of either thereof or under any applicable court or administrative decree or order or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the City of its obligations under the City Documents, the Bonds or the Community Facilities District Resolutions.

C. The information contained in the Official Statement (other than statements pertaining to the book-entry system, as to which no view is expressed) is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

D. The Underwriter shall have the right to cancel its obligation to purchase the Bonds and to terminate this Purchase Agreement by written notice to the City if, between the date of this Purchase Agreement and the Closing Date, in the Underwriter’s sole and reasonable judgment any of the following events shall occur (each a “Termination Event”):

1. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
a. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or the legislature of the State or recommended to the Congress by the President of the United States of America or a member of the President’s Cabinet, the Department of the Treasury, the Internal Revenue Service or any member of Congress or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America, the Internal Revenue Service or other federal or State authority with appropriate jurisdiction, with the purpose or effect, directly or indirectly, of imposing federal or State income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; Packet Pg. 1930
10 b. Legislation introduced in or enacted (or resolution passed) by the Congress, or shall have been favorably reported out of committee or be pending in committee, or shall have been recommended to the Congress for passage by the President of the United States of America or a member of the President’s Cabinet, or an order, decree, injunction or decision issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, the Resolution or the City Documents, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities laws as amended and then in effect;
c. A general suspension of trading in securities on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction;
d. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis;
e. Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or the Community Facilities District shall have occurred;

2. The introduction, proposal or enactment of any amendment to the federal or California Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City or the Community Facilities District, their property, income, securities (or interest thereon), or the validity or enforceability of Special Taxes;

3. Any event occurring or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

4. A general banking moratorium shall have been declared by federal, State of New York or State of California officials authorized to do so or a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; Packet Pg. 1931
11 5. Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation in interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the Comptroller of the Currency, the Securities and Exchange Commission or any other federal or State agency or the Congress of the United States of America, or by Executive Order;

6. A decision by a court of the United States of America shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Trust Indenture Act of 1939;

7. Any amendment is made to the Official Statement that in the Underwriter’s reasonable judgment will materially adversely affect the marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds;

8. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District;

9. The commencement of an Action described in Section 2(H); Upon the occurrence of a Termination Event and the termination of this Purchase Agreement by the Underwriter, all obligations of the City, the Community Facilities District, and the Underwriter under this Agreement shall terminate, without further liability, except that the City and the Underwriter shall pay their respective expenses as set forth in Section 5 below.

E. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:

1. Official Statement. The Official Statement and each supplement or amendment, if any thereto, executed by an authorized officer of the City;

2. Fiscal Agent Agreement. The Fiscal Agent Agreement, duly executed and delivered by the City and the Fiscal Agent;

3. Resolutions. Certifications by the City Clerk with respect to each resolution and ordinance of the City Council, for the City or as the legislative body of the Community Facilities District, relating to the City Documents, the transactions contemplated thereby, formation of the Community Facilities District and issuance of the Bonds;

4. City Continuing Disclosure Certificate. The Continuing Disclosure Certificate executed by the City;
Packet Pg. 1932
12 5. Bond Counsel Opinion. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the City, of Bond Counsel in substantially the form included as Appendix E to the Official Statement; together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;

6. Supplemental Opinion. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that:
(i) this Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding agreement of the City and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended;
(iii) the information contained in the Official Statement on the cover and under the captions “THE FINANCING PLAN,” “THE BONDS,” “SOURCES OF PAYMENT FOR THE BONDS,” “LEGAL MATTERS – Tax Exemption” and in Appendices D and F to the Official Statement (excluding any financial, statistical and economic data, forecasts, numbers, charts, graphs, estimates, projections, and assumptions and any information regarding The Depository Trust Company and the book-entry system as to which Bond Counsel need express no opinion or view, and further, excluding any material that may be treated as included under such captions by cross-reference), are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Fiscal Agent Agreement, Bond Counsel’s final approving opinion and the Community Facilities District Act; and
(iv) the Community Facilities District has been duly formed, and the Special Taxes have been duly and validly levied in accordance with the provisions of the Community Facilities District Act and, except to the extent prohibited by moratorium, bankruptcy, reorganization, fraudulent conveyance or transfer, insolvency or other similar laws affecting creditors’ rights generally, a lien to secure payment of the Special Taxes has been imposed on taxable property in the Community Facilities District;

