Tracy City Council
October 17, 2023

Date Posted: October 12, 2023

THIS MEETING WILL BE OPEN TO THE PUBLIC FOR IN-PERSON AND REMOTE PARTICIPATION PURSUANT TO GOVERNMENT CODE SECTION 54953(e).

MEMBERS OF THE PUBLIC MAY PARTICIPATE REMOTELY IN THE MEETING VIA THE FOLLOWING METHOD:

As always, the public may view the City Council meetings live on the City of Tracy’s website at CityofTracy.org or on Comcast Channel 26/AT&T U-verse Channel 99. To view from the City’s website, open the “Government” menu at the top of the City’s homepage and select “City Council Meeting Videos” under the “City Council” section.

If you only wish to watch the meeting and do not wish to address the Council, the City requests that you stream the meeting through the City’s website or watch on Channel 26.

Remote Public Comment:

During the upcoming City Council meeting public comment will be accepted via the options listed below. If you would like to comment remotely, please follow the protocols below:
• Comments via:
o Online by visiting https://cityoftracyevents.webex.com and using the following Event Number: 2553 401 3246 and Event Password: TracyCC o If you would like to participate in the public comment anonymously, you may submit your comment in WebEx by typing “Anonymous” when prompted to provide a First and Last Name and inserting [email protected] when prompted to provide an email address.
o Join by phone by dialing +1-408-418-9388, enter 25534013246#8722922# Press *3 to raise the hand icon to speak on an item.
• Protocols for commenting via WebEx:
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▪ Listen for the Mayor to open that portion of the agenda for discussion, then raise your hand to speak by clicking on the Hand icon on the Participants panel to the right of your screen.
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TRACY CITY COUNCIL REGULAR MEETING AGENDA
Tuesday, October 17, 2023, 7:00 P.M.

Tracy City Hall Chambers, 333 Civic Center Plaza, Tracy Web Site: www.cityoftracy.org
TRACY CITY COUNCIL AGENDA 2 October 17, 2023

Americans With Disabilities Act - The City of Tracy complies with the Americans with Disabilities Act and makes all reasonable accommodations for the disabled to participate in Council meetings. Persons requiring assistance or auxiliary aids should call City Hall (209/831-6105) 24 hours prior to the meeting.

Addressing the Council on Items on the Agenda - The Brown Act provides that every regular Council meeting shall provide an opportunity for the public to address the Council on any item within its jurisdiction before or during the Council's consideration of the item, provided no action shall be taken on any item not on the agenda. To facilitate the orderly process of public comment and to assist the Council to conduct its business as efficiently as possible, members of the public wishing to address the Council are requested to, but not required to, ha nd a speaker card, which includes the speaker’s name or other identifying designation and address to the City Clerk prior to the agenda item being called. Generally, once the City Council begins its consideration of an item, no more speaker cards will be accepted. An individual’s failure to present a speaker card or state their name shall not preclude the individual from addressing the Council. Each citizen will be allowed a maximum of five minutes for input or testimony. In the event there are 15 or more individuals wishing to speak regarding any agenda item including the “Items from the Audience/Public Comment” portion of the agenda and regular items, the maximum amount of time allowed per speaker will be three minutes. When speaking under a specific agenda item, each speaker should avoid repetition of the remarks of the prior speakers. To promote time efficiency and an orderly meeting, the Presiding Officer may request that a spokesperson be designated to represent similar views. A designated spokesperson shall have 10 minutes to speak. At the Presiding Officer’s discretion, additional time may be granted. The City Clerk shall be the timekeeper.

Consent Calendar - All items listed on the Consent Calendar are considered routine and/or consistent wit h previous City Council direction. One motion, a second, and a roll call vote may enact the items listed on the Consent Calendar. No separate discussion of Consent Calendar items shall take place unless a member of the City Council, City staff or the public request discussion on a specific item.

Addressing the Council on Items not on the Agenda – The Brown Act prohibits discussion or action on items not on the posted agenda. The City Council’s Meeting Protocols and Rules of Procedure provide that in the interest of allowing Council to have adequate time to address the agendized items of business, “Items from the Audience/Public Comment” following the Consent Calendar will be limited to 15 -minutes maximum period. “Items from the Audience/Public Comment” listed near the end of the agenda will not have a maximum time limit. A five - minute maximum time limit per speaker will apply to all individuals speaking during “Items from the Audience/Public Comment”. For non-agendized items, Council Members may briefly respond to statements made or questions posed by individuals during public comment; ask questions for clarification; direct the individual to the appropriate staff member; or request that the matter be placed on a future agenda or that staff provide additi onal information to Council. When members of the public address the Council, they should be as specific as possible about their concerns. If several members of the public comment on the same issue an effort should be made to avoid repetition of views already expressed.

Notice - A 90 day limit is set by law for filing challenges in the Superior Court to certain City administrative decisions and orders when those decisions or orders require: (1) a hearing by law, (2) the receipt of evidence, and (3) the exercise of discretion. The 90 day limit begins on the date the decision is final (Code of Civil Procedure Section 1094.6). Further, if you challenge a City Council action in court, you may be limited, by California law, including but not limited to Government Code Section 65009, to raising only those issues you or someone else raised during the public hearing, or raised in written correspondence delivered to the City Council prior to or at the public hearing.

Full copies of the agenda are available on the City’s website: www.cityoftracy.org

Date Posted: October 12, 2023
TRACY CITY COUNCIL AGENDA 3 October 17, 2023

CALL TO ORDER

ROLL CALL

PLEDGE OF ALLEGIANCE

INVOCATION
ACTIONS, BY MOTION, OF CITY COUNCIL PURSUANT TO AB 2449, IF ANY

PRESENTATIONS

1. Proclamation – Arbor Day

2. Proclamation – Breast Cancer Awareness Month

3. Employee of the Month

ORDER OF BUSINESS

1. CONSENT CALENDAR

1.A. Adoption of October 3, 2023 Closed Session and Regular Meeting Minutes

1.B. City Council 1) declare certain vehicles, equipment and commodities as surplus pursuant to Tracy Municipal Code Section 2.20.310, and 2) approve the sale of such surplus property at public auction to the highest bidder.

1.C. Adopt a Resolution approving Amendment No. 1 to the Professional Services Agreement with Guidepost Solutions, LLC for the Security System Implementation for the City’s Water Facilities Project, CIP 75169, to extend the term of the Agreement, amend the scope of work, and increase the total compensation by $18,400 (for a total not-to-exceed amount of $71,690).

1.D. Adopt a Resolution: (1) authorizing the submittal of an application, and upon award, execution by the Mayor of a grant agreement with the California Department of Transportation Division of Aeronautics, for the Airport Improvement Program Matching Grant 3-06-0259-025-2023; and (2) subject to and upon award, accepting such grant funds and appropriating the full grant amount to Capital Improvement Project 77593 - Slurry Seal Tee Hangar Taxilanes Project.

1.E. The Tracy Homelessness Advisory Committee recommends that the City Council adopt a resolution (1) making a determination that United Site Services of California, Inc. provides unique products and services that are not available from other sources, therefore compliance with the standard procurement process is not in the best interest of the City pursuant to Tracy Municipal Code Section 2.20.180(B)(2) and (2) approving the general services agreement with United Site Services of California, Inc., with a not-to-exceed amount of $125,000, to provide temporary showers and restrooms to Phase IV-Custom Container occupants until permanent bathrooms are installed under Phase II-Site Improvements at the Temporary Emergency Housing Facility, CIP 71112, at 370 West Arbor Avenue.

1.F. Adopt the Resolution authorizing the award of a construction contract to Anderson Striping and Construction, Inc. in the not-to-exceed amount of $269,354, and (2) authorizing a contingency for change orders in the amount of $26,935.

TRACY CITY COUNCIL AGENDA 4 October 17, 2023

2. ITEMS FROM THE AUDIENCE

3. REGULAR AGENDA

3.A. Adopt a Resolution adopting the 2024 Development Fee for the San Joaquin County Multi- Species Habitat Conservation and Open Space Plan.

3.B Adopt a Resolution 1) authorizing the issuance and sale of special tax bonds for the purpose of financing authorized facilities and 2) approving and authorizing related documents and actions for Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1.

3.C. Adopt a Resolution: 1) rescinding Resolution 2022-184 that approved the Regular Meeting Calendar of the Tracy City Council for 2023 (Calendar); and 2) approving an amended Regular Meeting Calendar of the Tracy City Council for 2023.

4. ITEMS FROM THE AUDIENCE

5. STAFF ITEMS

6. COUNCIL ITEMS

7. ADJOURNMENT

TRACY CITY COUNCIL - SPECIAL MEETING MINUTES

October 3, 2023, 5:00 p.m.

Tracy City Hall, 333 Civic Center Plaza, Tracy, CA.

1. Mayor Young called the meeting to order at 5:03 p.m.

2. There were no actions taken pursuant to AB 2449, if any

3. Roll Call found Council Members Arriola, Evans, Mayor Pro Tem Davis and Mayor Young present. Council Member Bedolla absent from roll call.

4. Items from the audience – There was no public comment.

5. Request to Conduct Closed Session

5.A Conference regarding Labor Negotiations involving a Joint Powers Agency (JPA) pursuant to Gov. Code § 54956.96

• Negotiators for South San Joaquin County Fire Authority (JPA):

Randall Bradley, Fire Chief
Christopher Boucher, Legal Counsel
Marc Zafferano, Legal Counsel

• Employee Organizations:

Tracy Firefighters Association
South County Fire Authority Association

5.B CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
(Paragraph (1) of subdivision (d) of Section 54956.9)

MARY MITRACOS, v. CITY OF TRACY, and SURLAND COMMUNITIES, LLC, CASE NO. C093383; COURT OF APPEAL, STATE OF CALIFORNIA THIRD

APPELLATE DISTRICT

5.C CONFERENCE WITH LEGAL COUNSEL—ANTICIPATED LITIGATION

Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9, and significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of Section 54956.9.

Mayor Pro Tem Davis recused herself from item 5.B due to proximity of real property.

Council Member Bedolla arrived at 5:09 p.m.

ACTION: Motion was made by Mayor Pro Tem Davis and seconded by Council Member Evans to recess to closed session. Roll call found all in favor; passed and so ordered. Time: 5:09 p.m.

Mayor Pro Tem Davis left the closed session at 5:59 p.m.

Mayor Pro Tem Davis rejoined the closed session at 7:05 p.m.

Special Meeting Minutes 2 October 3, 2023

6. Reconvene to Open Session – Time: 7:05 p.m.

7. Report of Final Action, if Any – None

8. Council Items and Comments – None

9. Adjournment – Time: 7:06 p.m.

ACTION: Motion was made by Mayor Pro Tem Davis and seconded by Council Member Bedolla to adjourn. Roll call found all in favor; passed and so ordered.

The above agenda was posted at the Tracy City Hall on September 28, 2023. The above are action minutes. A recording is available at the office of the City Clerk.

____________________________
Mayor
ATTEST:

___________________________
City Clerk

TRACY CITY COUNCIL REGULAR MEETING MINUTES

October 3, 2023, 7:00 p.m.

City Hall, 333 Civic Center Plaza, Tracy Web Site: www.cityoftracy.org

Mayor Young called the meeting to order at 7:15 p.m.

Roll call found Council Members Arriola, Bedolla, Evans, Mayor Pro Tem Davis and Mayor Young present.

Mayor Young led the Pledge of Allegiance.

Pastor Tim Heinrich, Crossroads Baptist Church offered the invocation.

There were no actions taken pursuant to AB 2449.

Mayor Young presented proclamations for National Domestic Violence Awareness and Prevention Month to Jessica Alfaro from Chest of Hope and Elizabeth Sanchez from PREVAIL.

1. CONSENT CALENDAR – Following the removal of consent items 1.G by Mayor Young and 1.K by Mike Souza motion was made by Council Member Arriola and seconded by Mayor Pro Tem Davis to adopt the Consent Calendar. Roll call found all in favor; passed and so ordered.

1.A. Approve September 19, 2023, Closed Session and Regular Meeting Minutes. – Minutes were approved.

1.B. Adopt
a resolution approving amendments to the City of Tracy Investment Policy. - Resolution 2023-200 approved the amendment to the Investment Policy.

1.C. A dopt a Resolution retroactively adopting an amended Operating and Capital Budget for the Fiscal Year ending June 30, 2023.– Resolution 2023-201 adopted an amended Operating and Capital Budget.

1.D. W aive the second reading and adopt an Ordinance amending Section 3.08.580 of the Tracy Municipal Code to update speed limits, as required by the California Vehicle Code.– Ordinance 1341 was adopted.

1.E. A dopt a Resolution (1) accepting the Federal Aviation Administration’s Airport Infrastructure Grant, in the amount of $220,100; (2) appropriating the full grant amount to Capital Improvement Project 77589 - Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot; and (3) appropriating an additional $6,806 of General Funds to CIP 77589 to meet the grant’s requisite 10% match requirement. - Resolution 2023-202 accepted the Federal Aviation Airport Infrastructure Grant, appropriated the full grant amount to CIP 77589, and appropriated General Funds to CIP 77589 to meet the grant’s requisite match requirement.

Regular Meeting Minutes 2 October 3, 2023

1.F. Amend Resolution 2023-006 to include a 10% contingency amount of $108,688 on the previously awarded lowest bid construction cost of $1,086,684 for the Ammonia Storage/Feed Systems at Park & Ride Well No. 6 and Ball Park Well No. 7, CIP 75162, consistent with Public Contract Code Section 10126.– Resolution 2023-203 amended Resolution 2023-006 to include the 10% contingency amount on the previously awarded lowest bid construction cost.

1.H. The Tracy Homelessness Advisory Committee recommend that the City Council adopt a Resolution to (1) approve the Professional Services Agreement with Roebbelen Construction Management Services, Inc. for construction management services for Phase II Site Improvements at the Temporary Emergency Housing Facility, CIP 71112, located at 370 W. Arbor Avenue, with a total not-to-exceed amount of $450,185.– Resolution 2023-204 approved the agreement with Roebbelen Construction Management Services, Inc.

1.I. A dopt a Resolution: (1) accepting public improvements as complete for Tracy Hills Phase 1A School Site Street Modifications, constructed by Tracy Phase 1, LLC, a Delaware Limited Liability Company, (2) authorizing the City Engineer to release bonds in accordance with the Offsite Improvement Agreement and Tracy Municipal Code section 12.36.080, (3) authorizing the City Clerk to file the Notice of Completion with the San Joaquin County Recorder’s Office, (4) accepting an Irrevocable Offer of Dedication of land from Jefferson Elementary School District, and (5) accepting a grant deed of land dedication from Tracy Hills Phase 1 Community Association.– Resolution 2023-205 accepted the public improvements as complete for Tracy Hills Phase 1A School Site Street Modifications, constructed by Tracy Phase 1, LLC, authorized City Engineer to release bonds, authorized City Clerk to file Notice of Completion, accepted an Irrevocable Offer of Dedication of land from Jefferson Elementary School District, and accepted the grant deed of land dedication from Tracy Hills Phase 1 Community Association.

1.J. C ity Council, by resolution, (1) accept improvements for Tracy Hills Village 2, Tract 3888 as complete, (2) authorize the City Engineer to release the Subdivider furnished bonds in accordance with State law and pre-existing Agreements, and (3) authorize the City Clerk to file a Notice of Completion with the San Joaquin County Recorder’s Office.– Resolution 2023-206 accepted improvements from Tracy Hills Village 2, Tract 3888, authorized the City Engineer to release bonds, and authorized the City Clerk to file a Notice of Completion.

1.G. The Trac y Homelessness Advisory Committee recommend that the City Council adopt a resolution awarding a professional service agreement to The Salvation Army to serve as the City's shelter operator for the Temporary Emergency Housing Facility, with an initial term of one (1) year and a not-to- exceed annual cost of $2.6 Million.

Mayor Young pulled the item and stated since committees have changed from adhoc it has narrowed down to a specific appointment or assignment.

Regular Meeting Minutes 3 October 3, 2023

The Council is not a part of the decision and are encouraged not to attend committee meetings so it would be good to have a brief report.

Virginia Carney, Homeless Services Manager provided the staff report and responded to questions.

Tracy Homelessness Advisory Committee members consisting of Council Member Bedolla and Mayor Pro Tem Davis provided comments supporting the item.

Brad Fieldhouse, City Net stated they support the motion, did not apply for the RFP and have worked with the Salvation Army. As an agency their primary focus is non congregate shelters and have learned it is not a model for shelter operations. As this project has developed, the commitment to have a flexible space and a sprung structure is the reason they did not apply.

They do not do those shelters statewide.

Captain Oregel, Salvation Army stated they do volunteer and partner up with people from Tracy and will continue to establish that and always welcome volunteers.

Robert Tanner shared in Southern California the Salvation Army had the facilities for preschool and kindergarten for his son and he dealt with them for the first six years of his sons’ life. They are the right group to run the facility.

Cynthia Camacho asked why the amount is over double. Is it going to be for hiring nonprofits to help with services. If it is just for shelter, she requested an explanation, it is a large jump.

Joanne Gregonis stated she serves the homeless in Tracy and asked when people are taken from the park where do they go. A man passed away behind Food Maxx last night who was homeless. He couldn’t go to the shelter because the shelter was full. He was from Plascencia Field and was kicked out one week ago.

Dotty Nygard asked about the summary of the provisions for the clients at the shelter, there is no reference to workforce development and hoped the need for workforce development would be addressed.

Captain Gastro from Salvation Army talked about the job component and the various programs they have in the area. They have a program called Next Step where it is housing for those who have completed programs. Goal is to have a job already waiting for them. Believe workforce development is key, have a lot of resources for those interested in bettering their lives and partnerships are important.

Alice English shared support for the Salvation Army. Used to go to adhoc committee and Salvation Army was one of the models.

Council comments continued.

Regular Meeting Minutes 4 October 3, 2023

ACTION: Motion was made by Mayor Pro Tem Davis and seconded by Council Member Bedolla to adopt Resolution 2023-207 awarding a Professional Services Agreement to the Salvation Army to serve as the City’s Operator for the Temporary Emergency Housing Facility, with an initial term of one year and a not to exceed annual cost of $2.6 million. Roll call found all in favor; passed and so ordered.

1.K. A dopt a Resolution: 1) approving the Offsite Improvement Agreement (OIA) between the City and Tracy Phase I, LLC for the Corral Hollow Road Widening Improvements required as part of the Conditions of Approval for the Final Map for Tract 4037 for the KT Project; and 2) directing the City Manager to terminate the Inspection Improvement Agreement dated August 30, 2021 for a subset of the work approved under the OIA.

Mike Souza pulled the item to share his concerns regarding changes in their relationship with the City and are working to better that relationship. Cannot get anything accomplished with the City right now. Spoke about language put into staff reports regarding conditions not met in the KT Project and problems with the Deferred Improvement Agreement. Shared concerns regarding lack of response when asking what it is they are not doing.

Communication is lacking in the City.

Karin Schnaider, Assistant City Manager responded to Mr. Souza’s comments and confirmed staff will be meeting with Tracy Hills on October 12, 2023.

Council questions followed.

Koosun Kim, City Engineer responded to questions.

Tim Silva stated roads have been discussed during the Transportation Commission meeting, have never seen a master plan of what the City wants to do with Corral Hollow and shared his concerns regarding Corral Hollow.

This Council does not know what past Councils agreed with.

ACTION: Motion was made by Mayor Pro Tem Davis and seconded by Council Member Arriola to adopt Resolution 2023-208 1) Approving the Offsite Improvement Agreement (OIA) between the City and Tracy Phase I, LLC for the Corral Hollow Road widening improvements required as part of the conditions of approval for the Final Map for Tract 4037 for the KT Project; and 2) Directing the City Manager to terminate the Inspection Improvement Agreement dated August 30, 2021 that allowed a subset of the work now approved under the OIA. Roll call found all in favor; passed and so ordered.