7. Letter of Disclosure Counsel. A letter, dated the Closing Date and addressed to the Underwriter and the City, of Best Best & Krieger LLP, acting as Disclosure Counsel, to the effect that no facts have come to the attention of the attorneys in such firm rending legal services in connection with the Bonds that cause them to believe that the Preliminary Official Statement as of its date and as of the date of this Purchase Agreement and the Official Statement, as of its date or as of the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statement made therein, in light of the circumstances under which they were made, not misleading (except that no opinion or belief need be expressed as to any appendices, CUSIP numbers, financial, accounting, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, Packet Pg. 1933
13 assumptions or expressions of opinion, any determinations regarding valuation, real estate, and environmental matters, or any basis therefor; information about the Underwriter, underwriting; statements relating to the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the laws of any jurisdiction and statements contained in the Official Statement under the caption LEGAL MATTERS – Tax Exemption,” any information about the Depository Trust Company or the book-entry system).

8. City Attorney Opinion. An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, in substantially the form attached hereto as Exhibit B;

9. Closing Certificate of the City. A certificate, dated the Closing Date, and signed by an authorized officer of the City substantially in the form of Exhibit C hereto, together with such additional certifications as Bond Counsel may require;

10. Fiscal Agent Incumbency Certificate. Certified copies of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent which resolution authorizes the execution of the Fiscal Agent Agreement and the authentication of the Bonds;

11. Fiscal Agent ’s Certificate. A certificate or certificates of the Fiscal Agent, dated the Closing Date, in form and substance acceptable to the Underwriter and Bond Counsel;

12. Fiscal Agent ’s Counsel Opinion. An opinion or opinions of counsel to the Fiscal Agent dated the Closing Date and addressed to the City and the Underwriter to the effect that the Fiscal Agent has duly authorized the execution and delivery of the Fiscal Agent Agreement and is a valid and binding obligation of the Fiscal Agent enforceable in accordance with its terms;

13. Opinion of Underwriter’s Counsel. An opinion of Kutak Rock LLP, counsel to the Underwriter, dated the date of the Closing, addressed to the Underwriter, in form and substance acceptable to the Underwriter;

14. Special Tax Consultant Certificate. A certificate, dated the Closing Date from Spicer Consulting Group, LLC (the “Special Tax Consultant”) substantially in the form attached as Exhibit D hereto;

15. Specimen Bonds. Copies of the Specimen Bonds;

16. Nonarbitrage Certificate. A certificate of the City, dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;

17. Form 8038-G. An Information Return for Tax-Exempt Bond Issues (Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed by a duly authorized officer of the City, together with evidence that such Form 8038-G has been mailed;

18. CDIAC Statements. Copies of filings with the California Debt and Investment Advisory Commission relating to the issuance of the Bonds; Packet Pg. 1934
14 19. Blanket Letter of Representations. A copy of the Blanket Letter of Representations to DTC relating to the Bonds signed by the City;

20. Certificates Regarding Preliminary Official Statement. Prior to and in connection with printing and distribution of the Preliminary Official Statement, (i) an executed certificate of the City deeming the Preliminary Official Statement final within the meaning of the Rule, and (ii) an executed certificate of JEC Enterprises, Inc., a California corporation (the “Property Owner”), substantially in the form under Exhibit F hereto;

21. Property Owner Continuing Disclosure Certificate. An executed copy of the Property Owner Continuing Disclosure Certificate in the form included as an appendix to the Official Statement;

22. Property Owner Bring-Down Certificate. An executed bring-down certificate from the Property Owner, dated as of the Closing Date, substantially in the form set forth in Exhibit G hereto;

23. Property Owner Counsel Opinion. The opinions of counsel to the Property Owner addressed to the City and the Underwriter, dated as of the Closing Date, in form and substance acceptable to the City and the Underwriter;

24. Appraiser Closing Certificate. A certificate in form and substance as set forth in Exhibit H hereto of Kitty Siino & Associates, Inc., Tustin, California, the appraiser of the property within the Community Facilities District, dated as of the Closing Date; and

25. Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the City contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the City and the Community Facilities District in connection with the transactions contemplated hereby and by the Fiscal Agent Agreement and the Official Statement.

If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the City nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the City set forth in Section 5 hereof shall continue in full force and effect.

4. Representations and Agreements of the Underwriter. The Underwriter represents to and agrees with the City that:

A. The Underwriter is duly authorized to execute and deliver this Purchase Agreement and to take any action under the Purchase Agreement required to be taken by it.

Packet Pg. 1935
15 B. The Underwriter is in compliance with MSRB Rule G-37 with respect to the City and the Community Facilities District, and is not prohibited thereby from acting as underwriter with respect to securities of the City and the Community Facilities District. The Underwriter is in compliance with MSRB Rule G-17 with respect to the City and the Community Facilities District.

C. The Underwriter has, and has had, no financial advisory relationship with the City or the Community Facilities District with respect to the Bonds, and no investment firm controlling, controlled by or under common control with the Underwriter has or has had any such financial advisory relationship, within the meaning of California Government Code Section 53590, or otherwise.

D. The Underwriter has not paid or agreed to pay, nor will it pay or agree to pay, any entity, company, firm or person (including, but not limited to, the City’s financial consultants, or any officer, agent or employee thereof), other than a bona fide officer, agent or employee working for the Underwriter, any compensation, fee, gift or other consideration contingent upon or resulting from the award of or entering into this Purchase Agreement.

E. The Underwriter has reasonably determined that the City’s undertaking in the Continuing Disclosure Certificate to provide continuing disclosure with respect to the Bonds is sufficient to effect compliance with the Rule.

5. Expenses.

A. Whether or not the Underwriter accepts delivery of and pays for the Bonds as set forth herein, it shall be under no obligation to pay, and the City shall pay out of the proceeds of the Bonds or any other legally available funds of the City, all expenses incidental to the performance of the City’s obligations hereunder, including but not limited to the cost of printing and delivering the Bonds to the Underwriter; the costs of printing and shipping the Preliminary Official Statement and the Official Statement; the fees and disbursements of the City, the Community Facilities District, the Fiscal Agent, Bond Counsel, Disclosure Counsel, accountants and any other experts or consultants retained by the City or the Community Facilities District in connection with the issuance and sale of the Bonds; and any other expenses not specifically enumerated in paragraph (B) of this Section incurred in connection with the issuance and sale of the Bonds.

B. Whether or not the Bonds are delivered to the Underwriter as set forth herein, the City shall be under no obligation to pay, and the Underwriter shall be responsible for and pay, CUSIP® and CDIAC fees and expenses to qualify the Bonds for sale under any “blue sky” laws; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph (A) of this Section, including the fees and disbursements of its counsel.

6. Undertakings of the City. The City agrees: (a) to inform the Underwriter, from time to time, upon the reasonable request of the Underwriter, of the amount then on deposit in the Reserve Fund; and (b) to make available to the Underwriter, upon reasonable request of the Underwriter, at the expense of the City, sufficient copies of its audited financial statements, if any, and any resolutions of the City Council with respect to the Community Facilities District Resolutions, the Bonds, the Fiscal Agent Agreement, the Official Statement, any amendments or supplements thereto, and other documents relating to the Bonds and pertaining to the City or the Community Facilities Packet Pg. 1936
16 District adopted or executed, as the case may be, after the Closing Date, to the extent that such documents are publicly available.

7. Establishment of Issue Price.

The Underwriter agrees to assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at or before the Closing Date an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit E, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the City and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds.

With respect to Bonds of those maturities as to which at least 10% of the Bonds of the maturity has been sold to the public (defined in paragraph (f) below) at a single price (the “10% test”), based on reporting by the Underwriter to the City on the date hereof and prior to the execution of this Purchase Agreement, which maturities are indicated in Exhibit A attached hereto as having satisfied the 10% test (the “10% Test Maturities”), the City will treat the first price at which 10% of each such maturity of the Bonds was sold to the public as the issue price of that maturity. With respect to Bonds of those maturities as to which the 10% test has not been satisfied, based on reporting by the Underwriter to the City on the date hereof and prior to the execution of this Purchase Agreement, which maturities are indicated in Exhibit A attached hereto as being subject to the “holdthe-offering-price rule,” defined below (the “Hold-the-Offering-Price Maturities”), the Underwriter and the City agree that the rules in paragraph (c) below shall apply. For purposes of this section, for Bonds maturing on the same date but having different interest rates, each separate group of Bonds having a different interest rate is subject to the 10% test or paragraph (c) below, as the case may be, as if such separate group of Bonds was a separate maturity.