2. ITEMS FROM THE AUDIENCE – Robert Tanner spoke about the City needing to have second thoughts regarding MGRC, as there is a stronger need for a Police substation for south Tracy. Found where the money was for the mall, as of last June it was $1.7 million. If the mall closes, that is what they owe us. Mr. Tanner asked about the balance of the weed abatement account.

Regular Meeting Minutes 5 October 3, 2023

Wes Huffman requested for the fourth time for Council to agendize changing election rules for the City of Tracy. Talked with friends who helped plant trees recently and stated they had to have insurance before bringing organizations here to do work for free and suggested the City review the policy for insurance for nonprofits.

Jenny Wood representing the trees on Bessie Ave presented Council with a petition that received support from 119 people that want to save the trees on Bessie. Was told that two arborists were in the process of deciding about the trees. Ms. Wood shared the benefits of trees and urged Council to save all Bessie trees.

Ajay spoke about Lammers Road in extension with the Corral Hollow Road discussion with Ellis and Tracy Hills residents and all the trouble they are facing. Supposed to extend to Tracy Hills and I-205 in the future, learn from mistakes that happened with Corral Hollow. Expand the road to Ellis and look to extend it to Tracy Hills and the freeway as soon as possible.

Karin Schnaider, Assistant City Manager responded to the previous speaker’s comments.

Rosario Arulappan stated the Lammers Road exit on I-580 is a critical project. There is no school in Ellis and Tracy Hills so everyone goes for all the various Jefferson School District schools. People have trouble on Lammers Road, lot of trucks. This area needs an exit on I-580 and spoke about having another exit on the backside of Tracy Hills.

Dotty Nygard thanked those that participated in tree planting. Had over 90 volunteers.

The trees were donated by community organizations and residents in memory of loved ones. Thanked Heirloom Carbon, Prologis, Tracy Tree Foundation, Sikhs of Tracy, Sunrise Rotary and Delta Disposal for purchasing trees, and thanked the Parks and Recreation Department for their support.

Alice English shared support for the State of the County event, bringing elected officials to Tracy and County Supervisor Robert Rickman. Heard a rumor from a lot of seniors that Mayor Young was supposed to speak at event, but that is incorrect. Was not the State of the City. No Mayors were supposed to speak.

Logan Sumez stated the decision to remove the security team from El Pescadero Park was a mistake. Within a week we have seen all kinds of negative activity increase.

Shared he witnessed a lady getting into a fight and get beaten in front of two children today. The Police show up for a short time and leave. Looked into laws that Sacramento passed about protecting land and making it so we can take homeless encampments away from schools within 100 yards and referred to SB 31. Having homeless encampments near these schools is a massive problem.

Jeff Moss asked what the plan is since the removal of the security team from the skate park and keeping the skate park regulated as they witnessed someone being dragged in the field and beaten and the same truck drove through the park three times unloading stuff. Police go through very slow past the skate park and leave.

Sekou Millington, Police Chief responded to questions by the previous speaker and Council.

Regular Meeting Minutes 6 October 3, 2023

Cynthia Camacho stated there was a retail grant we did not get and asked if the City had applied.

Ms. Schnaider responded to the question regarding the grant and confirmed that the City did apply and did not get it.

3. REGULAR AGENDA

3.A A dopt a resolution, in accordance with Sections 4.2 and 4.3 of the Development Agreement between the City of Tracy and Tracy Hills Project Owner, LLC and Tracy Hills Phase 1, LLC, recorded on June 9, 2016 (Development Agreement):
1) Approving the Conceptual Design for 15-Acres of the Tracy Hills Community Park; 2) Approving a High-Level Concept for an additional 15-Acres of the Tracy Hills Community Park and delegating to the City Manager the authority to further advance a conceptual design that complies with the Development Agreement and City standards; and 3) Approving the Tracy Hills Open Space Improvements Proposal.

Richard Joaquin, Parks Planning and Development Manager and responded to questions.

John Palmer stated they are excited to embrace the development obligations to provide the 30-acres of parks which is the15 acres of park to meet the Tracy Hills community park requirement and additional 15 acres they are gifting as part of the DA, in addition 150 acres of open space which is above and beyond the Quimby Act requirement. The presentation duplicates what was presented in 2021. If any assertion that they are not complying in the DA or circumventing process, they disagree and shared frustration with the amount of work that is in the queue to get to Council.

Perplexed why looking back instead of forward and want to look forward to the design process.

Tim Silva stated he was told by Tracy Hills and staff that the potential of a disc golf course may be going to Tracy Hills even though one is being developed at Veterans Park. Hopefully we get a disc golf course as one of the amenities. Dr. Powers Park disc golf course is used frequently.

Council questions and comments followed.

Mike Souza responded to the Mayor’s question stating they are going back and looking for a smoking gun on something they may not have done. Not a lot of communication from staff on that assertion and shared frustration with the amount of work in the queue trying to get to Council for approval to build infrastructure. Asked for the same approval they got from Council in 2021.

Council is not here tonight to approve the design of the park, but here to approve that they are providing the 30 acres with the requirements and reserving 150 acres and spoke about their commitments.

Karin Schnaider, Assistant City Manager and Bijal Patel, City Attorney responded to questions.

Regular Meeting Minutes 7 October 3, 2023

ACTION: Motion was made by Council Member Bedolla and seconded by Mayor Pro Tem Davis to adopt Resolution 2023-209 in accordance with Sections 4.2 and 4.3 of the Development Agreement between the City of Tracy and Tracy Hills Project Owner, LLC and Tracy Hills Phase 1, LLC, recorded on June 9, 2016 (Development Agreement): 1) Approving the Conceptual Design for 15-Acres of the Tracy Hills Community Park; 2) Approving a High-Level Concept for an additional 15-Acres of the Tracy Hills Community Park and delegating to the City Manager the authority to further advance a conceptual design that complies with the Development Agreement and City standards; and 3) Approving the Tracy Hills Open Space Improvements Proposal. Roll call found all in favor; passed and so ordered.

4. ITEMS FROM THE AUDIENCE – John Stanec, partner with Integral Communities owner of Tracy Hills stated he sent all a letter today asking for help in scheduling the meeting about getting clarifications on conditions they may or may not have met on the maps.

When talked about two parks last week, two separate conditions, Corral Hollow Road and KT are separate conditions. Specifically, to our phase 2 development and administrative recordation of the seven Final Maps we need to have recorded to start building houses there. Put in $85 million dollars of infrastructure in Phase 2 but can’t build houses because they cannot get approval of Final Maps because told conditions that have not been met. Met with staff in June asking for the same clarification of what they have not done that the Final Maps cannot be recorded. Requested Council figure out with staff to have those seven Final Maps on the agenda for the October 17 meeting.

The presentation done in 2021 is exactly the same as the one presented tonight.

Tim Silva stated there are a hodge podge of developments on Corral Hollow. Hear all the time they only build certain areas that front Corral Hollow. We need to get all the players involved and meet on how to develop Corral Hollow in the views we see and conceptual designs. Have not seen a master plan on how that thoroughfare is going to look from I-580 to I-205. Focus energy on how it can be done.

Joanne Gregonis stated there was a fire at Drainage Basin 4 in August and the homeless were kicked out due to a hazardous material situation and asked was the EPA involved and where was the waste taken to. A member of maintenance said they had not taken classes to deal with hazardous material and the days they were kicked out not one person had any protective equipment. What is being done about that.

Mayor Young went back to the request by Mr. Stanec to be able to have the meeting to make sure whatever conditions need to be met, request was for seven Final Maps and having a meeting with staff.

Ms. Schnaider confirmed the meeting is on October 12 and Final Maps are not ready and will discuss with Tracy Hills on October 12. Several agreements are still outstanding.

Mayor Young asked for an adjustment to meet this week.

Ms. Schnaider responded when we met ahead of time still more questions needed to be answered and they were not ready to present that information and this week the Interim City Manager is out at training, so the meeting is scheduled for next week.

Regular Meeting Minutes 8 October 3, 2023

Council Member Bedolla stated the meeting on the 12th only gives six workdays to prepare.

Ms. Schnaider responded that is correct and do not know we are going to resolve everything because there are outstanding agreements we have to agree upon.

Mayor Young stated it was already scheduled last week so should have already had things in place. Understand Ms. Lichtwardt is at a conference now but that is not going through next week. Think it is good to see what we can do that is not further hindering when our side cancelled the meeting last week. Perhaps becomes more of a priority for the beginning of the week.

Bijal Patel, City Attorney responded that is an administrative action so not sure if Council has purview to direct a meeting. We have heard it loudly and clearly. We are working long hours trying our best, complex work and trying to get coordination, there are a lot of details on these maps. It is scheduled for October 12 and we need a few more internal meetings and want to have a productive meeting on October 12.

Mayor Young stated there has to be something between June and now.

Ms. Schnaider responded she has been in communication with the developer and have communicated what she has been working on and research. When she has needed questions answered they have been forthcoming. Don’t have all of the answers or questions ready today. Have more than one meeting between now and the 12 th to get
ready for the 12th and that is what we are here to do as good administrators of the City.

Ms. Schnaider assured Council if she can move up anything or have questions, she feels she can reach out to the developer and have those conversations on or before and beyond the 12
th. There are a lot of moving parts staff is working on.

5. STAFF ITEMS – Karin Schnaider, Assistant City Manager provided the following updates:
• Caltrans Traffic Advisory: Expect overnight (11:00 p.m. – 7:00 a.m.) I-205 lane and ramp closures from Mountain House Parkway to Hansen Road. • The Bessie Ave. project is under way. Click the “Construction Updates” shortcut on our homepage to learn more about the project and work to be done. In response about the trees, there are no trees planned for removal during the construction.

Some trimming occurred already and will be ongoing health monitoring of the trees to determine the safety of the trees during the construction and project. • New, split-phase temporary traffic advisory signals have been activated at the Valpico and Corral Hollow Road intersection. Commended Engineering and Police Departments for going out daily to work on checking the timing during peak hours.

Will continue until the permanent one is complete in Spring of 2024. • The results of the 2023 Retail Survey are in and available on our homepage:

CityOfTracy.org.
• Classes started today for South County Fire’s Community Emergency Response Team (CERT) program – send a message to [email protected] if you are interested in signing up for their next CERT session [also an old Council Follow-Up Item].

Regular Meeting Minutes 9 October 3, 2023

• Tracy Police Department invites the community to Coffee with a Cop at Raley’s tomorrow from 10:00 -11:00 a.m.

6. COUNCIL ITEMS – Council Member Bedolla gave a shout out to the Grand Theatre for their combined Chamber mixer and their 100 years of Disney Show. Hoping we can market our shows better. Felt there was a lot of people that would have gone to the show and could have done better on marketing.

Council Member Bedolla stated this past Thursday he had the opportunity on behalf of the City to speak at the San Joaquin Council of Governments to advocate for Tracy’s Valley Link station. We still have to get to the point to find out the City’s preferred location for the station but between logistics and safety it is making more sense to be positioned on the north side of the City with a bus route that will make our cities TOD plan. One thing announced during COG’s presentation is that the plans are further in the works for Tracy’s hydrogen, solar and energy storage facility and we were there to support as a City.

Council Member Bedolla stated when we come up against holidays like Thanksgiving and Christmas, there is usually not an intent to have a controversial item during those days but if it happens to be an item where the public wishes there was more input and wanted to check with Council to see if there is any appetite to skip the second meetings in November and December because they are heavy holiday weeks. Looking for support to entertain the discussion. Mayor Pro Tem Davis supported the request.

Council Member Bedolla stated at the last board meeting for EBCE was proud to be part of the board that voted to give residents a 5% total discount from their PG&E bill. It is hard to see that prices are continually going up for PG&E, proportionally EBCE prices are going up but compared to PG&E it is a 5% decrease and while the agency is not changing their name, it is still going to be East Bay Community Energy Authority, the doing business as name that the residents will see is going to be AVA.

Council Member Bedolla noted he will be out of Tracy on Saturday, October 7, 2023.

Mayor Young confirmed the 2
nd meeting in December is already cancelled.

Mayor Pro Tem Davis reported on her attendance at the League of California Cities as the voting delegate and there was nothing to vote on, continued education as required for ethics and harassment training and attended City Manager/City Council relationship session. Hoped for support to bring the ethics training to the City of Tracy as what was taught at LOCC was outstanding. Council Member Arriola seconded the request.

Mayor Pro Tem Davis spoke about a powerful presentation by Brandon during open session at LOCC and one thing he talked about was love first and lead second and think our Council could use more of that and intend to hold herself to that standard.

Mayor Pro Tem Davis stated the light worked for one day and is not working on Corral Hollow Road and Valpico and whether we are running some test with it.

Mayor Pro Tem Davis gave a shout out to The Grand and the Grand Foundation who did a fantastic job of the Gala and attended the Grand mixer also.

Regular Meeting Minutes 10 October 3, 2023

Mayor Pro Tem Davis congratulated Carina Diaz for expanding her business for Kids Place 2 Explore and Learn.

Bijal Patel, City Attorney asked for clarification whether Mayor Pro Tem Davis was requesting that particular vendor for ethics training as the City just had ethics training a few months ago.

Mayor Pro Tem Davis responded the lady was fantastic and can get her name, she was an attorney. It would be great to have that come here to City of Tracy.

Ms. Patel clarified that an attorney come to the City of Tracy and provided virtual and in person AB1234 training through the City Attorney’s office and will also be providing Brown Act Training. Ms. Patel asked Mayor Pro Tem Davis if she was requesting that specific vendor or just to provide the training.

Mayor Pro Tem Davis responded she cannot compare as she did not know about the training at the City. Was phenomenal experience at LOCC and Council could benefit but don’t want to step on toes if someone is doing a great job.

Council Member Arriola reported on the League of California Cities and attended a variety seminar and workshops including public service ethics, mobile crisis response teams, meeting decorum, issues related to hate crimes and hate speech, issues related to diversity, equity and inclusion services, public affective communication strategies.

Attended networking events related to the Latino Caucus Young Professionals Meeting, and LGBTQ Caucus and re-elected to the LGBTQ Caucus board.

Council Member Arriola requested an update on the status of an agenda item regarding voluntary transition to District Elections for 2024. Had asked our former City Attorney back in September 2019 and February 2021 and requested from Ms. Patel and did get a memo in June 2023 and requested it as a Council item with a second on June 27, 2023.

We are about a year away from elections and have not seen any progress and liked to know how we can get it on an agenda item sooner such that it will be effective by the next election.

Ms. Patel responded she did provide a comprehensive legal opinion with a third-party opinion on this issue.

Council Member Arriola responded one of the outcomes of Ms. Patel’s memo was a voluntary transition and did request it with a second.

Ms. Patel responded that has always been an option but the question is what are the pros and cons of doing that so did specific analysis related to that. Council Member Arriola had made a motion and there was a second but putting all of that together in a package if there is not going to be a majority support from Council to move forward is a pretty significant step to take.

Council Member Arriola responded Council has never had it as an agenda item so does not know how we would know whether there would be a majority support for it.

Regular Meeting Minutes 11 October 3, 2023

Ms. Patel responded before we start the trigger, we will need to make sure there is a majority support to move down that path and stated she will go back to the motion made and legal opinion and see what we can move forward with.

Council Member Arriola stated we are asking for an agenda item where we would get the majority opinion, it sounds like you are asking for a majority opinion behind the scenes.

Ms. Patel responded she is not asking for a majority opinion behind the scenes and had not received comments back from anyone else as to if there was any interest moving forward on that voluntary path.

Council Member Arriola responded he did not understand what that feedback question would be because he has gone through the procedure via the Code of Conduct and got a second. Council Member Arriola asked Ms. Patel if it is not done quickly, we will not be able to do it by the 2024 election. That is why he asked for it in June and again in 2021 and 2019. Council Member Arriola confirmed he received Ms. Patel’s memorandum, reviewed the possible outcome one of which is a voluntary transition and have asked for it as a policy item to be discussed.

Ms. Patel responded a policy item is different from asking for an action item to proceed with the implementation and confirmed she would go back to specific request and make sure we get something on the agenda.

Mayor Young stated she is doubly seconding that as it is time sensitive and was the will of the entire Council when we first brought this before. Mayor Young stated she is giving her feedback as the seconder of the request.

Ms. Patel responded she could have something back by the end of this year, was not here in 2019 or 2021 and did not know what the prior Council decided or discussed.

Council Member Arriola stated this appears to be something different than the Code of Conduct Protocols that we have implemented related to a second Council Member bringing something on to an agenda item.

Ms. Patel responded she was not here in August, is scrambling without any staff in the office, has been a thousand items between May and this month that she has handled by herself and can only take on so much. If it is believed that she is delaying it, she apologized and will get something on the agenda before the end of the year.

Council Member Arriola invited everyone to Tracy Pride this weekend at 10:00 a.m. at Lincoln Park.

Mayor Young asked for clarity of when the City Attorney was going to get something on the agenda as election is in March and is concerned that we are being consistent with the Code of Conduct.

Ms. Patel responded she is trying her best and we have three meetings left. There was no date specific so in terms of priorities as Council has been hearing from developers today, have had so many items on the agenda and try to fit as much as staff can. The City Manager has a huge list of priorities. Ms. Patel added she is trying to accommodate Regular Meeting Minutes 12 October 3, 2023

everyone’s need and has committed to bring something for Council’s discussion before the end of the year.

Council Member Evans gave a shout out to Bruce Cleaver, President of Tracy War Memorial Association as he brought a proposal to Council Member Evans and Mayor Pro Tem Davis to fly the MIA POW flag at the war memorial and worked with Brian MacDonald and thanked him for his efforts. The POW MIA flag will be posted permanently at the War Memorial Monument and will be there on Veterans Day. The POW MIA flag is in recognition of our armed forces who have been prisoners of war or missing in action.

Council Member Evans stated there was an attempted kidnapping today at Poet School and gave a huge shout out to Tracy Police Department and any other law enforcement agencies.

Council Member Evans attended the Grand Theatre Gala, 100-year celebration of our Grand Theatre, was amazing event and gave shout out to the Grand Foundation and donors in Tracy, they raised over $200,000 for our Grand Theatre. Gave shout out to Jay’s Gourmet and The Press for the food.

Mayor Young reported she was notified by Kaiser that the labor strike will commence as of 6:00 a.m. on October 4, 2023, and scheduled to conclude on Saturday, October 7 at 6:00 a.m. Be patient as you may have longer call volume. Good news is the hospitals and emergency services are still open during the strike. Lab and radiology and optical may be temporarily closed for these days.

Mayor Young announced on October 4
th there is a Quick Draw Art Contest reception at
the Grand Theatre put on by the Grand Foundation and on October 7th the Blues, Brews and BBQ event will be Saturday from noon to 6:00 p.m. downtown.

Mayor Young provided a summary of events and meetings she has attended.

7. ADJOURNMENT – Time: 10:20 p.m.

ACTION: Motion was made by Council Member Arriola and seconded by Mayor Pro Tem Davis to adjourn. Roll call found all in favor; passed and so ordered.

The above agenda was posted at the Tracy City Hall on September 28, 2023. The above are action minutes. A recording is available at the office of the City Clerk.

____________________________
Mayor

ATTEST:

__________________________
City Clerk
October 17, 2023
Agenda Item 1.B

RECOMMENDATION
Staff recommends that the City Council 1) declare certain vehicles, equipment and commodities as surplus pursuant to Tracy Municipal Code Section 2.20.310, and 2) approve the sale of such surplus property at public auction to the highest bidder.

EXECUTIVE SUMMARY
The City per
iodically declares vehicles, equipment, and commodities that have been used beyond their economical and/or useful life as surplus for sale at public auction. The objective is to optimize our asset allocation while generating revenue that can be reinvested into critical municipal projects. This request seeks authorization to declare and approve the list of a range of vehicles, equipment, and commodities, pursuant to Tracy Municipal Code Section 2.20.310, and authorize the sale of these items at public auction to the highest bidder.

BACKGROUND AND LEGISLATIVE HISTORY
The Oper
ations and Utilities Department is responsible for managing most of the City’s vehicle and equipment fleet. This includes the responsibility of determining items that have been used beyond their economical and/or useful life and are no longer needed by the City. These items are removed from service and are declared as surplus property.

The disposal of surplus equipment and commodities or other property no longer needed by any department of the City is governed by Section 2.20.310 of the Tracy Municipal Code which identifies the method of disposition of surplus property. Disposition methods may include abandonment, destruction or donation to public bodies, charitable, civic or nonp rofit organizations and may include City property which has no commercial value or for which the estimated cost of continued care, handling, maintenance or storage would exceed the estimated proceeds of sale. Further, permissible s ales procedures include negotiated sales, acceptance of sealed bids or public auction . Staff proposes to dispose of the surplus property at a public auction, to the highest bidder. Items which are not sold at public auction will be reviewed for value, and if appropriate, sold for scrap value.

ANALYSIS
In our effort to streamline operations and allocate resources efficiently, staff harnessed the use of the City’s Faster data system to aid in identifying units and assets for surplus and auction based on age, mileage, and condition. Staff focused on older assets that had surpassed their prime years, high-mileage items, and those with significant wear or repair needs were selected.

This decision ensures cost-effectiveness and aligns with the City’s commitment to responsible resource management while potentially generating revenue.

The foll
owing table lists the surplused vehicles, reason for surplus, and replacements purchased.

Agenda Item 1.B
October 17, 2023

STRATEG

IC PLAN
This agenda item is a routine operational item and does not relate to the Council’s strategic plans.

FISCAL IMPACT
The proceeds from this sale of surplus property will be deposited into the appropriate City funds fr
om which the property was originally purch ased. The estimated aggregate value of this surplus pr
operty is $30,000.

ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends that the City Council 1) declare certain vehicles, equipment and commodities as
surplus pursuant to Tracy Municipal Code Section 2.20.310; and 2) approve the sale of such surplus property at public auction to the highest bidder.

Prepared by: Adrian Taylor, Fleet Supervisor
Reviewed by: James Thompson, Operations Superintendent
Davi
d Murphy, Assistant Director- Operations
Sara Cowell, Director of Finance
Karin Schnaider, Assistant City Manager
Approved
by: Midori Lichtwardt, Interim City Manager
Attac
hment A: Proposed Surplus Vehicles and Equipment List

ATTACHMENT A
SURPLUS VEHICLES AND EQUIPMENT 03/16/2023
Miscellaneous Items EQ. DESCRIPTION VIN/SERIAL NUMBER
2357 2012 Prius JTDKN3DU7C1504732 2288 2008 Charger 2B3KA43G58H317562 2660 2022 Ford Escape 1FMCU9F67NUA61438
2353 2012 Prius JTDKN3DU8C5391236
2381 2013 Ford Taurus 1FAHP2M82DG213142
2489 2016 BMW R1200RTP WB10A130XHZ431495
2354 2012 Prius JTDKN3DU2C1498953 2276 1980 Kubota L3750 L3750DT60242
2003 Turfco Spreader E00651
Land Pride Rotary Cutter 826-3840
2181 2006 Meco35 concrete saw 8220
Target MC18 concrete saw N/A
Target Porta cut IV 20171017
Sase VA30S 20172053
Coats 1000D wheel Balancer 20172004
Coats Rim Clamp 5060AX 20172005
300 Gal. Hydraulic holding tank w/electric motor 20172013 Honda EB5000 Generator
Carrier A/C condensers (2 total)
1 pallet bolt bins
6 pallets fire hydrants
Ex. Large Planters (2 total)
19 5ft. round wooden tables

APPROVED AS TO FORM AND LEGALITY
________________________
CITY
ATTORNEY’S OFFICE

TRACY CI

TY COUNCIL
RESOL
UTION NO. _______________
1) DECLARING CERTAIN VEHICLES, EQUIPMENT AND COMMODITIES AS SURPLUS PURSUANT TO TRACY MUNICIPAL CODE SECTION 2.20.310, AND 2)

APPROVING THE SALE OF SUCH SURPLUS PROPERTY AT PUBLIC AUCTION TO

THE HIGHEST BIDDER
WHEREA
S, the City periodically declares equipment and commodities that have been used beyond their economical and/or useful life as surplus property; and WHEREA
S, the disposal of surplus equipment and commodities or other property no longer needed by a department in the City is governed by Section 2.20.310 of the Tracy Municipal Code which identifies the method of disposition of surplus property; and WHEREAS, dispo sition methods may include abandonment, destruction or donation to public bodies, charitable, civic or nonprofit organizations and may include City property which has no commercial value or for which the estimated cost of continued care, handling, maintenance or storage would exceed the estimated proceeds of sale; and WHEREAS, permissible sales procedures include negotiated sales, acceptance of sealed bids or public auction; and
WHEREA
S, staff proposes the items listed on Attachment A, once declared surplus by the City Council, will be sold at public auction to the highest bidder, and items which are not sold at public auction will be reviewed for value, and if appropriate, sold for scrap value, and WHEREA
S, the proceeds from the sale of the surplus property will be deposited in the appropriate City fund from which the property was originally purchased, and NOW, T
HEREFORE, be it resolved as follows:

RESOLVED
: That the above recitals are true and correct; and be it,

RESOLVED
: That the City Council of the City of Tracy hereby declares and approves the list of equipment and commodities, shown in Attachment A, as surplus; and be it further

RESOLVED
: That the City Council hereby authorizes the sale of said items at public auction to the highest bidder and the remining items to be sold for scrap value; and be it further

RESOLVED
: That the City Council directs the City Manager to cause the proceeds from the sale of the surplus property to be deposited in the appropriate City funds from which the properties were originally purchased.

Resolution 2023-

The foregoing Resolution 2023-_____ was adopted by the Tracy City Council on October 17, 2023, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
___________________________________________
NANCY D. YOUNG
Mayor of the City of Tracy, California
ATTEST:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
October 17, 2023
Agenda Item 1.C

RECOMMENDA
TION
Staff recommends that City Council adopt a Resolution approving Amendment No. 1 to the Professional Services Agreement with Guidepost Solutions, LLC for the Security System Implementation for the City’s Water Facilities Project, CIP 75169, to extend the term of the Agreement, amend the scope of work, and increase the total compensation by $18,400 (for a total not-to-exceed amount of $71,690).

EXECUTIVE SUMMARY
Staff recommends City Council adopt a Resolution approving Amendment No. 1 (Amendment) to the Professional Serv
ices Agreement (PSA) with Guidepost Solutions, LLC. (Consultant) for the Security System
Implementation for the City’s Water Facilities Project, CIP 75169, to extend the term of the PSA, amend the scope of work
to include tasks listed in Exhibit A-1, and increase the total compensation by $18,400 to a total not-to-exceed amount of $71,690.

BACKGROUND AND LEGISLATIVE HISTORY
The City and Consultant entered into the PSA for the Security System Implementation for the City’s Water Facilities Project, CIP 75169, on February 7 2023, pursuant to Resolution 2023-022.

The PSA included a not-to-exceed amount of $53,290.

ANALYSIS
The Security System design requires site surveys or record drawings at all water facilities for use in system design
; however, many of the record drawings located were inaccurate or out of date, so additional site data
collection and survey work is required. On Tuesday, July 11, 2023, Staff requested a proposal for
the required additional work and on July 24, 2023, the Consultant provided a proposal for
the additional scope and fees.

The City desires to amend the PSA via the Amendment to include the additional services and increase the total
compensation by $18,400 for a total not-to-exceed amount of $71,690 and extend the term in order to complete the necessary data collection for the Security System design.

FISCAL IMPACT
The Securi
ty System Implementation for City’s Water Facilities Project (CIP 75169) is an approved project in the adopted FY 2023-24 budget and is funded from the Water Capital fund.

CIP 75169 has an available project budget of $88,094. Sufficient funding exists for the contract amendment with Consultant.

PUBLIC OUTREACH/INTEREST
No public outreach is required for this water operations item.

Agenda Item 1.C
October 17, 2023

CEQA DETERMINATION
The project is categorically exempt from CEQA pursuant to CEQA Guidelines Section 15301, which pertains to the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of an existing facility.

STRATEGIC PLAN
This
agenda item supports the City of Tracy’s Quality of Life Strategic Priority.

ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends City Council adopt a Resolution approving Amendment No. 1 to the Professional Services Agreement with Guidepost Solutions, LLC for the Security System Implementation for the City’s Water
Facilities Project, CIP 75169, to extend the term of the Agreement, amend the scope of work to include tasks listed in Exhibit A-1, and increase the total compensation by
$18,400, for a total not-to-exceed amount of $71,690.

Prepared by: Ilene Macintire, PE, Senior Civil Engineer Lea Emmons, Water Operations Superintendent
Reviewed by: Sara Cowell, Finance Director
Stephanie Reyna-Hiestand, Assistant Director of Utilities Karin Schnaider, Assistant City Manager
Bijal M. Patel, City Attorney
Approved by: M
idori Lichtwardt, Interim City Manager

ATTACHME
NTS
Exhibit A
– Amendment No. 1 with Guidepost Solutions, LLC
Exhibit B – Original Agreement with Guidepost Solutions, LLC City of Tracy
AMEND
MENT NO. 1 TO PROFESSIONAL SERVICES AGREEMENT WITH GUIDEPOST SOLUTIONS, LLC. FOR THE SECURITY SYSTEM IMPLEMENTATION FOR THE CITY’S WATER FACILITIES PROJECT, CIP 75169
This A
mendment No. 1 (Amendment) to the Professional Services Agreement is entered into between the City of Tracy, a municipal corporation (City), and Guidepost Solutions, LLC. (Consultant).

Recital
s
A. The City
and Consultant entered into a Professional Services Agreement (Agreement) for the Security System Implementation for the City’s Water Facilities Project, CIP 75169, which was approved by the City Council on February 7, 2023, under Resolution No. 2023-022 B. The original
scope of work addressed design of security, access systems and security controls at the City’s water facilities throughout the water system and providing bid documents and installation supervision throughout the project.

C. The Secur
ity System design requires site surveys or record drawings at all water facilities for use in system design, however many of the record drawings are inaccurate or out of date, so additional site data collection and survey work is required.

D. The Ci
ty and Consultant now seek to amend the Agreement to include the additional services not to exceed an amount of $18,400. After negotiations between the City and Consultant, the parties have reached an agreement for performance of services in accordance with the terms set forth in this Amendment.

D. The Ci
ty and Consultant now seek to amend the Agreement to include the additional services in the amount of $18,400 and to extend the term through December 31, 2023.

Now th
erefore, the parties mutually agree as follows:

1. Incorpora
tion by Reference. This Amendment incorporates by reference all terms set forth in the Agreement, unless specifically modified by this Amendment. The terms which are not specifically modified by this Amendment will remain in effect.

2. Terms o
f Amendment.

A. Secti
on 2.1 is hereby amended to read as follows:
“The term of this Agreement shall begin on February 8,2023 and end on December 31, 2023, unless terminated in accordance with Section 6.” B. Secti
on 3.1 is hereby amended to read as follows:
“For s
ervices performed by Consultant under this Agreement, City shall pay Consultant on a time and expense basis, at the billing rates set forth in Exhibit “B-1”, attached and incorporated by reference. Consultant’s fee, for the scope of services set forth in Exhibit “A-1” is Not to Exceed $18,400. Consultant’s billing Exhibit A
City of Tracy – Amendment No. 1 to Agreement with Guidepost Solutions, LLC

rates shall cover all costs and expenses for Consultant’s performance of this Agreement. No work shall be performed by Consultant in excess of the Not to Exceed amount without the City’s prior written approval.

C. Exhib
its.

Exhib
it A-1 “Scope of Services”, attached hereto shall supplement Exhibit “A” of the Agreement. Consultant is responsible for completing all tasks identified in Exhibits “A” and “A-1”.
“For s
ervices performed by Consultant under this Agreement, City shall pay Consultant on a time and expense basis, at the billing rates set forth in Exhibit B-1.

3. Modifi
cations. This Amendment may not be modified orally or in any manner other than by an agreement in writing signed by both parties, in accordance with the requirements of the Agreement.

4. Severabil
ity. If any term of this Amendment is held invalid by a court of competent jurisdiction, the Amendment shall be construed as not containing that term, and the remainder of this Amendment shall remain in effect.

5. Signatur
es. The individuals executing this Amendment represent and warrant that they have the right, power, legal capacity and authority to enter into and to execute this Amendment.

This Amendment shall inure to the benefit of and be binding upon the parties and their respective successors and assigns.

The parti
es agree to the full performance of the terms set forth here.

City of Tracy
_____________________________
By: Nancy D. Young
Title: Mayor
Date: _______________________
Attest:
_____________________________
Adri
anne Richardson, City Clerk
Approved
as to form:
_____________________________
Bij
al M. Patel, City Attorney
Consultant
Guidepost Solutions, LLC.
________________________________
By:
________________________
Title:
_______________________
Date:
_______________________
Federal E
mployer Tax ID No. ___________
________________________________
EXHIBITS:

A-1 Scope of Services
B-1 Compensation
Nicholas Heywood
Associate Vice President - Technology Design
80-0581535
9 /13/23

July 24, 2023
Lea Emmons
Water Operations Superintendent
City of Tracy
6649 South Tracy Blvd.

Tracy, CA 95377
209-831-6302
Project: Water District Main Plant and Remote Location Survey & Drafting Services Dear Mr. Emmons,
As requested, we are submitting this proposal for low voltage systems consulting services related to the City of Tracy Water Facilities – Security Design located in Tracy, CA. This proposal is based on your request for a proposal to update the current documentation to support the original security design project.

SCOPE OF WORK
Guidepost Solutions LLC’s Security and Technology Consulting practice (“Guidepost Solutions LLC”) will provide survey and drafting services for the following locations:

1. Main Water Treatment Plant – 6649 S. Tracy Blvd.

2. Linne Tank & BPS – 238 Glenhaven Dr.

3. Well 8 – ASR – 645 6 th St.

4. NEI Tank & BPS – Brichetto Rd. & N. Chrisman Rd.

5. Lincoln Well – 20 E. Eaton Ave.

6. Lewis Manor Well – 1050 W. 12 th St.

7. Ballpark Well – 2300 Tracy Blvd.

8. Park n Ride Well – 2650 Naglee Rd.

9. Cordes Ranch Tank & BPS – 5926 Hood Wy.

10. Tracy Hills Tank & BPS – 5403 Tracy Hills Dr.

The project involves 3 days of onsite physical surveys of the locations listed above to create dimensionally accurate floorplans on which the security program can be designed.

EXHIBIT A-1
City of Tracy – Water District Main Plant and Remote Location Survey & Drafting Services Page 2 Low Voltage Systems Consulting Proposal 7/26/2023
GPS Proposal # P22.OAK.31203-1

SCOPE OF SERVICES
Guidepost will create schematic diagrammatic buildings plans that will support the security electronics design project only. Schematic plans will detail:
 Building permiter
 Permitter openings
 Interior walls and doors graphically only
 Fence line
Deliverables will be in PDF and DWG files.

Assumptions and Exclusions:
o The schematic building and fence line drawings shall not suffice for dimensional representation of the built environment.
o The drawings shall be representative of the built environment only.

COMPENSATION AND REIMBURSABLES
For all work described in our proposal, Guidepost Solutions LLC proposes a Lump Sum Fee of $18,400 as shown in the accompanying table: “Fees by Task”.

In addition to fees, Owner will reimburse Guidepost Solutions LLC for all ordinary and necessary costs and any expenses directly relating to the project and approved by Owner. Reimbursable expenses for this project are estimated as shown in the table below (or ‘aforementioned table’). Reimbursable expenses include items such as copy and blueprint services, overnight delivery service, mileage, and special project insurance requirements, if required. The reimbursable expenses shall be billed at cost and shall not include ordinary overhead expenses, or any other expenses not directly related to the project. Reimbursable expenses will comply with Owner’s terms and conditions.

EXHIBIT A-1
City of Tracy – Water District Main Plant and Remote Location Survey & Drafting Services Page 3 Low Voltage Systems Consulting Proposal 7/26/2023
GPS Proposal # P22.OAK.31203-1

FEES BY TASK
Survey & Schematic Design
Phase of Work Fee by Phase
Project Design Services
Schematic Design Layout and Drafting $9,100
Site Survey $4,800
Project Management and QAQC $2,000
Compensation $15,900
Estimated Travel Expenses $2,500
Total Compensation + Expenses $18,400
This chart is intended as estimates only. In effort to accomplish the work most effectively for each project, we may reallocate resources between phases.

PAYMENT TERMS
Guidepost Solutions LLC will submit a monthly invoice for completed work, including any reimbursable expenses. Invoices are payable 30 days after receipt of invoice. If payments are not received within 60 days, services may be suspended, and Guidepost Solutions LLC will not be held responsible for any damages due to delays from such suspension.

ASSUMPTIONS & EXCLUSIONS
Guidepost Solutions LLC's services under this proposal are limited to those expressly specified. The following additional services may be desired or required, and, if performed at Owner’s direction, will be charged at Guidepost Solutions LLC’s standard rates as indicated in the attached Exhibit A, or at fees as mutually agreed.
o Changing or re-designing any project aspect or element previously submitted by Guidepost Solutions LLC in compliance with this proposal, or previously approved by Owner, including but not limited to project description, scope, requirements, goals, equipment, capabilities, facilities, contractors, plans, or designs.
o Producing site plans, floor plans, or any drawings not listed under construction documents. o Design or specification of building management systems (BMS) or control systems or any other system not expressly required by this proposal.
o Preparation of maintenance and operation manuals or as-built drawings will be the systems contractor's responsibility.

EXHIBIT A-1
City of Tracy – Water District Main Plant and Remote Location Survey & Drafting Services Page 4 Low Voltage Systems Consulting Proposal 7/26/2023
GPS Proposal # P22.OAK.31203-1
o Training or establishing training programs (to be performed by the systems contractor). o System permits and approvals including Professional Engineering stamp.  This proposal does not include site utility coordination, site utility surveys, vault investigation, or discovery of existing underground site utilities, unless specifically mentioned within the scope of services.
 This proposal does not include structural engineering.  This proposal does not include security, fire alarm, telecommunications, and audiovisual systems consulting and/or design services.
 Site plans, if required, are for information purposes only. Unless otherwise noted in the scope of work above, design services for site areas are not included in this proposal.  This proposal assumes all system drawings will be produced using AutoCAD. If BIM is selected as the drawing deliverable method, the drawings will be considered supplemental services and will be billable.
 This proposal includes submission of full-size electronic PDF drawings to the Owner for all deliverables.
 If phases beyond the above scope of work are required, additional service fees will also be required.  Services are limited to buildings defined in the scope of work above. The inclusion of additional structures, buildings, floors, and/or all site work not previously defined in the above scope of work will require additional fees.
 Reimbursable expenses will comply with Owner Standards.  This Proposal and the prices quoted are valid for 30 days from the date of this Proposal.

AUTHORIZATION
If approved, please return our signed proposal, or provide a contract/agreement including general terms, deliverables, rates, and budget for signature to [email protected] or Guidepost Contracts at 2121 North California Blvd., Suite 800, Walnut Creek, CA 94596.