The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (each an “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, identified under the columns (X) “10% Test Satisfied,” (Y) “10% Test Not Satisfied,” and (Z) “Subject to Hold-the-Offering-Price-Rule Used,” as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (based on the assumption that the orders aggregating more than 10% of a maturity will be confirmed by the close of the business day immediately following the date of this Purchase Agreement) (see clause (X) above, which will be checked), or (ii) the 10% test has not been satisfied and for which the City and the Underwriter agree that the restrictions set forth in the next sentence shall apply (see clauses (Y) and (Z) above, both of which will be checked) , which will allow the City to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:

1. the close of the fifth (5th) business day after the sale date; or Packet Pg. 1937
17 2. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.

The Underwriter shall promptly advise the City, after the close of the fifth (5th) business day, whether it has sold at least 10% of each Hold-the-Offering-Price maturity to the public at a price that is no higher than the initial offering price to the public of that maturity, if such sale has occurred prior to the close of the fifth (5th) business day after the sale date.

The Underwriter confirms that:
(i) any selling group agreement and any retail or other third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail or other third-party distribution agreement, as applicable:
(A) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or brokerdealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a retail or other third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such retail or other third-party distribution agreement to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires.
(e) The City acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail or other third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the retail or other third-party distribution agreement and the related pricing wires.

Packet Pg. 1938
18 (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.

Further, for purposes of this section:
(i) “public” means any person other than an underwriter or a related party;
(ii) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail or other thirdparty distribution agreement participating in the initial sale of the Bonds to the public); (iii) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (iv) “sale date” means the date of execution of this Purchase Agreement by all parties.

8. Notices. Any notice or other communication to be given to the City pursuant to this Bond Purchase Agreement may be given by delivering the same in writing to such entity, at the addresses set forth on the cover page hereof. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Hilltop Securities Inc., 2533 South Coast Highway 101, Suite 250, Cardiff by the Sea, California 92007, Attention: Public Finance. All such notices, requests or other communications may be made by telephone, personal or courier delivery, registered or certified mail, facsimile transmission or electronic communication, provided that delivery by facsimile transmission or electronic communication must be confirmed by the sender. The City and the Underwriter may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications.

9. Parties In Interest. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. The City and the Underwriter may not assign this Agreement. The term “successor” shall not include any holder of any Bonds merely by virtue of such holding.

10. Survival of Representations and Warranties. The representations and warranties of the City under this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on Packet Pg. 1939
19 behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City or the Community Facilities District and regardless of delivery of and payment for the Bonds.

11. Severability. If any provision of this Purchase Agreement is, or is held or deemed to be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, because it conflicts with any provisions of any constitution, statute, rule of public policy or for any other reason, such circumstances shall not make the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or make any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever.

12. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

13. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding between the parties hereto in relation to the sale of the Bonds by the City.

14. Governing Law. This Purchase Agreement shall be governed by the laws of the State applicable to contracts made and performed in the State. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
Packet Pg. 1940
20 15. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance.

Very truly yours,
HILLTOP SECURITIES INC.

By:

Its: Managing Director
The foregoing is hereby agreed to and
accepted as of the date first above written:

CITY OF SAN BERNARDINO, for and on
behalf of COMMUNITY FACILITIES
DISTRICT NO. 2018-2 (VERDEMONT

RANCH) OF THE CITY OF SAN

BERNARDINO
By:

Authorized Representative
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT – COMMUNITY FACILITIES DISTRICT NO. 2018-2 (VERDEMONT RANCH) OF THE CITY OF SAN BERNARDINO 2023 SPECIAL TAX BONDS]
Packet Pg. 1941
A-1

EXHIBIT A

MATURITY SCHEDULE
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-TheOffering-Price
Rule (marked
if used)
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
20__(T)
20__(T)
20__(T)
20__(T)
_________________
(T) Term Bond.
*At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.