Date July 24, 2023
Lea Emmons
Water Operations Superintendent
Authorized Representative of
City of Tracy
Michael Johnson CPP
Sr. Consultant
Authorized Representative of
Guidepost Solutions LLC
EXHIBIT A-1
City of Tracy – Water District Main Plant and Remote Location Survey & Drafting Services Page 5 Low Voltage Systems Consulting Proposal 7/26/2023
GPS Proposal # P22.OAK.31203-1
EXHIBIT A-1: GUIDEPOST SOLUTIONS LLC 2022 HOURLY RATES
Design Services
Principal/Project Lead $225
Senior Consultant / Senior Project Manager / Professional Engineer $200 Consultant / Project Manager / Technology Designer $185 Associate $170
BIM / REVIT Coordinator $130
Subject Matter Expert - Advisory (Security / AV / Fire / TEL / GSOC) $225 Physical Security Consulting Services
Principal / Project Lead $275
Senior Consultant / Project Manager $250
Consultant $200
Associate $175
Subject Matter Expert - Advisory (Risk / Operations / Technology / CPTED, Sub Contractors)
$250
Cyber Security Consulting Services
Principal / Project Lead $400
Senior Consultant / Project Manager $350
Consultant $300
Associate $250
Subject Matter Expert - Advisory (Risk / Operations / Technology) $350 Subject Matter Expert - Incident Response $450
Risk & Emergency Management Services
Principal / Project Lead $300
Senior Consultant / Project Manager $250
Consultant $225
Associate $200
Subject Matter Expert - Advisory (Risk / Operations / Technology) $250 Subject Matter Expert - Incident Response $350
Subject Matter Expert – Threat / Behavioral $900
EXHIBIT B-1
Cityof Tracy -- ProfessionalServicesAgreementwithGuidepostSolutionsLLC

CITY OF TRACY

PROFESSIONAL SERVICES AGREEMENT WITH GUIDEPOST SOLUTIONS, LLC

FOR SECURITY SYSTEMS DESIGN AT CITY' S WATER FACILITIES This Professional Services Agreement (Agreement) is entered into between the City of Tracy, a municipalcorporation (City), andGuidepostSolutionsLLC, a LimitedLiabilityCompany (Consultant).

CityandConsultantare referredto individuallyas "Party" andcollectivelyas "Parties." Recitals
A. City desires to retain Consultant to provide design services for security services; and B. On October 19, 2022, the City issued a Request for Proposals (RFP) for the Security Assessment at City' s Water Facilities ( Project). On November 9, 2022, Consultant submitted its proposal for the Project to the City. City has determined that Consultant possesses the skills, experience and certification required to provide the services.

C. After negotiationsbetweenthe Cityand Consultant, the Partieshavereachedan agreementfor the performance of services in accordance with the terms set forth in this Agreement.

D. This Agreement is being executed pursuant to Resolution No. 2023- 0 1- 2- approved by Tracy City Council on February 7, 2023.

Now therefore, the Parties mutually agree as follows:

1. Scope of Work. Consultant shall perform the services described in Exhibit " A" attached and incorporatedby reference. Theservicesshallbeperformedby, or underthe directsupervisionof, Consultant' s Authorized Representative: David Rickerson. Consultant shall not replace its Authorized Representative, nor shall Consultant replace any of the personnel listed in Exhibit "A," nor shall Consultantuseor replaceanysubcontractoror subconsultant, withoutCity's priorwrittenconsent. A failureto obtainthe City's priorwrittenconsentfor anychangeor replacementin personnelor subcontractor/subconsultant may result in the termination of this Agreement.

2. Time of Performance. Time is of the essence in the performance of services under this Agreement and the timing requirements set forth shall be strictly adhered to unless otherwise modified in writingin accordancewith thisAgreement. Any servicesfor whichtimesfor performanceare not specified in this Agreement shall be started and completed by Consultant in a reasonably prompt and timelymannerbaseduponthe circumstancesanddirectioncommunicatedto the Consultant.

Consultant shall submit all requests for time extensions to the City in writing no later than ten days after the start of the condition which purportedly caused the delay, and not later than the date on which performance is due. City shall grant or deny such requests at its sole discretion.

2.1 Term. The term of this Agreement shall begin on February 8, 2023 and end on June 9, 2023, unless terminated in accordance with Section 6.

3. Compensation. City shall pay Consultant at the billing rates set forth in Exhibit " B," attached and incorporated by reference for services performed under this Agreement.

3. 1 Not to Exceed Amount. Consultant' s total compensation under this Agreement shall not exceed $ 53,290. Consultant's billing rates shall cover all costs and expenses for Consultant' s performance of this Agreement. No work shall be performed by Consultant in excess of the total compensation amount provided in this section without the City' s prior written approval.

Exhibit B

Cityof Tracy — ProfessionalServicesAgreementwithGuidepostSolutionsLLC

3. 2 Invoices. Consultant shall submit monthly invoice(s) to the City that describe the services performed, including times, dates, and names of persons performing the services.

3. 2. 1 If Consultant is providing services in response to a development application, separate invoice(s) must be issued for each application and each invoice shall contain the City's designated development application number.

3. 2. 2 Consultant' s failure to submit invoice( s) in accordance with these requirements mayresultintheCityrejectingsaidinvoice(s) andtherebydelayingpaymentto Consultant.

3. 3 Payment. Within 30 days after the City's receipt of invoice(s), City shall make payment to the Consultant based upon the services described on the invoice( s) and approved by the City.

4. Indemnification. Consultant shall, to the fullest extent permitted by law, indemnify, defend with independentcounselapprovedbythe City), and holdharmlessthe Cityfromandagainstany claimsarisingoutofConsultant's performanceorfailuretocomplywithobligationsunderthis Agreement, exceptto the extentcausedbythe sole, activenegligenceor willful misconductof the City.

In this section, "City" means the City, its officials, officers, agents, employees and volunteers; Consultant" means the Consultant, its employees, agents and subcontractors; " Claims" includes claims, demands, actions, losses, damages, injuries, and liability, direct or indirect (including any and all relatedcostsand expenses) and anyallegationsof these; and "Arisingout of includes "pertaining to" and " relating to".

Theduty of a "designprofessional" to indemnifyand defendthe Cityis limitedto claimsthat ariseout of, pertain to, or relate to the negligence, recklessness or willful misconduct of the design professional, under Civ. Code § 2782. 8.)
The provisions of this section survive completion of the services or the termination of this Agreement, andare notlimitedbythe provisionsof Section5 relatingto insurance.

5. Insurance. Consultant shall, throughout the duration of this Agreement, maintain insurance to cover Consultant, its agents, representatives, and employees in connection with the performance of services under this Agreement at the minimum levels set forth herein.

5. 1 Commercial General Liability ( with coverage at least as broad as ISO form CG 00 01 01 96) " per occurrence" coverage shall be maintained in an amount not less than $ 4,000, 000 general aggregate and $2,000,000 per occurrence for general liability, bodily injury, personal injury, and property damage.

5. 2 Automobile Liability (with coverageat leastas broadas ISOformCA 00 01 07 97, for any auto") " claims made" coverage shall be maintained in an amount not less than $ 1, 000, 000 per accident for bodily injury and property damage.

5. 3 Workers' Compensation coverage shall be maintained as required by the State of California.

5. 4 Professional Liability "claimsmade" coverageshallbe maintainedto coverdamages thatmaybetheresultoferrors, omissions, ornegligentactsofConsultantinanamountnotlessthan 1, 000, 000 per claim.

5. 5 Endorsements. Consultant shall obtain endorsements to the automobile and commercial general liability insurance policies with the following provisions:

5. 5. 1 The City (including its elected officials, officers, employees, agents, and volunteers) shall be named as an additional " insured."

5. 5. 2 Foranyclaimsrelatedto this Agreement, Consultant's coverageshallbeprimary insurancewith respectto the City. Any insurancemaintainedby the Cityshallbe excessof the Consultant' s insurance and shall not contribute with it.

Cityof Tracy -- ProfessionalServicesAgreementwith GuidepostSolutionsLLC

5. 6 Notice of Cancellation. Consultantshallnotifythe Cityifthe policyis canceledbefore the expiration date. For the purpose of this notice requirement, any material change in the policy prior to the expiration shall be considered a cancellation. Consultant shall immediately obtain a replacement policy.

5. 7 Authorized Insurers. All insurance companies providing coverage to Consultant shall be insuranceorganizationsauthorizedby the InsuranceCommissionerof the Stateof Californiato transact the business of insurance in the State of California.

5. 8 Insurance Certificate. Consultant shall provide evidence of compliance with the insurancerequirementslistedaboveby providinga certificateof insuranceandendorsements, in a form satisfactory to the City, before the City signs this Agreement.

5. 9 Substitute Certificates. Consultant shall provide a substitute certificate of insurance no laterthan30dayspriortothepolicyexpirationdateof anyinsurancepolicyrequiredbythisAgreement.

5. 10 Consultant' s Obligation. Maintenance of insurance by the Consultant as specified in this Agreement shall in no way be interpreted as relieving the Consultant of any responsibility whatsoever (includingindemnityobligationsunderthisAgreement), andtheConsultantmaycarry, atits own expense, such additional insurance as it deems necessary. Failure to provide or maintain any insurance policies or endorsements required herein may result in the City terminating this Agreement.

6. Termination. The CitymayterminatethisAgreementby givingten days' writtennoticeto Consultant. Upon termination, Consultant shall give the City all original documents, including preliminarydraftsandsupportingdocuments, preparedbyConsultantforthisAgreement. TheCity shallpayConsultantforallservicessatisfactorilyperformedinaccordancewiththisAgreement, upto the date notice is given.

7. DisputeResolution. IfanydisputearisesbetweentheCityandConsultantthatcannotbe settledafterengagingingoodfaithnegotiations, CityandConsultantagreeto resolvethedisputein accordance with the following:

7. 1 EachPartyshalldesignatea seniormanagementorexecutivelevelrepresentativeto negotiate the dispute;

7. 2 The representatives shall attempt, through good faith negotiations, to resolve the dispute by any means within their authority.

7. 3 If the issue remains unresolved after fifteen (15) days of good faith negotiations, the Parties shall attempt to resolve the disagreement by negotiations between legal counsel. If the aforementionedprocessfails, the Partiesshallresolveanyremainingdisputesthroughmediationto expedite the resolution of the dispute.

7. 4 The mediation process shall provide for the selection within fifteen ( 15) days by both Parties of a disinterested third person as mediator, shall be commenced within thirty (30) days and shall be concluded within fifteen ( 15) days from the commencement of the mediation.

7. 5 The Partiesshallequallybearthe costsof anythird partyin any alternativedispute resolution process.

7. 6 The dispute resolution process is a material condition to this Agreement and must be exhaustedpriorto eitherPartyinitiatinglegalaction. Thisdisputeresolutionprocessisnotintendedto nor shallbeconstruedto changethetime periodsfor filinga claimor actionspecifiedby Government Code §§ 900 et seq.

8. Ownership of Work. All original documents prepared by Consultant for this Agreement, whethercompleteor in progress, arethe propertyof the City, and shallbegivento the Cityat the completion of Consultant's services, or upon demand from the City. No such documents shall be revealedor madeavailableby Consultantto anythird partywithoutthe City's priorwrittenconsent.

Cityof Tracy — ProfessionalServicesAgreementwith GuidepostSolutionsLLC

9. Independent Contractor Status. Consultant is an independent contractor and is solely responsible for the acts of its employees or agents, including any negligent acts or omissions.

Consultantis notCity's employeeand Consultantshallhaveno authority, expressor implied, to act on behalfof the Cityas an agent, orto bindthe Cityto anyobligation, unlessthe Cityprovidespriorwritten authorization. Consultant is free to work for other entities while under contract with the City.

Consultant, and its agents or employees, are not entitled to City benefits.

10. Conflicts of Interest. Consultant ( including its employees, agents, and subconsultants) shall notmaintainor acquireanydirector indirectinterestthat conflictswith the performanceof this Agreement. If Consultant maintains or acquires such a conflicting interest, the City may terminate any contract (including this Agreement) involving Consultant's conflicting interest.

11. Rebates, Kickbacks, or Other Unlawful Consideration. Consultant warrants that this Agreement was not obtained or secured through rebates, kickbacks, or other unlawful consideration eitherpromisedor paidto anyCityofficialor employee. Forbreachof this warranty, Cityshallhavethe right, in its sole discretion, to terminate this Agreement without liability; to pay only for the value of the workactuallyperformed; ortodeductfromthecontractprice; orotherwiserecoverthefullamountof such rebate, kickback, or other unlawful consideration.

12. Notices. All notices, demands, or other communications which this Agreement contemplates or authorizesshallbe inwritingand shallbe personallydeliveredor mailedto the otherpartyto the addresses listed below. Communications shall be deemed to have been given and received on the first to occur of: (1) actual receipt at the address designated below, or (2) three working days after the deposit in the United States Mail of registered or certified mail, sent to the address designated below.

To City:

Director Operations & Utilities
520 N. Tracy Blvd
Tracy, CA 95376
With a copy to:

City Attorney
333 Civic Center Plaza
Tracy, CA 95376
To Consultant:

Guidepost Solutions LLC
2121 N California Blvd., Suite 800
Walnut Creek, CA 94596

13. Miscellaneous.

13. 1 Standard of Care. Unless otherwise specified in this Agreement, the standard of care applicable to Consultant's services will be the degree of skill and diligence ordinarily used by reputable professionals performing in the same or similar time and locality, and under the same or similar circumstances.

13. 2 Amendments. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by both Parties.

13. 3 Waivers. Waiver of a breach or default under this Agreement shall not constitute a continuingwaiveror a waiverof a subsequentbreachof thesameor anyotherprovisionof this Agreement.

Cityof Tracy -- ProfessionalServicesAgreementwith GuidepostSolutionsLLC

13. 4 Assignment and Delegation. Consultant may not assign, transfer or delegate this Agreementor anyportionof it withoutthe City's writtenconsent. Any attemptto do so will bevoid.

City's consentto one assignmentshallnot bedeemedto be a consentto anysubsequentassignment.

13. 5 Jurisdiction and Venue. The interpretation, validity, and enforcement of the Agreementshallbegovernedby and construedunderthe lawsof the Stateof California. Any suit, claim, or legalproceedingof any kindrelatedto this Agreementshallbefiled andheardin a courtof competent jurisdiction in the County of San Joaquin.

13. 6 Compliance with the Law. Consultant shall comply with all applicable local, state, and federal laws, whether or not those laws are expressly stated in this Agreement.

13.6.1 Prevailing Wage Laws. Consultantis awareof the requirementsof California LaborCodeSection1720, et seq., and 1770, et seq., as well as CaliforniaCodeof Regulations, Title 8, Section 16000, et seq., (" Prevailing Wage Laws"), which require the payment of prevailing wage rates; employment of apprentices (§ 1777. 5), certified payroll records (§ 1776), hours of labor (§ 1813 and 1815), debarment of contractors and subcontractors (§ 1777. 1) and the performance of other requirements on public works and "maintenance" projects. If the services being performed under this Agreement are part of a "public works" or "maintenance" project, as defined in the Prevailing Wage Laws, and if the total compensation is $ 1,000 or more, Consultant agrees to fully comply with such PrevailingWageLaws. Theseprevailingratesareon filewith the Cityand areavailableonlineat http://www.dir.ca.gov/DLSR. Consultant shall defend, indemnify and hold the City, its officials, officers, employees and agents, harmless from any and all claims, costs, penalties, or interests arising out of anyfailureor allegedfailureto complywith the PrevailingWageLaws.

13. 6.2 Non- discrimination. Consultant represents and warrants that it is an equal opportunityemployerandit shallnotdiscriminateagainstanysubconsultant, employeeorapplicantfor employment because of race, religion, color, national origin, handicap, ancestry, sex or age.

Consultantshallalsocomplywith all applicableanti -discriminationfederalandstatelaws, includingbut not limited to, the California Fair Employment and Housing Act (Gov. Code 12990 (a -f) et seq.).

13. 7 Business Entity Status. Consultantis responsiblefor filingall requireddocuments and/or formswith the CaliforniaSecretaryof Stateand meetingall requirementsof the FranchiseTax Board, to the extent such requirements apply to Consultant. By entering into this Agreement, Consultant represents that it is not a suspended corporation. If Consultant is a suspended corporation at the time it entersthisAgreement, City maytakestepsto havethis Agreementdeclaredvoidable.

13. 8 Business License. Before the City signs this Agreement, Consultant shall obtain a City ofTracyBusinessLicense. ConsultantshallmaintainanactiveCityofTracyBusinessLicenseduring the term of this Agreement.

13. 9 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns.

13.10 Construction of Agreement. Each Party hereto has had an equivalent opportunity to participatein thedraftingof thisAgreementand/orto consultwith legalcounsel. Therefore, the usual construction of an agreement against the drafting Party shall not apply hereto.

13. 11 Severability. If a term of this Agreementis heldinvalidby a courtof competent jurisdiction, the Agreement shall be construed as not containing that term, and the remainder of this Agreement shall remain in effect.

13. 12 Controlling Provisions. In the caseof anyconflictbetweenthe termsof this Agreement and the Exhibits hereto, and Consultant's proposal (if any), the Agreement shall control. In thecaseofanyconflictbetweentheExhibitsheretoandtheConsultant's proposal (if any), theExhibits shall control.

13. 13 Entire Agreement. This Agreement and the attached Exhibits comprise the entire integratedunderstandingbetweenthe Partiesconcerningthe servicesto be performed. This Agreement supersedes all prior negotiations, representations or agreements. All exhibits attached hereto are incorporated by reference herein.

Cityof Tracy — ProfessionalServicesAgreementwithGuidepostSolutionsLLC

14. Signatures. The individuals executing this Agreement on behalf of Consultant represent and warrantthattheyhavetheright, power, legalcapacityandauthoritytoenterintoandto executethis Agreement on behalf of Consultant.

SIGNATURES ON FOLLOWING PAGE]

Cityof Tracy — ProfessionalServicesAgreementwithGuidepostSolutionsLLC The Parties agree to the full performance of the terms set forth here. of Tr cy
0 By: Nancy D. oung
Title: Mayor
Date:

Att
1 Adnan e Richardson; ity Clerk
Approved as to form:

BVI M. Patel, City Attofney
Consultant
Guidepost Solutions,
Company
LLC, a Limited Liability
By: Nicholas Heywood
Title: Associate Vice President - Technology Design
Date: 01/ 09/ 2023
Federal Employer Tax ID No. 80- 0581535
Exhibits:

A Scopeof Work, includingpersonnelandtime of performance (SeeAgreementsections1 and 2.)
B Compensation ( See Agreement section 3.)

Cityof Tracy -- ProfessionalServicesAgreementwith GuidepostSolutionsLLC EXHIBIT A - Scope of Work
Attendsecuritysystemdesigncoordinationmeetingswith Citystaffto reviewthe security requirementsandto coordinatefinal securitydevicelocations, installationdetailsandfinish requirements.

Documentandcoordinatethe securitysysteminfrastructurerequirementsincludingsecurity equipment layout and space requirement, IT network, 120 VAC power, electric door hardware and interfaces to other building systems such as required.

Check applicable codes, regulations, and restrictions governing the design.

Preparesecuritysystemdesignplansfortheinfrastructureimprovementsto beinstalled. The plansshouldincludea securitydevicesymbolslegend, blockdiagrams, rough -in details, equipment installation details and device location site/ floor plans.

Preparesecuritysystemspecificationsincludinggeneralconditions, functionalandtechnical system and device requirements and execution requirements.

Evaluate Contractor bids for compliance with the construction documents and document the findings in a bid evaluation letter.

Participate in meetings to review the bid evaluation letter.

Review the Contractor' s prefabrication submittals.

Participate in progress/coordination meetings during the security system installation Conduct one system installation progress inspections per site and prepare field reports to document the results.

Conduct final system acceptance testing and prepare a punch list to document results.

Reviewthe securitycontractor's O&M and as -builtdocumentationfor accuracy.

Cityof Tracy -- ProfessionalServicesAgreementwithGuidepostSolutionsLLC EXHIBIT B — Compensation
Compensation for completion of all items listed in Exhibit A shall be a not to exceed amount of $53,290.

APPROVED AS TO FORM AND LEGALITY
________________________

CITY ATTORNE
Y’S OFFICE

TRACY CITY COUNCIL

RESOLUTION
NO. _______________
RESOLUTION APPROVING AMENDMENT NO. 1 TO THE PROFESSIONAL SERVICES AGREEMENT WITH GUIDEPOST SOLUTIONS, LLC. FOR THE SECURITY SYSTEM IMPLEMENTATION FOR THE CITY’S WATER
FACILITIES PROJECT, CIP 75169, TO EXTEND THE TERM OF THE

AGREEMENT, AMEND THE SCOPE OF WORK, AND INCREASE THE TOTAL COMPENSATION BY $18,400 (FOR A TOTAL NOT-TO-EXCEED AMOUNT OF $71,690)
WHEREAS, On October 19, 2022, the City issued a Request for Proposals (RFP) for the Security System Design at the City’s Water Fac ilities (Project); and WHEREAS, On November 9, 2022, Consultant submitted its proposal for the Project to the City. The City determined that Consultant possesses the skills, experience and certification required to provide the services; and
WHEREAS, The City and Consultant entered into a Professional Services Agreement (Agreement) for the Project on February 7, 2023, pursuant to Resolution 2023-022, with a not- to-exceed amount of $53,290; and
WHEREAS, The Project requires site surveys or record drawings at all water facilities for use in system design; however, many of the City record drawings are inaccurate or out of date, so additional site data collection and survey work is required; and WHEREAS, On Tuesday, June 27, 2023, Staff requested a proposal for the required additional work and on July 24, 2023 the Consultant provided a proposal for the additional scope and fees; and
WHEREAS, City desires to amend the Agreement to extend the term through December 31, 2023, amend the scope of work, and increase the total compensation by $18,400 (for a total not-to-exceed amount of $71,690); therefore, be it resolved as follows:

RESOLVED: That the above recitals are true and correct and are hereby incorporated herein as findings and determinations of the City; and be it FURTHER RESOLVED: That the City Council of the City of Tracy hereby approves Amendment No. 1 to Agreement with Consultant; and it be FURTHER RESOLVED: The City, after review and approval by the City Attorney’s office, may execute the Agreement and take any and all further actions to effectuate the purposes of this Resolution; and be it
FURTHER RESOLVED: That this resolution takes effect i mmediately upon its adoption.

Resolution 2023-

The foregoing Resolution 2023-_____ was adopted by the Tracy City Council on the 17th of October 2023, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
____________________________________________
NANCY D. YOUNG
Mayor of the City of Tracy, California
ATTEST:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
** * * * * * * * * * * * * *
October 17, 2023
Agenda Item 1.D

RECOMMENDATION
Staff recommends that the City Council adopt a Reso lution: (1) authorizing the submittal of an application, and upon award, execution by the Mayor of a grant agreement with the California Department of Transportation Division of Aeronautics, for the Airport Improvement Program Matching Grant 3-06-025 9-025-2023; and (2) subject to and upon award, accepting such grant funds and appropriating the full grant amount to Capital Improvement Project 77593 - Slu rry Seal Tee Hangar Taxilanes Project.

EXECUTIVE SUMMARY
On September 5, 2023, the City Council approved the acceptance of a grant from the Federal Aviation Administration (FAA)
in the amount of $162,718 for CIP 77593 – Slurry Seal Tee Hangar Taxilanes (Project). This represents 90% of the total Project costs of $180,798. The City is responsible for the remaining 10% of the total Project cost in the amount of $18,080.

A State Airport Improvement Program (AIP) matching grant is available which will offset the City’s required match amount. In order to finalize the State grant award process, the FAA requires
that the City Council adopt a resolution authorizing the Mayor to submit the application and executing the grant agreement once awarded and accepting the allocation of State AIP Matching
Grant funds.

Receiving this grant will result in $8,136 from the State toward the Project, and reduce the amount paid by the City to $9,944, or approximately 5.5% of the total Project costs.

BACKGROUND AND LEGISLATIVE HISTORY
Staff recently applied for, and was offered, a grant in the amount of $162,718, through the FAA, to complete CIP 77593 – Slurry Seal Tee Hangar Taxilanes. This was accepted by the City Council
at the September 5, 2023, regular City Council meeting. The FAA only pays for 90% of the total Project costs, and the City is required to provide a 10% match.

The State of
California Department of Transportation Division of Aeronautics (Division of Aeronautics) provides matching grants of 5% of the FAA grant awards, not to exceed $50,000.

The application for the grant must be submitted and approved before any work can be completed on the new Project. The Project i s ready to begin, and City staff have identified this grant and are requesting to utilize it to offset the General Fund’s grant match prior to starting the Project.

To apply for the Division of Aeronautics matching grant and receive the grant funds, the Mayor needs to sign the grant application and return it to the Division of Aeronautics. Staff is requesting the City Council approve a resolution: 1) authorizing the Mayor to sign the application so that staff may timely submit it and execute the grant agreement once awarded by the Division of
Aeronautics; 2) accepting the allocation of State AIP Matching Grant funds, and 3) appropriate the full grant amount to CIP 77593 - Slurry Seal Tee Hangar Taxilanes.

Agenda Item 1.D
Octobe
r 17, 2023

ANAL
YSIS
Applying for and accepting the Division of Aeronautics S tate Matching Grant will allow the City to
complete the Project, CIP 77593 - Slurry Seal Tee Hangar Ta xilanes and reduce the previous Gener
al Fund appropriation approved by the City Council.

The tot
al estimated cost of this Project is as follows:

Construction Cost $98,798
Administration $4,000
Preliminary, Engineering Design, Preparation of Plans and Specs
$31,000
Design Engineering through Bidding and Award $4,000
Engineering Design During Construction/ Final Closeout $13,000 Residential Engineering, Testing and Inspection $30,000 Total Project Cost $180,798
FAA Participation- Entitlement/Discretionary $162,718
State Matching Grant $8,136
Sponsor Local Match $9,944

FISCAL IMPACT
CIP 77593, Slurry Seal Tee Hangar Taxilanes Project, has an approved budget of $176,418, based upon an estimated FAA grant amount the City anticipated to receive. If the City did not receive the FAA grant monies, then the City anticipated using General Fund monies to advance this necessary CIP.

The total estimated project cost is $180,798. Of that amount, 90% of the project will be funded by an FAA Airport Improvement Program, in the amount of $162,718. The remaining cost of $18,080 will be paid from the General Fund and a State matching grant through CIP 77593.

Assuming $8,136 will come from the Division of Aeronautics grant, then the City’s matching requirement from the General Fund will be only $9,944. At the September 5, 2023, meeting, the City Council aut horized the execution of the original FAA grant agreement and appropriated an additional $39,418 of anticipated FAA grant funds to C IP 77593. Any appropriated but unused funds will be returned to the General Fund at the end of project completion.

COORDINATION
Engineering staff coordinated with the Mobility & Housing Department and the Airport Engineering consultant firm during the application phase of the project.

CEQA/NEPA DETERMINATION
On January 26, 2023, the FAA had determined the proposed project is Categorically Excluded pursuant to FAA Order 1050.1F as it relates to the National Environmental Policy Act of 1969, as amended (NEPA). No further federal environmental disclosure documentation for the project is necessary for NEPA purposes.

Agenda Item 1.D
October 17, 2023

The Project is categorically exempt per CE QA Guidelines Section §15301 Existing Facilities, Cl
ass I category, which consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or for mer use, item (c) Existing highways and streets, sidewalks, gutter s, bicycle and pedestrian trails, and similar facilities.

STRATEGIC PLAN
This agenda item supports the Q uality-of-Life Strategic Priority which is t o provide an outstanding quality of life by enhancing the City’s amenities, business mix and services and cul
tivating connections to promote positive change and progress in our community.

ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends that the City Council adopt a Resolution: (1) authorizing the submittal of an application, and upon award, execution by the Mayor of a grant agreement with the California Department of Transportation Division of Aeronautics, for the Airport Improvement Program Matching Grant
3-06-0259-025-2023; (2) subject to and upon award, accepting such grant funds and appropriating the full grant amount to Capital Improvement Project 77593 - Slurry Seal Tee Hangar Taxilanes Project.

P
repared by: Ilene Macintire, Senior Civil Engineer
Paula Jessup, Airport Manager
Reviewed by: Brian MacDonald, Int erim Assistant City Manager Bijal Patel, City Attorney
Approv
ed by: Midori Lichtwardt, Interim City Manager
Attachments:

Attachment A: Attachment A - Federal Aviation Administration Grant Agreement for AIP #3-06- 0259-025-2023
Attachment B: Matching Grant Application
Attachment A

Attachment B

APPROVED AS TO FORM AND LEGALITY
________________________
CITY
ATTORNEY’S OFFICE

TRACY CIT

Y COUNCIL
RESOLU
TION NO. _______________
(1) AUTHORIZING THE SUBMITTAL OF AN APPLICATION, AND UPON

AWARD, EXECUTION BY THE MAYOR OF A GRANT AGREEMENT WITH

THE CALIFORNIA DEPARTMENT OF TRANSPORTATION DIVISION OF

AERONAUTICS, FOR THE AIRPORT IMPROVEMENT PROGRAM
MATCHING GRANT 3-06-0259-025-2023; AND (2) SUBJECT TO AND

UPON AWARD, ACCEPTING SUCH GRANT FUNDS AND

APPROPRIATING THE FULL GRANT AMOUNT TO CAPITAL IMPROVEMENT PROJECT 77593 - SLURRY SEAL TEE HANGAR TAXILANES PROJECT WHEREAS, the Airport Pavement Maintenance Management Plan (PMMP), accepted by the City of Tracy in 2013, advised to perform crack repair, seal cracks, and seal coat the Tee Hangar Taxilanes in the North Hangar area in 2023; and
WHEREAS, a Capital Improvement Project (CIP) request form for the proposed work (CIP 77593) was submitted in Fiscal Year (FY) 2022-23 and approved by the City Council; and WHEREAS, CIP 77593 - Slurry S eal T ee Hangar Taxilanes P roject is an approved Federal Aviation Administration (FAA) project to meet those maintenance requirements; and WHEREAS, to meet these maintenance needs, staff submitted grant applications to the FAA, and the City was awarded a grant in October 2023 from the FAA to complete the project; and
WHEREAS, the FAA will pay for 90% ($162,718) of grant eligible project costs through the Airport Improvement Program (AIP), and the City’s General Fund will need to supply the required 10% match of $18,080 to fulfill the grant obligation; and WHEREAS, on September 5, 2023, the City Council, per Resolution 2023-176, authorized the execution of the AIP grant agreement and appropriated the anticipated additional AIP funds to CIP 77593; and
WHEREA
S, acceptance of this grant will reduce the required match amount from the General Fund to $9,944, with the remaining $8,136 coming from the State matching grant; and WHEREAS, the CIP has an approved budget of $176,418, based on anticipated FAA grant monies that the City expected to receive, and if the City did not receive the FAA grant monies, then the City anticipated using General Fund monies to advance this necessary CIP; and
WHEREAS, the California Department of Transportation Division of Aeronautics, pursuant to the Public Ut ilities C ode section 21683.1, provides matching grants of 5% of FAA grant
s for airports, not to exce ed $50,000; and
WH
EREAS, in or der t o finalize the D ivision of Aeronautics g rant award pro cess, a City Council resolution is required, authorizing the submittal of t he application, and upon award, exe
cution by the Mayor of the grant agreem ent, and subject to and upon award, accepting the funds and
allocating them to CIP 77593 - Slurry Seal Tee Hangar Taxilanes.

NOW,
THEREFORE, be it resolved as follows:

RESOLVED: That the above recitals are true and correct; and be it FURTHER RESOLVED: That the City Council of the City of Tracy hereby authorizes the su
bmittal of an application to the California Department of Transportation Division of Aer
onautics by the Mayor, for Ai rport I mprovement Program (AIP) Matching Grant 3-06-0259- 025-2023, and upon award of such grant, execution by the Mayor of the grant agreement; and be it
FURTHER RESOLVED: That subject to and upon award of the funds, the City Council hereby accepts such grant funds and appropriates the full grant amount to Capital Improvement
Project 77593 - Slurry Seal Tee Hangar Taxilanes Project; and be it

FURTHER RESOLVED: That the City Council hereby authorizes the City Manager to take such additional actions that may be necessary to consummate the intent of this Resolution, provided that such actions do not detrimentally impact the City * * * * * * * * * * * * * *
The foregoing Resolution 2023-_____ was adopted by the Tracy City Council on October 17, 2023, by the following vote:

AYES: COUNCI
L MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
___________________________________________
NANCY D.

YOUNG
Mayor of the City of Tracy, California
ATTEST:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
Resolution 2023-

October 17, 2023
Agenda Item 1.E
REC

OMMENDATION
The Tr
acy Homelessness Advisory Committee recommends that the City Council adopt a resolution (1) making a determination that United Site Services of California, Inc. provides unique products and services that are not available from other sources, therefore compliance with the standard procurement process is not in the best interest of the City pursuant to Tracy Municipal Code Section 2.20.180(B)(2) and (2) approving the general services agreement with United Site Services of California, Inc., with a not- to-exceed amount of $125,000, to provide temporary showers and restrooms to Phase IV-Custom Container occupants until permanent bathrooms are installed under Phase II-Site Improvements at the Temporary Emergency Housing Facility, CIP 71112, at 370 West Arbor Avenue.

EXECUT

IVE SUMMARY
The Tracy
Homelessness Advisory Committee recommends that the City Council adopt a Resolution ratifying, pursuant to Tracy Municipal Code Section 2.20.180(B)(2), contracts for goods and general services executed by the City Manager to implement emergency interim housing solutions for the unsheltered with United Site Services of California, Inc. (Consultant).

On Augus
t 16, 2022, the City Council adopted Resolution No. 2022-121 (Resolution), which reaffirmed an emergency shelter crisis as the City of Tracy continues to experience an increasing number of unsheltered individuals. Due to the declaration of an emergency, the Resolution authorized the City Manager to take requisite actions needed to expeditiously provide interim housing solutions.

This agenda
item is to approve a general services agreement for specialty services with the service provider, United Site Services of California, Inc., to provide the temporary showers and restrooms facilities to the Phase IV-Custom Containers occupants until the permanent bathrooms are installed in Phase II-Site Improvements.

The Tracy
Homelessness Advisory Committee heard this item on September 26, 2023 and recommended that the City Council adopt the proposed Resolution.

BACK

GROUND AND LEGISLATIVE HISTORY
On Septem
ber 1, 2020, City Council authorized the creation of a Capital Improvement Project (CIP) for the Temporary Emergency Housing Project on Arbor Avenue, CIP 71112 (Project) to create a safe and dignified facility for residents experiencing homelessness.

On Jul
y 5, 2023, as part of the Phase IV interim shelter facility improvements, City Council authorized the purchase of eight (8) custom container dormitories from Linked Equipment under Resolution 2023-140.

Perm
anent restroom and shower facilities to serve the occupants of Phase IV will be included in the construction of the site improvements referred to as Phase II. Until construction is Agenda Item 1.E
October 17, 2023

complete, temporary restrooms and showers are required to serve the Phase IV custom containers.

ANALYSI
S
Consul
tant is a sole source vendor that provides and maintains self-contained and fully functional bathroom facilities. These temporary facilities provide safe and sanitary facilities for showering and restroom use. Consultant will provide and maintain the temporary showers and restrooms to the Phase IV-Custom Containers until permanent facilities are available.

Pursuant to Tracy Municipal Code Section 2.20.180(B)(2), the City may enter into a contract without formal bidding if a contract is for a unique product available from only one source. City Council must approve the contract by a resolution which includes findings as to why the product is unique and only one source exists.

Due to the im
minent need to provide housing solutions, a general service agreement has been prepared with the following terms to provide temporary showers and restrooms to Phase IV-Custom Containers:

Vendor Summary
Amount Not to Exceed
Amount
United Site Services of
California, Inc.

Temporary Rental of Showers and
Restrooms for Phase IV
$125,000 $125,000
TOTAL $125,000 $125,000
The above-m
entioned agreement for goods and general services total is $125,000 and the term of this Agreement shall begin on October 23, 2023 and end on May 31, 2024 as part of this request.

FISCA

L IMPACT
The City
secured a grant of $1.2 Million dollars from Health Plan of San Joaquin for the costs of the custom containers and interim site expenses related to Phase III and Phase IV. In addition, the City has committed funding from American Rescue Plan Act (ARPA) for the operations costs at the Temporary Emergency Housing Facility. Per City Council’s approval of the $1.2 Million dollar grant from Health Plan of San Joaquin, below is a breakdown of the funding allocation. Funding for the contract with United Site Services of California, Inc. is covered by the grant funds from Health Plan of San Joaquin.

Health P
lan of San Joaquin Grant
Modulars (Phase III first year) $120,000
Custom Containers (Phase IV) $716,320
Operating (Supplies, Fuel) (Phase III and IV first year) $363,680 Total Health Plan of San Joaquin Grant Funding $1,200,000 Agenda Item 1.E
October 17, 2023

CEQA

DETERMINATION
A Notice of Exemption was issued on October 16, 2020, for the Temporary Emergency Housing site at 500 Arbor
Avenue in accordance with Government Code sections
65660
-65662 for Low Barrier Navigation Centers and Section 15269(c) of the CEQA Guidelines
(14 Cal. Code Regs. 15269(c) for (Emergency Projects). No environmental impacts
beyond those already analyzed for the CIP exist; accordingly, no further CEQA analy
sis is needed.

STRATEGIC PLAN
This
agenda item supports the Public Safety Strategic Priority, Implement the adopted Homelessness Strategic Plan.

ACTION REQUESTED OF THE CITY COUNCIL
The Tracy Homelessness Advisory Committee recommends that the City Council adopt a resolution (1)
making a determination that United Site Services of California, Inc. provides unique products and services that are not available from other sources, therefore compliance with the standard procurement process is not in the best interest of the City pursuant to Tracy Municipal
Code Section 2.20.180(B)(2) and (2) approving the general services agreement with United Site Services of California, Inc., with a not-to -exceed amount of $125,000, to provide temporary showers and restrooms to Phase IV-Custom Container occupants until permanent bathrooms
are installed under Phase II-Site Improvements at the Temporary Emergency Housing Facility, CIP 71112, at 370 West Arbor Avenue.