Packet Pg. 1942
B-1

EXHIBIT B

FORM OF CITY ATTORNEY OPINION
[Closing Date]
Hilltop Securities Inc.

Cardiff by the Sea, CA
City of San Bernardino
San Bernardino, CA
Re: Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds
Ladies and Gentlemen:

We serve as City Attorney to the City of San Bernardino (the “City”). This opinion is addressed to you in connection with the issuance by the City of its Community Facilities District No. 2018-2 (Verdemont Ranch) of the City of San Bernardino 2023 Special Tax Bonds (the “Bonds”) in the principal amount of $______. The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of ____ 1, 2023 (the “Fiscal Agent Agreement”), between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent ”) and sold pursuant to the Bond Purchase Agreement dated [BPA Date] (the “Purchase Agreement”), between the City and Hilltop Securities Inc., as underwriter (the “Underwriter”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement or, if not defined in the Fiscal Agent Agreement, in the Purchase Agreement.

In rendering this opinion, we have made the assumption that all documents submitted to or reviewed by us are accurate and complete and, if not originals, are true and correct copies of originals. As to questions of fact material to this opinion letter, we have relied upon representations and information supplied to us by the City and its officers, employees, and representatives and upon representations and certificates of various public officials. In the course of my representation, nothing has come to our attention that caused us to believe that any of the factual representations upon which we have relied are not true, but we have made no other factual investigations.

When used herein, the phrase “to our current actual knowledge” means that, during the course of our representation of the City, no information that would give us current actual knowledge of the inaccuracy of such statements has come to our attention. However, we have not undertaken any independent investigation or inquiry to determine the accuracy of such statements other than inquiries of officers of the City. Any limited inquiry undertaken by us during the preparation of this opinion letter should not be regarded as such an investigation. No inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of my representation of the City, either past or present.

For the purpose of rendering the opinions set forth below, we have assumed that the Bonds have been issued in compliance with the provisions of the Mello-Roos Community Facilities Act of 1982 of the State of California (being §§53311 et seq., of the California Government Code), that the Bonds have been issued in accordance with the requirements of the Fiscal Agent Agreement, and that Packet Pg. 1943
B-2
such issuance does not result in the violation of any constitutional, statutory, or other limitation relating to the amount of indebtedness that may be incurred by the City.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the opinion that:

1. The City is a public body, corporate and politic, duly organized and existing under and by virtue of the laws of the State of California.

2. The meetings of the City relating to the proceedings taken in connection with the issuance of the Bonds were duly called and held and the Resolution was duly adopted or enacted and is in full force and effect and has not been amended, modified or supplemented in any way.

3. The Purchase Agreement, the Fiscal Agent Agreement, the Continuing Disclosure Certificate and the Bonds have been duly authorized and executed by the City and, assuming the due authorization, execution, and delivery of the Purchase Agreement, Continuing Disclosure Certificate, and the Fiscal Agent Agreement by and their enforceability against the other parties thereto, the Purchase Agreement, Continuing Disclosure Certificate, the Fiscal Agent Agreement and the Bonds are legal, valid, binding agreements of the City for the District enforceable against the City in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally; by the application of general principles of equity, including without limitation concepts of materiality, reasonableness, good faith, and fair dealing, regardless of whether considered in a proceeding in equity or at law; the possible unavailability of specific performance or injunctive relief; and by the limitations imposed on actions against governmental entities in the State of California.

4. The adoption of the Resolution and the execution and delivery by the City of the Purchase Agreement, the Fiscal Agent Agreement, Continuing Disclosure Certificate, and the Bonds and compliance with the provisions thereof by the City do not violate any applicable law, regulation or, to the best of my current actual knowledge, judgment, order or decree of any court or any public or governmental agency or authority of the State of California or the federal government of the United States of America and, to the best of my current actual knowledge, do not result in the breach of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the City is a party or by which it is otherwise subject.

5. To our current actual knowledge, the City is not violating any applicable law or administrative regulation of the State of California or the United States, is not violating or in breach of any applicable judgment or decree, and is not in breach of or default under any loan agreement, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, which violation, breach, or default would materially adversely affect the transactions contemplated by the Purchase Agreement, the Fiscal Agent Agreement, or the Bonds.