Prepared by: Virginia Carney, Homeless Services Manager Reviewed by:

Sara Cowell, Director of Finance
Bijal Patel, City Attorney
Brian MacDonald, Interim Assistant City Manager
Approved by: Midori Lichtwardt, Interim City Manager
ATTACHMENTS:

Attachment A- General Services Agreement-United Site Services of California, Inc.  3DJHRI5HY'HFHPEHU 


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6 X E W R W D O  2 Q H  7 L P H            7 D [  2 Q H  7 L P H   
7 R W D O  2 Q H  7 L P H           
* U D Q G  7 R W D O   



APPROVED AS TO FORM AND LEGALITY
________________________

CITY ATTORNE
Y’S OFFICE

TRACY CITY COUNCIL
RESOLUTION NO. _______________
RESOLUTION (1) MAKING A DETERMINATION THAT UNITED SITE SERVICES OF CALIFORNIA, INC. PROVIDES UNIQUE PRODUCTS AND SERVICES THAT ARE

NOT AVAILABLE FROM OTHER SOURCES, THEREFORE COMPLIANCE WITH

THE STANDARD PROCUREMENT PROCESS IS NOT IN THE BEST INTEREST OF THE CITY PURSUANT TO TRACY MUNICIPAL CODE SECTION 2.20.180(B)(2) AND (2) APPROVING THE GENERAL SERVICES AGREEMENT WITH UNITED SITE SERVICES OF CALIFORNIA, INC., WITH A NOT-TO-EXCEED AMOUNT OF $125,000, TO PROVIDE TEMPORARY SHOWERS AND RESTROOM TO PHASE IV-

CUSTOM CONTAINER OCCUPANTS UNTIL PERMANENT BATHROOMS ARE

INSTALLED UNDER PHASE II-SITE IMPROVEMENTS AT THE TEMPORARY EMERGENCY HOUSING FACILITY, CIP 71112, AT 370 WEST ARBOR AVENUE WHEREAS, the City of Tracy, like many cities across California, is experiencing a shelter crisis; and
WHEREAS, on March 10, 2020, the City C ouncil dec lared a shelter c risis through the adoption of Resolution 2020-052; and
WHEREAS, under the shelter crisis, the City is authorized to provide emergency housing, shelters, bridge housing communities, and other services to the unsheltered; and WHEREAS, on September 1, 2020, the City Council authorized the creation of a Capital Improvement Project for the Temporary Emergency Housing Project on Arbor Avenue, CIP 71112 (Project) to create a safe and dignified facility for residents experiencing homelessness (Facility); and
WHEREAS, the City desires to provide interim housing solutions until the completion and opening of the Facility; and
WHEREAS, Government Code section 8698.4 exempts the application of the California Environmental Quality Act (CEQA) to various actions taken by public agencies to implement the construction of a homeless shelter in response to a declared shelter crisis; and WHEREAS, a Notice of Exemption was issued on October 16, 2020, for the Temporary Emergency Housing site at 500 Arbor Avenue in accordance with Government Code sections 65660-65662 for Low Barrier Navigation Centers and Section 15269(c) of the CEQA Guidelines (14 Cal. Code Regs. 15269(c) for (Emergency Projects); and WHEREAS, on August 16, 2022, the City Council approved Resolution 2022-1 21 and directed the City Manager to take immediate and emergency actions necessary to implement interim housing solutions for the City’s unsheltered until the completion and opening of the Facility, including negotiating with potential service providers and identifying potential sites for such interim housing solutions; and
WHEREAS, Tracy Municipal Code Section 2.20.180(b)(2), the City may enter into a contract without formal bidding if a contract is for a unique product available from only one source so that competitive bidding would be meaningless. For this exception to apply, the City Council must approve the contract by a resolution which includes findings as to why the product is unique and only one source exists; and
WHEREAS, on July 5, 2023, City Council authorized the purchase of eight (8) custom container dormitories , which will provide an additional 38 beds from Linked Equipment under Resolution 2023-140 for installation as part of Phase IV interim facilities; and WHEREAS, Phase IV-Custom C ontainers do not include permanent bathrooms, which are part of the construction under Phase II-Site Improvements; and WHEREAS, United Site Services of California, Inc. (Consultant) has agreed to provide and maintain the temporary showers and restrooms to the Phase IV -Custom Containers until permanent facilities are available providing safe and sanitary bathroom facilities to those occupants; and
WHEREAS, The Tracy Homelessness Advisory Committee heard this item on September 26, 2023 and recommended that the City Council adopt this proposed Resolution; and now, therefore, be it resolved as follows:

RESOLVED: That the City Council finds and det
ermines the foregoing recitals to be true
and correct and hereby makes them a part of this Resolution; and be it

FURTHER RE
SOLVED: That United Site Services of California, Inc. i s a sole source vendor, as set forth in Tracy Municipal Code Section 2.20.180(b)(2); and be it FURTHER RES OLVED: That the City Council hereby approves general services agreement with Consultant (which includes a not-to-exceed amount of $125,000). After review and approval by the City Attorney’s office, City Council authorizes the execution of the General Services Agreement; and be it
FURTHER RESOLVED: The City Council finds that no further analysis under the California Environmental Quality Act (CEQA) for the actions authorized herein because:
1) Government Code section
8698.4 exempts the application of the various actions taken by public agencies to implement the construction of a homeless shelter in response to a declared shelter crisis; 2) the interim solutions taken thus far are in furtherance of and related to the permanent solution that will be implemented, referred to as the Temporary Emergency Housing Project on Arbor Avenue (CIP 71112); 3) A Notice of Exemption was issued on October 16, 2020 for the Temporary Emergency Housing site at 500 Arbor Avenue in accordance with Government Code sections 65660-65662 for Low Barrier Navigation Centers and Section 15269(c) of the CEQA Guidelines (14 Cal. Code Regs. 15269(c) for (Emergency Projects); and 4) No environmental impacts beyond those already analyzed for the CIP exist; and be it
FURTHER RESOLVED: That this resolution takes effect immediately upon its adoption. * * * * * * * * * * * * * *
Resolution 2023-

The foregoing R
esolution 2023-_____ was adopted by the Tracy City Council on October 17, 2023, by the following vote:

AYES: COU
NCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
___________________________________________
NANCY
D. YOUNG
Mayor of the City of Tracy, California
ATTEST:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
Resolution 2023-

October 17, 2023
Agenda Item 1.F

RECOMMENDATION
Staff recommends that the City Council adopt the Resolution authorizing the award of a construction contract to Anderson Striping and Construction, Inc. in the not-to-exceed amount of $269,354, and (2) authorizing a contingency for change orders in the amount of $26,935.

EXECUTIVE SUMMARY
The Airport Pavement Maintenance Management Plan (PMMP), accepted by the City of Tracy in 2013, the airport was advised to perform Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot in 2022. In 2023, it was recommended.to perform crack repair, seal cracks, and seal coat the Tee Hangar Taxilanes in the North Hangar area.

To meet these maintenance needs, the City submitted grant applications to the Federal Aviation Administration (FAA). Staff requested funding for the following construction projects, Crack Seal
and Slurry Seal of the Tee Hangar Taxilanes and Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot, at the Tracy Municipal Airport.

BACKGROUND AND LEGISLATIVE HISTORY
The City Council accepted two grants from the FAA to complete two pavement projects at the Tracy Municipal Airport. On September 5, 2023, an FAA grant for Capital Improvement Project (CIP) 77593 – Slurry Seal of Tee Hangar Taxilanes, was accepted through the FAA’s Airport Improvement Program (AIP). On October 3, 2023, an FAA grant for CIP 77589 – Airport Slurry Seal
& Pavement Patching Entrance Road and Parking Lot, was accepted through the FAA’s Airport Infrastructure
Grant (AIG) program. The City Council is also set to approve a State of California Department
of Transportation Division of Aeronautics (Division of Aeronautics) matching
grant at the October 17, 2023, City Council meeting to offset the City’s grant matching requirements. City
proceeded with General Fund dollars until these grant monies were received.

The Tee H
angar Taxilanes of the North Hangar Area of the airport were built in two phases, in 1975 and 1985, to accommodate growth at the Tracy Municipal Airport. In 2013, a Pavement Maintenance Management Study of Tracy Municipal Airport was performed by Brandley Engineering through an FAA
AIP grant. At that time, the pavement conditions of the existing North Hangar Area Taxilanes were found to be fair to very poor, with Pavement Conditions Indices (PCI) ranging between 24 to 44. The recommendation of the PMMP was to remove and reconstruct
existing sections in the North Hangar Area Taxilanes area in 2014, and to perform crack
repair, seal cracks, and seal coat the area in 2023. It was recommended to perform Crack Seal
and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot in 2022.

Engineering staff worked with Brandley Engineering to prepare the plans and specifications for the following projects:

• Schedule A - Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road Agenda Item 1.F
October 17, 2023

and Parking Lot to be funded by an FAA Airport Infrastructure Grant. • Schedule B - Crack Seal and Slurry Seal of the Tee Hangar Taxilanes to be funded by an FAA Airport Improvement Program Grant.

The project was advertised for competitive bids on March 4 and 31, 2023. Bids were received and publicly opened on April 19, 2023, at 2:00 pm with the following results:

Contractor: Bid Amounts:

Anderson Striping and Construction Inc. Schedule A: $170,556 Schedul e B: $98,798
Tot al Bid: $ 269,354
VSS
International Schedule A: $201,501
Schedul e B: $96,464
Tota l Bid: $ 297,965
Pavement Coatings Company Schedul e A: $222,132
Schedule B: $94,444
Tota l Bid: $ 316,576

ANALYSIS
Awar
ding this construction contract will allow the City to complete CIP 77589 - Airport Slurry Seal & Pavement Patching Entrance Road and Parking Lot Project and CIP CIP77593 - Slurry Seal of Tee Hangar Taxilanes Project.

The tot
al estimated cost of this project, if awarded to the lowest bidder, is as follows:

Construction Cost $269,354
Administration $9,000
Preliminary, Engineering Design, Preparation of Plans and Specs
$50,000
Design Engineering through Bidding and Award $8,000
Engineering Design During Construction/ Final Closeout $26,000 Residential Engineering, Testing and Inspection $63,000 Total Project Cost $425,354
FAA Participation- Entitlement/Discretionary $382,818 Sponsor Local Match + State Matching Grant $42,536

FISCAL IMPACT
CIP
77589 - Airport Slurry Seal & Pavement Patching Entrance Road and Parking Lot Project has an approved budget of $220,100 from FAA funding. The total estimated project cost is $244,556. Of that amount, 90% of the project will be funded by an FAA Airport Infrastructure Grant Program. The remaining cost of $24,456 will be paid from the General Fund.

CIP
77593 - Slurry Seal of the Tee Hangar Taxilanes Project, has an approved budget of $162,718 from FAA funding. The total estimated project cost is $180,798. Of that amount, 90% of the percent of the project will be funded by an FAA Airport Improvement Program grant.

Agenda Item 1.F
October 17, 2023

The remaining cost will be paid through a State matching grant and the General Fund.

COORDINATION
Engineering staff coordinated with the Mobility & Housing Department and the Air port Engineering consultant firm during the application phase of the project.

CEQA/NEPA DETERMINATION
On January 26, 2023, the FAA had determined the proposed project is Categorically Excluded pursu
ant to FAA Order 1050.1F as it relates to the National Environmental Policy Act of 1969, as amended (NEPA). No further federal environmental disclosure documentation for the project is necessary for NEPA purposes.

STRATEGIC PLAN
This agenda item supports the Quality-of-L ife Strategic Priority which is t o provide an outst
anding quality of life by enhancing the City’s amenities, business mix and services and cult
ivating connections to promote positive change and progress in our community.

ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends that the City Council adopt the resolution (1) authorizing the awarding of a construction contract to
Anderson Striping and Construction, Inc. in the not-to-exceed amount of $269,354, and (2) authorizing a contingency for change orders in the amount of $26,935.

Prepared by: Ilene Macintire, Senior Civil Engineer
Paula
Jessup, Airport Manager
Reviewed by: Sara Cowell, Director of Finance
Bijal Patel, City Attorney
Brian MacDonald, Interim Assistant City Manager
Approved by:

Midori Lichtwardt, Interim City Manager

APPROVED AS TO FORM AND LEGALITY
________________________
CITY
ATTORNEY’S OFFICE

TRACY CI

TY COUNCIL
RESOL
UTION NO. _______________
AUTHORIZING (1) THE AWARD OF A CONSTRCUTION CONTRACT TO ANDERSON STRIPING AND CONSTRUCTION, INC. IN THE NOT-TO-EXCEED AMOUNT OF $269,354, AND (2) A CONTINGENCY FOR CHANGE ORDERS IN THE AMOUNT OF $26,935 WHEREAS, the Airport Pavement Maintenance Management Plan (PMMP), accepted by the City of Tracy in 2013, advised the airport to perform Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot in 2022; and WHEREAS, in 2023, the PMMP recommended to perform crack repair, seal cracks, and seal coat the Tee Hangar Taxilanes in the North Hangar area; and WHEREAS, the following construction projects, Crack Seal and Slurry Seal of the Tee Hangar Taxilanes and Crack Seal and Slurry Seal, and Minor Pavement Patching Entrance Road and Parking Lot, at the Tracy Municipal Airport are approved FAA projects; and

WHEREAS,
the City Council accepted two grants from the FAA to complete two pavement projects at the Tracy Municipal Airport: On September 5, 2023, an FAA grant for Capital
Improvement Project (CIP) 77593 – Slurry Seal of Tee Hangar Taxilanes, was accepted through the FAA’s Airport Improvement Program (AIP), and on October 3, 2023, an FAA grant for
CIP 77589 – Airport Slurry Seal & Pavement Patching Entrance Road and Parking Lot, was accepted through the FAA’s Airport Infrastructure Grant (AIG) program; and WHEREAS, the City Council is also set to approve a State of California Department of Transportation
Division of Aeronautics (Division of Aeronautics) matching grant at the October 17, 2023,
City Council meeting to offset the City’s grant matching requirements; and WHEREAS, the City has proceeded with General Fund dollars until these grant monies have been received;
and
WHEREAS, the project was advertised for competitive bids on March 4 and 31, 2023, and
bids were received and publicly opened on April 19, 2023; and WHEREAS, Anderson Striping and Construction Inc. was the apparent lowest bidder with a not-to
-exceed budget of $ 269,354; and
WHEREAS, the Tracy Municipal Code Section 2.20.090(b) authorizes the City Manager to approve change orders within contingency amounts approved by City Council; and NOW, THEREFORE, be it resolved as follows:

RESOLVED: That the above recitals are true and correct; and be it FURTHER RESOLVED: That the City Council of the City of Tracy hereby awards a construction contract
to Anderson Striping and Construction Inc. with the Not-to-Exceed budget of $269,354 for the Crack Seal and Slurry Seal of the Tee Hangar Taxilanes project and the Crack Seal, Slurry Seal and Minor Pavement Patching Entrance Road and Parking Lot project; and be it

FURTHER RESOLVED: That the City Council of the City of Tracy authorizes the contingency
amount of $ 26,935 for change orders, if needed, pursuant to Tracy Municipal Code Section 2.20.090(b).
* * * * * * * * * * * *
* *
The foregoing Resolution 2023-_____ was adopted by the Tracy City Council on October 17, 2023, by the following vote:

AYES: COUNCI
L MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
___________________________________________
NANCY D.

YOUNG
Mayor of the City of Tracy, California
ATTEST:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
Resolution 2023-

Oct ober 17, 2023
Agenda Item 3.A

RECOMMENDATION
Staf
f recommends that the City Council adopt a Resolution adopting the 2024 Development Fee for the San Joaquin County Multi-Species Habitat Conservation and Open Space Plan.

EXECUTIVE SUMMARY
In 2001,
the City of Tracy (City) began participating in the San Joaquin County Multi-Species Habitat Conservation and Open Space Plan (SJMSCP) established by the San Joaquin Council of Governments (SJCOG). The fees for participation in the plan were established in 2001 and have been updated annually since 2007 based on SJMSCP’s five-year financial analysis, land sales comparables, and the Consumer Price Index (CPI). This agenda item asks the City Council to adopt the 2024 SJMSCP Development Fee to continue participation in the SJMSCP.

The development fees for year 2024 is an overall 7.4 percent decrease from the fees collected in 2023 in the most impacted categories of Agricultural and Natural habitat classifications.

BACKGROUND AND LEGISLATIVE HISTORY
The SJMSC
P acts as a mechanism to streamline compliance with federal and state endangered species acts. The City adopted the SJMSCP on February 6, 2001 (Resolution No. 2001-050) as a means to streamline the development process for projects constructed within the City.

While participation is voluntary on behalf of developers, paying a fee to SJCOG and having them administer the SJMSCP (e.g., procure easements, maintain preserves) enables developers and the City to avoid costly and lengthy negotiations with the US and California Fish and Wildlife Service agencies.

On November 6, 2001, the City Council adopted Resolution No. 2001-398 authorizing the collection of a development fee for participation in the SJMSCP. The SJMSCP fee is based on classification of habitat type (Attachment A – City of Tracy Land Category / Pay Zones Map).

The methodology for determining the fee is based upon a Financial Analysis Model approved by the SJCOG, which has been subsequently updated in 2006, 2011, 2016, and 2020. The formula for updating the fee is categorized into three distinct components to better calculate an accurate fee per acre [FEE = Category A (acquisition) + Category B (assessment & enhancement) + Category C (management & admin)]. The final mitigation fees reflect true costs in each category and other real costs associated to fulfill the goals of the plan.

ANALYSIS
The Development Fee is updated annually by the SJCOG Board to keep current with the associated costs of implementing the SJMSCP. On August 24, 2023, the SJCOG Board approved the Development Fee for 2024 as shown in the table below and in Attachment B – 2024 Updated Habitat Fees. Each participating local agency must adopt the updated fees to continue participation in the SJMSCP.

Agenda Item 3.A
October 17, 2023

2024 SJMSCP Development Fees
Habitat Type Category A Category B Category C Total Fee Rounded Fee
Other Open Space $5,502.00 $3,019.00 $396.66 $8,917.66 $8,918 Natural/Ag Lands $11,003.00 $6,038.00 $792.15 $17,833.15 $17,833 Vernal Pool
Grasslands $52,545.00 $14,906.00 $1,956.53 $69,407.53 $69,408 Vernal Pool Wetted $52,748.00 $123,058.00 $1,918.14 $177,724.14 $177,724 The proposed
2024 SJMSCP development fees were adjusted using the recommended 2020 SJMSCP 5-Year Financial Analysis Model Update for the respective categories. The development fees for year 2024 is an overall 7.4 percent decrease from the fees collected in 2023 in the most impacted categories of Agricultural and Natural habitat classifications. The decrease is due primarily to a dip in the land acquisition component (Category A) for agricultural land price values of comparable sales even though there was an unusually robust rise in the reported CPI for Categories B and C. All of the land within and adjacent to the current City limits are classified as Open Space or AG/Natural, as there are no vernal pools near the City of Tracy.

Category A (acquisition) – Comparable Land Sales
This category is directly related to land valuation based on comparable land sales in San Joaquin County in specific zones of the plan area (Central Zone, Central Southwest Transition Zone and Delta Zone) over a two-year period meeting the established criteria used for comparable land sales. Cost estimates for this category will continue to be evaluated on a yearly basis by taking all qualified fee title comparable sales in each zone to set a weighted cost per acre. Based on a mid-cycle review of the percentage of easement value to fee title value percentage, the percentage used in the fee model for this category dropped slightly from 58% to 55%, which will be incorporated going forward until the next five-year review process.

The fee m
odel update results in a 13.5% decrease in the Agricultural/Natural Habitat types of Category A (Acquisition) component to be $11,003. The reason for the decrease is the decline in overall comparable fee title land sale values from prior year values.

Category B (assessment & enhancement) - Consumer Price Index w/ Model Data Update The Category B component of the fee is adjusted using several factors including the California CPI, as reported by the California Department of Finance for the preceding 12-month fiscal year (June 2022 – June 2023) and from the updated model numbers completed annually based on the SJMSCP Annual Report.

The unit
cost factors (per acre or per year for some items) are adjusted only by the CPI (the California CPI calculation was an increase of 2.88%). The total cost for Category B is also a function of the SJMSCP Annual Report data updated annually (acres remaining to be acquired and the number of years remaining in the permit term; the fee per acre is a function of those total calculated costs and the land conversion acres remaining). These factors feed into the fee model.

The model
update results in a 4.7% increase in the Agricultural/Natural Habitat types of Category B (Assessment and Enhancement) component to be $6,038.

Agenda Item 3.A
October 17, 2023

Category C (management & administration) – Consumer Price Index Annual cost updates use the CPI, as reported by the California Department of Finance, for the preceding 12-month fiscal year (June 2022 – June 2023) to keep up with inflation on an annual basis.

The model
update results in a 2.88% increase in the Agricultural/Natural Habitat types of Category C (Management, Monitoring and Administration) component from prior years to be $7.92.15.

Progr
am Participation
As previously mentioned, participation in the SJMSCP is voluntary. Projects participating under the SJMSCP benefit from pre-determined streamlined processing of the project rather than navigating through a potentially very long, cumbersome, and expensive regulatory process outside the habitat plan. By opting for participation, the project can choose any number of ways to provide mitigation for the impacts of the project through the plan and even control much of the mitigation, costs if desired. The options are:

1. Pay
the applicable fee;

2. Redesign the project to avoid/minimize impacts;

3. Provide land in lieu of the SJMSCP fee which the project will negotiate the easement/fee title costs (Category A component); or

4. Any combination of the above options.

Alt
ernatively, the project proponent can choose to not participate in the plan (opt-out) and fulfill mitigation requirements on their own with state and federal permitting agencies independently.

FISCAL IMPACT
Devel
opment fees provide funding for SJCOG to mitigate project impacts covered under the SJMSCP permits for the subsequent calendar year beginning January 1, 2024. The City of Tracy does not retain any of these fees.

COORDINATION
This
staff report and resolution were prepared in coordination with SJCOG staff.

CEQA DETERMINATION
The proposal
is to modify the fees collected for certain new development applications which participate in the SJCOG SJMSCP program. The purpose of the SJMSCP program is to streamline compliance, for projects, with the State and Federal Endangered Species Acts.

The program also serves as CEQA mitigation measures for qualified projects, in accordance with California Environmental Quality Act (CEQA) Guidelines, collection and use of the SJMSCP. Following collection of the fees, the City submits the entire fee amount to SJCOG for use in the SJMSCP program. Collection and transmission of the SJMSCP fees is categorically exempt from CEQA pursuant to Guidelines Sections

1. 15308 - Actions by Regulatory Agencies for Protection of the Environment. This Agenda Item 3.A
October 17, 2023

exemption pertains to “…actions taken by regulatory agencies…to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment.”

2. 15313 - Acquisition of Lands for Wildlife Conservation Purposes, which applies to “the acquisition of lands for fish and wildlife conservation purposes.” and

3. 15317 - Open Space Contracts or Easements, which pertains to “the establishment of agricultural preserves…or the acceptance of easements or fee interests in order to maintain the open space character of the area.”
Therefo
re, the project is exempt from CEQA and no additional CEQA documentation is required.

STRATEGIC PLAN
This
agenda item does not relate to any of the Council’s Strategic Plans.

ACTION REQUESTED OF THE CITY COUNCIL
Staf
f recommends that the City Council adopt a Resolution adopting the 2024 Development Fee for the San Joaquin County Multi-Species Habitat Conservation and Open Space Plan.

Prepar
ed by: Kimberly Matlock, Associate Planner
Revi
ewed by: Alan Bell, Senior Planner
William Dean, Assistant Development Services Director
Sara Cowell, Finance Director
Bijal M. Patel, City Attorney
Karin Schnaider, Assistant City Manager
Approv
ed by: Midori Lichtwardt, Interim City Manager

ATTACHMENTS
Att
achment A – City of Tracy Land Category / Pay Zones Map Attachment B – 2024 Updated Habitat Fees
Attachment A
SJCOG, Inc.
555 East Weber Avenue ● Stockton, CA 95202 ● (209) 235-0574 ● Email: [email protected] San Joaquin County Multi-Species Habitat Conservation & Open Space Plan (SJMSCP)
2024 Updated Habitat Fees*
Habitat Type Fee Per Acre
Multi-Purpose Open Space $8,918
Natural $17,833
Agriculture $17,833
Vernal Pool - uplands $69,408
Vernal Pool - wetted $177,724
* Effective January 1, 2024 – December 31, 2024
\
2024 Endowment Fees with In-lieu Land**
Type of Preserve Enhancement
Cost/acre
Land
Management
Cost/acre

TOTAL PER
ACRE

ENDOWMENT
Agricultural Habitat Lands $6,038.00 $792.15 $6,830.15
Natural Lands $6,038.00 $792.15 $6,830.15
Vernal Pool Habitat
Vernal Pool Grasslands $14,906.00 $1,956.53 $16,862.53
Vernal Pool Wetted $123,058.00 $1,918.14 $124,976.14
** Effective January 1, 2024 – December 31, 2024 in lieu of fees to be used as the endowment for the dedicated land preserves (Category B + C) based on impacted acres.

VELB Mitigation
A special fee category shall apply when removal of the Valley Elderberry Long-horned Beatle (VELB) habitat of elderberry shrubs occurs. The fee shall be paid to SJCOG, Inc. or a VELB mitigation bank approved by the Permitting Agencies. The current fee, as established in the VELB Conservation Fund Account managed by the Center for Natural Lands Management, and approved by the USFWS, is $1,800 per VELB Unit (one unit= one stem over 1" in diameter at ground level which is removed). Fees shall be established by the JPA during preconstruction surveys (i.e., counts of stems to be removed with and without exit holes shall be completed during preconstruction surveys) and shall be paid to the JPA prior to ground disturbance or stem removal, whichever comes first.

David Bellinger
CHAIR
Diane Lazard

VICE CHAIR
Diane Nguyen

EXECUTIVE DIRECTOR
Member Agencies

CITIES OF

ESCALON,

LATHROP,
LODI,

MANTECA,
RIPON,

STOCKTON,
TRACY,
AND

THE COUNTY OF

SAN JOAQUIN
Attachment B

APPROVED AS TO FORM AND LEGALITY
________________________
CIT
Y ATTORNEY’S OFFICE
TRAC

Y CITY COUNCIL
RES
OLUTION 2023-______
ADOP
TING THE 2024 DEVELOPMENT FEE FOR THE SAN JOAQUIN COUNTY

MULTI-SPECIES HABITAT CONSERVATION AND OPEN SPACE PLAN
WHERE
AS, the Tracy City Council approved Resolution No. 2001-050 on February 6, 2001 adopting the San Joaquin County Multi-Species Habitat Conservation and Open Space Plan (SJMSCP), established by the San Joaquin Council of Governments (SJCOG), and Resolution No. 2001-398 on November 6, 2001 to establish the authority for collection of a Development Fee for all new developments within the City of Tracy (City) pursuant to the SJMSCP; and
WHERE
AS, participation in the SJMSCP is voluntary; and
WHEREAS, the purpose of the SJMSCP Development Fee is to finance the goals and objectives of the SJMSCP that include, but are not limited to, preserve land acquisition, preserve enhancement, land management, and administration that compensate for such lands lost as a result of future development in the City of Tracy and in San Joaquin County; and WHERE
AS, a “Fee Study,” dated July 16, 2001, was prepared, which analyzed and identified the costs, funding, and cost-benefit of the SJMSCP; and WHER
EAS, after considering the Fee Study and the testimony received at the public hearing, the Tracy City Council approved said report and further found that the future development in the City of Tracy will need to compensate cumulative impacts to threatened, endangered, rare and unlisted SJMSCP Covered Species and other wildlife and compensation for some non-wildlife related impacts to recreation, agriculture, scenic values and other beneficial Open Space uses; and
WHERE
AS, the SJMSCP Development Fees are divided into three categories: Category A – Acquisition; Category B – Enhancement; and Category C – Land Management/Administration; and
WHERE
AS, Category A – Acquisition, directly relates to land valuations based on comparable land sales in the San Joaquin County in specific zones of plan areas (Central Zone, Central Southwest Transition Zone and Delta Zone) over a two-year period meeting the established criteria used for comparable land sales; and WHERE
AS, Category B – Assessment & Enhancement, is calculated using several factors including California Consumer Price Index (CPI) with updates from model numbers completed annually based on the SJMSCP Annual Report; and Resolution 2023-_____

WHERE
AS, Category C – Management, Monitoring and Administration, uses the California CPI to calculate how much money to allocate to Management, Monitoring and Administration; and
WHERE
AS, an “Updated Fee Study” was prepared in 2006, 2011, 2016 and 2020 which analyzed and identified the costs and funding of the SJMSCP; and WHER
EAS, to ensure that the SJMSCP development fees keep pace with inflation, annual adjustments are made to the fees based on the method previously adopted by the City Council, starting from 2007 (Resolution No. 2007-021), and WHERE
AS, the method of annual adjustments was modified in 2011, 2016, and again in 2020; and
WHER
EAS, on August 24, 2023, the SJCOG Board approved the Development Fee for 2024 as shown in Attachment B to the staff report; and
WHERE
AS, each local agency must adopt the updated fees to continue participation in the SJMSCP; and
WHEREA
S, in accordance with the California Environmental Quality Act (CEQA) Guidelines Sections 15308, 15313, and 15317, actions to protect the environment, acquire lands for conservation purposes, and the establishment of agricultural preserves are exempt from CEQA review; and
WHER
EAS, the City Council conducted a Public Hearing on October 17, 2023, to consider the 2024 Development Fee for the SJMSCP; and
WHERE
AS, the new fees were available for public inspection and review in the office of the City Clerk for more than 10 days prior to the date of this Public Hearing; now, therefore, be it RESOL
VED: That the City Council of the City of Tracy hereby finds and declares that the purposes and uses of the SJMSCP Development Fee and the determination of the reasonable relationship between the fees’ uses and the type of development project on which the fees are imposed are all established in Resolution No. 2001-398 and No. 2007-021 and remain valid, and the City Council therefore adopts such determinations; and be it FURTHE
R RESOLVED: That the City Council finds and declares that since adoption of Resolution No. 2001-398 and No. 2007-021, the cost of land has changed in San Joaquin County and that in order to maintain the reasonable relationship established by Resolution No. 2001-398 and No. 2007-021, it is necessary to adjust the Development Fee for the San Joaquin County Multi-Species Habitat Conservation and Open Space Plan; and be it FURTHE
R RESOLVED: Adoption of the 2024 SJMSCP Development Fee is exempt from CEQA pursuant to Guidelines Sections 15308, 15313, and 15317; and be it FURTHE
R RESOLVED: That the City Council adopts the 2024 Development Fee as set forth in the following table; and be it
Resolution 2023-_____

2024 SJMSCP Development Fees
Habitat Type Fee Per Acre
Open Space $8,918
AG/Natural $17,833
Vernal Pool (uplands) $69,408
Vernal Pool (wetted) $177,724
FURTHE
R RESOLVED: That the 2024 Development Fee provided in this resolution shall be effective on January 1, 2024, which is at least sixty days after the adoption of this resolution, through December 31, 2024.
* * *
* * * * * * * * * * *
The foregoing Resolution 2023-_____ was adopted by the Tracy City Council on the 17th day of October 2023, by the following vote:

AYES: CO
UNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTENTION: COUNCIL MEMBERS:
___________________________________________
NANCY
D. YOUNG
Mayor of the City of Tracy, California
ATTEST
:

ADRIANNE RICHARDSON
City Clerk and Clerk of the Council of the
City of Tracy, California
October 17, 2023
Agenda Item 3.B

RECOMMENDATION
Staff recommends that the City Council adopt a Resolution 1) authorizing the issuance and sale of special tax bonds for the purpose of financing authorized facilities and 2) approving and authorizing related documents and actions for Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1.

EXECUTIVE SUMMARY
For the purpose of financing public facilities and public se rvices for development in the Tracy Hills Specific Plan, the City Council p reviously acted under the Mello-Roos Community Facilities Act
of 1982 (the “Mello-Roos Act”) to establish the following:
• City of Trac
y Community Facilities District No. 2016-1 (Tracy Hills) (the “CFD”), • Improvement
Area No. 1 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) (“Improvement Area No. 1”),
• City of Trac
y Community Facilities District No. 2016-1 (Tracy Hills) (Future Annexation Area) (the “Future Annexation Area”), and
• Improvement
Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) (“Improvement Area No. 2”).

All of the property that is currently in the CFD i s located in Improvement Area No. 1 and Improvement Area No. 2. The purpose of the Future Annexation Area is to facilitate a streamlined annexation of property into the CFD.

Staff recommends that the City Council adopt the referenced resolution (the “2023 Bond Resolution”) for the purpose of authorizing the issuance of an initial series of bonds on behalf of the CFD with respect to Improvement Area No. 2 and approving related documents and actions.

DISCUSSION
A. LOCAL GOALS AND POLICIES
Section 53312.7(a) of the Mello-Roos Act requires the City to consider and adopt local goals and policies concerning the use of t he Mello-R oos Act prior to the initiation of proceedings on or afte
r January 1, 1994 to establish a new community facilities district.

The Ci
ty adopted “Amended Local Goals and Policies for Community Facilities Districts (CFDs)” on Febr
uary 4, 2014, by Resolution No. 2014-019 (“Goals and Policies”).

The Goals and Policies provide guidance and conditions for the conduct by the City of pr
oceedings for, and the i ssuance of bonds secured by special taxes levied in, a community facilities district established under the Mello-Roos Act.

Agenda Item 3.B
October 17, 2023

B. CFD FORMATION PROCESS, APPROVAL OF BONDS AND ANNEXATION OF PROPERTY INTO IMPROVEMENT AREA NO. 2
Under the Mello-Roos Act, the City previously formed the CFD, Improvement Area No. 1 and a Future Annexation Area for the purpose of financing the public facil ities and services described in the City Council’s Resolution No. 2016-157 adopt ed on July 19, 2016 (the “Resolution of Formation”).

In the Resolution of Formation, the City Council also provided for the levy of special taxes upon the land within the CFD.

Pursuant to Resolution No. 2016-158, adopted by the City Council on July 19, 2016, the City Council declar
ed the necessity to incur bonded indebtedness and other debt on behalf of the CFD and allocated $215,000,000 as the maximum principal amount of bonded indebt edness or other debt that could be issued with respect to the Futur e Annexation Area (the “Non- Improvement Area No. 1 Indebtedness Limit”).

Subsequently, the City Council undertook change proceedi ngs and, on August 21, 2018, adopted Resolution No. 2018-169 (the “Resolution of Change”) which, among other things, increased the Non-I mprovement Area No. 1 Indebtedness Limit to $305,000,000.

The City Council later received separate Unanimous A pprovals executed by Lennar Homes of California, LLC (“Lennar Homes”) and AG Essential Housing CA 1, L.P. (“AG Essential”, which acts as a land bank entity for Lennar Homes); among other things, the Unanimous Approvals approved
the annexation of certain property in the Future Annexation Area into the CFD as “Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills)”, approved the levy of special taxes by the City in Improvement A rea No. 2 pursuant to the rate and method of apportionment of the special tax (the “Improvement Area No. 2 Rate and Method”), and the issuance of $50,000,000 of bonds by the City with respect to Improvement Area No. 2. This annexation was confirmed and approved by the City Council in Resolution No. 2022-130, adopted by the City Council on September 6, 2022 (the “Annexation Resolution”).

C. PROPOSED 2023 BONDS
Staff recommends that the City Council adopt a resol ution (the “2023 Bond Resolution”) for the following purposes:
(i) approve the i
ssuance of special tax bonds by the City for and on behalf of the CFD with respect to Improvement Area No. 2 (the “2023 Bonds”) in a principal amount not to exceed $38,000,000,
(ii) approve the sale of the 2023 Bonds to Piper Sandler & Co. (the “Underwriter”), (iii) a ppoint U.S. Bank National Association as fiscal agent for the 2023 Bonds (the “Fiscal Agent”),
(iv) approve the do
cuments related to the 2023 Bonds, and
(v) authorize staff to take all actions necessary related to issuance of the 2023 Bonds.

Agenda Item 3.B
October 17, 2023

D. TERMS OF THE 2023 BONDS
The 2023 Bonds are a limited obligation of the City, payable only from special taxes levied in Improvement Area No. 2 and moneys in the funds and accounts established under the Fiscal Agent Agreement described below.

Pursuant to the 2023 Bond Resolution, the true interest cost of the 2023 Bonds cannot exceed

7.00% and the principal amount of the 2023 Bonds cannot exceed $38,000,000.

Government Code Section 5852.1 requires the City to obtain and disclose a good faith estimate of certain information about the 2023, including the estimated true interest cost, financing costs, net proceeds and the total payment amount, and the information is included in Appendix A of the 2023 Bond Resolution. Based upon current market conditions as of September 27, 2023 , the 2023 Bonds are estimated to be issued in the amount of $35,110,000 and carry a true interest
cost of approximately 5.73%.

The Goals and Policies require a minimum aggregate value to lien ratio for special tax financings
of 3:1 (the value-to-lien calculation compares the market value of the taxable property in Improvement Area No. 2 to the proposed principal amount of the 2023 Bonds and bonds issued by overlapping community facilities districts and assessment distric ts). Based on the appraisal dated September 22, 2023 (the “Original Appraisal Report”) prepared by Integra Realty Resources (the “Appraiser”), the value of the property in Improvement Area No. 2 as of July 19, 2023 has been det ermined to be not less than $163,006,149, resulting in an estimated value to lien ratio of approximately 4.64:1 based on the estimated principal amount of the 2023 Bonds of $35,110,000 (there are no overlapping special tax or assessment bonds). The Appraiser has issued a Bring Forward Letter dated September 26, 2023, in which the Appraiser (1) reported that since the date of value of the Original Appraisal Report (July 19, 2023), a number of homes have been completed and/or sold to individual homeowners, a number of homes have begun construction with building permits and impact fees paid and (2) in the Appraiser’s opinion, the cumulative, or aggregate, value derived in the Original Appraisal Report, as of July 19, 2023, in accordance with the assumptions and conditions set forth in the Original Appraisal Report, as of September 21, 2023, is not less than $163,006,149.

The proposed Resolution authorizes staff to execute a bond purchase agreement with the Underwriter only if the aggregate value to lien ratio based on the final principal amount of the 2023 Bonds will be at least 3:1.

Of the 432 lots in Improvement Area No. 2, as of September 15, 2023:
• 108 are c
ompleted homes owned by individual homeowners
• 21 are completed homes owned by Lennar Homes (including model homes) • 92 are homes under construction owned by Lennar Homes • 114 are improved lots owned by Lennar Homes
• 97 are improved lots owned by AG Essential, Lennar Homes’ land bank entity However, as
of the July 19, 2023 date of value of the Original Appraisal Report, 177 lots would meet a 3:1 value-to-lien ratio on a parcel-by-parcel basis; whereas 255 lots under development are less than 3:1.

Agenda Item 3.B
October 17, 2023

The proposed bond financing has been structured to hold $6 million of the proceeds of the 2023 Bonds with the Fiscal Agent until (a) the Phase 1B Neighborhood Park has been constructed by Lennar Homes, (b) the Phase 1B Neighborhood Park has been inspected by the City, and (c) the City has determined that the Phase 1B Neighborhood Park has been constructed in accordance wi
th approved plans and specifications and all applicable City standards (other than any items identified by the City that need to be addressed before the Phase 1B Neighborhood Park can be deemed complete by the City, and which the City and Lennar Homes estimate to cost no more than $100,000 in the aggregate). As a result, the value-to-lien ratio of the 255 lots under development are expected to be not less than 2.90:1 based on the value estimated by the Appraiser, and depending on the final principal amount of the 2023 Bonds.

Consistent with this requirement, the Original Appraisal Report and the Bring Forward Letter include a hypothetical condition that the conditions for release of the $6 million of proceeds of the 2023
Bonds will be met. Lennar Homes has reported to the City that (1) it expects to commence construction on the Phase 1B Neighborhood Park immediately following execution of the plans, which is anticipated to be in the first week of October, 2023 and (2) weather permitting, it expects that it will take approximately 7 months from commencement of construction to complete the Phase 1B Neighborhood Park and another 2-3 months for acceptance by the City Council (“Estimated Park Acceptance Timeline”).

E. DOCUMENTS RE
LATED TO THE 2023 BONDS
The City Council is being asked to approve each of the following:
• Preliminary Official Statement. The Official Statement is the primary disclosure document for investors in the 2023 Bonds. A Preliminary Official Statement will be circulated to potential investors prior to the pricing of the 2023 Bonds. After the 2023 Bonds have been priced, a Final Official Statement will be circulated to investors; the Final Official Statement should be identical to the Preliminary Official Statement except for the addition of pricing information (principal amount, interest rates, redemption terms).

The Pr
eliminary Official Statement describes the special taxes to be levied in Improvement Area No. 2, each of the parcels to be taxed, and, based on information by the developers of property in Improvement Area No. 2, the development plans for the parcels within Improvement Area No.

2. The Preliminary Official Statement will also include the appraisal of the taxable parcels in Improvement Area No. 2.

The Prelim
inary Official Statement is prepared by Jones Hall, serving the City as Bond Counsel and Disclosure Counsel for this transaction, with the assistance of the remainder of the financing team, including City staff; the property owners in Improvement Area No. 2; CSG Advisors Incorporated, the City’s municipal advisor (“Municipal Advisor”); the Underwriter; and Goodwin Consulting, the City’s special tax consultant (“Special Tax Consultant”).

The Preliminary
Official Statement has been reviewed and approved for transmittal to the City Council by the City’s financing team. The distribution of the Preliminary Official Statement by the City is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the Preliminary Official Statement to include all facts that would be material to an investor in the 2023 Bonds. Material information is information that there is a substantial likelihood would have actual significance in the deliberations of the Agenda Item 3.B
October 17, 2023

reasonable investor when deciding whether to buy or sell the bonds. If the City Council concludes that the Preliminary O fficial Statement includes all facts that would be material to an investor in the 2023 Bonds, it must adopt a resolution that authorizes staff to exec ute a certificate to the effect that the Preliminary Official Statement has been “deemed final.” The Securities and Exchange Commission (the “SEC”), the agency with regulatory authority over the City’s compliance with the feder al securities laws, has issued guidance as to the duties of the City Council with respect to its approval of the Preliminary Official Statement. In its “Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors” (Release No. 36761 / January 24, 1996) (the “Release”), the SEC stated that, if a member of the City Council has know ledge of any facts or circumstances that an investor would want to know about prior to investing in the 2023 Bonds, whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the Preliminary Official Statement. In the Release, the SEC stated that the steps that a member of the City Council could take include becoming familiar with the Preliminary Official Statement and questioning staff and consultants about the disclosure of such facts.

The key sections of the Preliminary Official Statement are summarized below:
• “THE 2023
BONDS”: This section summarizes the key terms of the 2023 Bonds, including payment dates and redemption provisions. • “SECURIT
Y FOR THE BONDS”: This section summarizes key security
terms, including the City’s pledge of special tax revenues, its covenant to levy special taxes according to the Improvement Area No. 2 Rate and Method, and its covenant to foreclose on parcels that are delinquent in the payment of special taxes. As described above, the 2023 Bonds are a limited obligation of the City, payable only from special taxes levied in Improvement Area No. 2 and moneys in the funds and accounts established under the Fiscal Agent Agreement.
• “THE
DISTRICT AND IMPROVEMENT AREA NO. 2”: This section
summarizes certain features of Improvement Area No. 2, including the appraised value of taxable property, overlapping taxes, assessments and debt and anticipated debt service coverage provided by maximum special taxes that may be levied under the RMA.
• “PROPER
TY OWNERSHIP AND DEVELOPMENT STATUS”: This
section includes information provided by the property owners in Improvement Area No. 2, and describes the proposed development in Improvement Area No. 2 and its current status.
• “BON
D OWNERS’ RISK”: This section highlights the primary risks associated with the 2023 Bonds, including failure to complete the proposed development, natural disasters and failure of property owners to pay their special taxes. One of the primary risks associated with the proposed 2023 Bonds is that 341 of the 432 total lots are owned Lennar Homes or AG Essential, which means that payment of the 2023 Bonds is Agenda Item 3.B
October 17, 2023

dependent on Lennar Homes completing construction of homes on those lots and paying special taxes prior to completing construction. • “LEGAL
MATTERS - Tax Exemption”: This section describes the tax- exempt nature of interest on the 2023 Bonds.
• Continuing Disclosure Certificate. Under SEC Rule 15c2-12, the underwriter of the 2023 Bonds may only purchase the 2023 Bonds if it has determined that the City is obligated to provide continuing disclosure, including annual updates of the financial and operating data included in the Official Statement and notices of certain specified events. The developers in Improvement Area No. 2 will also provide continuing disclosure on a semi-annual basis until certain development thresholds have been met.
• Fiscal Agent Agreement. This document governs the 2023 Bonds and the use of special taxes from Improvement Area No. 2 to pay debt service on the 2023 Bonds. The special taxes will be levied on the regular County tax roll and collected by the County from each taxable parcel in Improvement Area No. 2. The County will remit these special taxes to the City. The City will remit them to the Fiscal Agent as provided for in the Fiscal Agent Agreement. The Fiscal Agent will use the revenues to (1) pay administrative costs of the CFD and (2) pay principal of and interest on the 2023 Bonds to the bond owners.
• Bond Purchase Agreement. At the time the 2023 Bonds are sold, the City will enter into a Bond Purchase Agreement with the Underwriter, who will agree to underwrite the 2023 Bonds subject to satisfaction of the conditions described in the Bond Purchase Agreement. The resolution provides the Underwriter’s discount on the purchase of the 2023 Bonds may not exceed 1.25% of the par amount of the 2023 Bonds. The Underwriter was selected as underwriter for the 2023 Bonds through an RFP process, and was chosen based upon the combination of its qualifications and proposed fees.

F. PERMIT CONDITION RELATED TO PHASE 1B NEIGHBORHOOD PARK The development of taxable property in Improvement Area No. 2 is subject to a condition that before final inspection or occupancy of the 180th dwelling unit (whichever occurs first, except for up to fifteen model homes), the Phase 1B Neighborhood Park must be completed and accepted by the City Council. If the Phase 1B Neighborhood Park is not completed and accepted by the City Council before final inspection or occupancy of the 180th dwelling unit (whichever occurs first, except for up to fifteen model homes), no further building permits (except for plumbing only building permits) will be issued until the Phase 1B Neighborhood Park is completed and accepted by the City Council.

The Preliminary Official Statement describes the potential impact of this permit condition, and the differing interpretations of the condition by City staff and Lennar Homes. In connection with the issuance of the 2023 Bonds, the City hired Empire Economics, Inc., to prepare a market absorption study for the homes planned for Improvement Area No. 2 (the “Absorption Study”).

Agenda Item 3.B
October 17, 2023

The Absorption Study has been updated to reflect the Estimated Park Acceptance Timeline (described above) under the City’s interpretation of the pa rk condition, and it assumes most of the calendar year absorption would occur in the fourth quarter of calendar year 2024.

STRATEGIC PLAN
This agenda item supports Governance Strategic Goal 2: Ensure Short and Long-term fiscal health and Goal 3: Increase Public Awareness around City finances and other civic matters.

FISCAL IMPACT
There is no cost to the General Fund associated with this request. The fees and expenses of the financing team, including Bond Counsel, Disclosure Counsel, Underwriter, Municipal Advisor, Special Tax Consultant and Appraiser are paid from proceeds of the 2023 Bonds or paid through an existing Cost Recovery Agreement with the developer.

ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends that the City Council adopt a resolution 1) authorizing the issuance and sale of special tax bonds for the purpose of financing authorized facilities and 2) approving and authorizing related
documents and actions, for Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1.

Prepared by: S ara Cowell, Director of Finance
Reviewed by: Bijal Patel, City Attorney
Karin Schnaider, Assistant City Manager
Approved by: Midori Lichtwardt, Interim City Manager

ATTACHMENTS
A. Preli
minary Official Statement (including Continuing Disclosure Certificates) B. Fiscal Agent Agreement
C. Bond Purchase Agreement
PRELI
MINARY OFFICIAL STATEMENT DATED ___________, 2023
NEW ISSUE – BOOK-ENTRY ONLY
Attachment A

NOT RATED
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2023 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2023 Bonds may be subject to the corporate alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes.

See “TAX MATTERS.”
$36,000,000*
IMPROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1 (TRACY HILLS)
SPECIAL TAX BONDS, SERIES 2023
Dated: Date of Delivery Due: September 1, as shown on inside cover.

Autho
rity for Issuance. The bonds captioned above (the “2023 Bonds”) are being issued by the City of Tracy (the “City”) for and on behalf of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) (the “District”) with respect to its Improvement Area No. 2 (“Improvement Area No. 2”) under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), the Resolution of Issuance (as defined herein), and a Fiscal Agent Agreement dated as of November 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”). See “THE 2023 BONDS – Authority for Issuance.” Security and Sources of Payment. The 2023 Bonds are payable from proceeds of Special Taxes (as defined herein) levied on property within Improvement Area No. 2 according to the rate and method of apportionment of special tax approved by the City Council of the City (the “City Council”), acting as legislative body of the District, and the eligible landowner voters in Improvement Area No. 2. The 2023 Bonds are secured by a first pledge of the revenues derived from the levy of Special Taxes and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement, on a parity with bonds that may be issued in the future, subject to the conditions set forth in the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.”
Use of P
roceeds. The 2023 Bonds are being issued to (i) finance the acquisition and construction of certain capital improvements necessary for the development of the property in the District, (ii) fund a debt service reserve fund for the 2023 Bonds, and (iii) pay the costs of issuing the 2023 Bonds. See “FINANCING PLAN.”
Bond Ter
ms. Interest on the 2023 Bonds is payable on each March 1 and September 1, commencing March 1, 2024. The 2023 Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The 2023 Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ( “DTC”). DTC will act as securities depository for the 2023 Bonds. See “THE 2023 BONDS – General Bond Terms” and “APPENDIX I – DTC and the Book-Entry Only System.” Redempt
ion. The 2023 Bonds are subject to optional redemption, mandatory sinking fund redemption and special redemption from prepaid Special Taxes. See “THE 2023 BONDS - Redemption.”
The 2023 Bond
s are not general obligations of the City, but are limited obligations, payable solely from the Special Tax Revenues and the funds pledged therefor under the Fiscal Agent Agreement. Neither the faith and credit nor the taxing power of the City (except to the limited extent set forth in the Fiscal Agent Agreement) or of the State of California (the “State”) or any political subdivision thereof is pledged to the payment of the 2023 Bonds.

MATURITY SCHEDULE
(see inside cover)
This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the 2023 Bonds involves risks which may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2023 Bonds.

The 2023 Bonds are
offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Jones Hall , A Professional Law Corporation, has served as disclosure counsel to the City. Stradling Yocca Carlson & Rauth, A Professional Corporation, Newport Beach, California, is serving as counsel to the Underwriter, and Holland & Knight LLP, San Francisco, California, is serving as counsel to Lennar Homes of California, LLC. It is anticipated that the 2023 Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about _______, 2023.
[Piper Sandler Logo]
The date of this Official Statement is: ___________, 2023. * Preliminary; subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. 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 solic itation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

MATURI

TY SCHEDULE
$ _______________ Seri
al Bonds
(Base CUSIP†: ______)
Maturity Principal Interest
(September 1) Amount Rate Yield Price CUSIP†
$ ___ __%
Term Bond due September 1, 20___, Yield: __%, Price: __% CUSIP† No. __
$ ___ __%
Term Bond due September 1, 20___, Yield: __%, Price: __% CUSIP† No. __
* Preliminary; subject to change.
† CUSIP Global Services (CGS) is managed on behalf of American Bankers Association by FactSet Research Systems Inc. Copyright 2023 CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database.

CUSIP numbers are provided for convenience of reference only. Neither the City nor the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.

CITY

OF TRACY

CITY CO
UNCIL
Nancy
Young, Mayor
Eleassia Davis, Mayor Pro Tem
Dan Arriola, Council Member
Mateo Bedolla, Council Member
Dan Evans, Council Member
CITY
STAFF
Midori
Lichtwardt, Interim City Manager
Karin Schnaider, Assistant City Manager
Sara Cowell, Finance Director
Adrianne Richardson, City Clerk
Bijal Patel, City Attorney
___________________________________
PROFE

SSIONAL SERVICES

BOND COUNS
EL and DISCLOSURE COUNSEL
Jones H
all, A Professional Law Corporation
San Francisco, California

MUNICIP

AL ADVISOR
CSG Adv
isors Incorporated
San Francisco, California
SPECI

AL TAX CONSULTANT
Goodwin
Consulting Group, Inc.

Sacramento, California

APPRAIS
ER
Integra
Realty Resources, Inc.

Rocklin, California
MARKET

ABSORPTION CONSULTANT
Empir
e Economics, Inc.

San Juan Capistrano, California
FISCAL
AGENT
U.S.

Bank Trust Company, National Association
San Francisco, California

TABLE OF CONTENTS
Page Pag e
INTRODUCTION ............................................... 2 FINANCING PLAN ............................................. 6 Authorized Facilities ....................................... 6 Estimated Sources and Uses of Funds ......... 6
THE 2023 BONDS ............................................. 7 Authority for Issuance .................................... 7 General Bond Terms ..................................... 7 Redemption* .................................................. 8 Registration, Transfer and Exchange .......... 10
DEBT SERVICE SCHEDULE .......................... 12
SECURITY FOR THE BONDS ........................ 13
General ........................................................ 13 Limited Obligation ........................................ 13 Special Taxes .............................................. 13 Rate and Method ......................................... 15 Covenant to Foreclose ................................. 20 Special Tax Fund ......................................... 21 Bond Fund ................................................... 23 Improvement Fund ....................................... 24 2023 Reserve Fund ..................................... 26 Investment of Moneys in Funds ................... 28
Issuance of Future Parity Bonds for
Refunding Only ........................................ 28

THE DISTRICT AND IMPROVEMENT AREA
NO. 2 ............................................................ 30 Formation and Background ......................... 30
Description and Location ............................. 30 Authorized Facilities ..................................... 33 Debt Service Coverage ................................ 33 City of Tracy Growth Management
Ordinance (GMO) .................................... 33 Market Absorption Study ............................. 34 Environmental Matters ................................. 35 Appraised Values ......................................... 36 Fiscal Year 2023-24 Special Tax Levy ........ 38
Value-to-Lien Ratios and Share of Fiscal
Year 2023-24 Special Taxes ................... 38
Direct and Overlapping Governmental
Obligations ............................................... 42 Potential Consequences of Special Tax
Delinquencies .......................................... 43

PROPERTY OWNERSHIP AND THE
DEVELOPMENT .......................................... 44 The Master Developer and Subsidiaries ..... 44
The Tracy Hills Project ................................. 45 Acquisition Agreement ................................. 46 Development Plan for Improvement Area No.
2 ............................................................... 47 Lennar Homes ............................................. 47 Landbank Arrangement ............................... 52 Status of Development ................................. 55 Home Construction Financing Plan ............. 56
BOND OWNERS’ RISKS ................................. 56 Limited Obligation of the City to Pay Debt
Service ..................................................... 56 Concentration of Ownership ........................ 57
Future Property Development ...................... 57
Potential Early Redemption of Bonds from
Prepayments ............................................ 57 Levy and Collection of the Special Tax ........ 57
Property Tax Delinquencies ......................... 58 Risks Related to High Loan to Value Ratios 59
Payment of Special Tax is not a Personal
Obligation of the Property Owners .......... 60
Appraised Values ......................................... 60 Property Values ........................................... 60 Other Possible Claims Upon the Value of
Taxable Property ..................................... 62 Exempt Properties ....................................... 63 FDIC/Federal Government Interests in
Properties................................................. 63 Depletion of 2023 Reserve Fund ................. 65
Bankruptcy Delays ....................................... 65 Cyber Security ............................................. 66 Disclosure to Future Purchasers ................. 66
No Acceleration Provisions .......................... 66 Impact of Certain Events on Tax Exemption 66
IRS Audit of Tax-Exempt Bond Issues ........ 67
Voter Initiatives ............................................ 67 Public Health Emergencies .......................... 68 Secondary Market for Bonds ....................... 68
LEGAL MATTERS ........................................... 69 Legal Opinions ............................................. 69 No Litigation ................................................. 69 TAX MATTERS ................................................ 69 CONTINUING DISCLOSURE .......................... 71
NO RATING ..................................................... 72 UNDERWRITING ............................................. 72 PROFESSIONAL FEES .................................. 73 EXECUTION .................................................... 73 APPENDIX A – General Information About the City of Tracy and San Joaquin County APPENDIX B – Rate and Method of Apportionment of Special Taxes for Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) APPENDIX C – Appraisal Report and Update
APPENDIX D – Market Absorption Study
APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement APPENDIX F – Form of Opinion of Bond Counsel
APPENDIX G – Form of Issuer Continuing Disclosure Certificate APPENDIX H – Form of Developer Continuing Disclosure Certificate APPENDIX I – DTC and the Book-Entry Only System
[INSER
T REGIONAL MAP]

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Of
fering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2023 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.

No Un
lawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effect
ive Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2023 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, the District, any other parties described in this Official Statement, or in the condition of property within Improvement Area No. 2 of the District since the date of this Official Statement.

Use o
f this Official Statement. This Official Statement is submitted in connection with the sale of the 2023 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2023 Bonds.

Prepar
ation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.

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

Documen
t References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statem ent are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stab
ilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize or maintain the market prices of the 2023 Bonds at levels above those that might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2023 Bonds to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.

Bond
s are Exempt from Securities Laws Registration. The issuance and sale of the 2023 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Estimat
es and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “ expect,” “estimate,” “budget” or other similar words.

The ach
ievement 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 those forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur.

The Ci
ty maintains an Internet website, but the information on the website is not incorporated in this Official Statement. -2-
_____________________
OFFI

CIAL STATEMENT
_____________________
$36,000,000*
IM
PROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1 (TRACY HILLS)
SPECIAL TAX BONDS, SERIES 2023
INTRO

DUCTION
This O
fficial Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “2023 Bonds”) to be issued by the City of Tracy (the “City”) on behalf of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) (the “District”) with respect to its Improvement Area No. 2 (“Improvement Area No. 2”).

This i
ntroduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page, the inside cover and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the 2023 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the definitions given in the Fiscal Agent Agreement (as defined below).

The Dist
rict and Improvement Area No. 2. The District (and Improvement Area No. 2) is located west of Corral Hollow Road, south of W. Valpico Road and north of Interstate 580, in the City. The property in Improvement Area No. 2 is part of the larger master -planned community known as “Tracy Hills” (the “Tracy Hills Project” or the “THPO Property”) being master-planned by The Tracy Hills Project Owner, LLC, a Delaware limited liability company ( “THPO”). THPO is developing the property through six affiliated owners (the “THPO Affiliates”). THPO and the THPO Affiliates were formed as special - purpose entities managed by the principals of Integral Communities.

The
District was formed and established by the City Council of the City (the “City Council”), as legislative body of the District, under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), pursuant to a resolution adopted by the City Council following a public hearing and a special landowner election. At the time of establishment of the District, an Improvement Area No. 1 (“Improvement Area No. 1”) and a future annexation area (the “ Future Annexation Area”) were also established for the District.

In Sep
tember 2022, the City Council, as legislative body of the District, and the landowners in Improvement Area No. 2, by unanimous approval, authorized the annexation of certain property from the Future Annexation Area into the District as Improvement Area No. 2, the incurrence of bonded indebtedness for Improvement Area No. 2 in an aggregate principal amount not to exceed $50,000,000, and the levy of special taxes within Improvement Area No. 2. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Formation and Background.” Although the bonded indebtedness limit for Improvement Area No. 2 is $50,000,000, the City covenants in the Fiscal Agent Agreement to issue Parity Bonds only * Preliminary; subject to change.
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for refunding purposes. See “SECURITY FOR THE BONDS – Issuance of Future Parity Bonds for Refunding Only”.

Additi
onal parcels may annex into the District in the future from the Future Annexation Area.

There is currently no intention for any additional territory to annex into Improvement Area No. 2. Parcels that annex into an improvement area within the District other than Improvement Area No. 2 do not serve as security for the 2023 Bonds.

Authori
ty for Issuance of the 2023 Bonds. The 2023 Bonds are issued under the Act and the following:
• a resolut
ion adopted by the City Council on October 17, 2023 (the “Resolution of Issuance”), and
• a Fiscal
Agent Agreement dated as of November 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”).

See “THE 2023
BONDS – Authority for Issuance.”
Purpose of
the 2023 Bonds. Proceeds of the 2023 Bonds will be used primarily to finance the acquisition and construction of certain capital improvements necessary for the development of the property in the District and for the Tracy Hills project as a whole. Proceeds of the 2023 Bonds will also fund a debt service reserve fund for the 2023 Bonds and pay the costs of issuing the 2023 Bonds. See “FINANCING PLAN.”
Redempti
on of Bonds before Maturity. The 2023 Bonds are subject to optional redemption, mandatory sinking fund redemption and special redemption from prepaid Special Taxes (as defined below). See “THE 2023 BONDS – Redemption.”
Securit
y and Sources of Payment for the 2023 Bonds. The City Council will annually levy special taxes on the property in Improvement Area No. 2 for the purposes of financing facilities (the “Special Taxes ”) in accordance with the Rate and Method of Apportionment of Special Taxes for Improvement Area No. 2 (the “Rate and Method”). The 2023 Bonds are secured by and payable from a first pledge of the proceeds of the Special Taxes received by the City (as more particularly defined in the Fiscal Agent Agreement, the “Special Tax Revenues”), on a parity with any bonds that may be issued in the future (the “Parity Bonds”), subject to the conditions set forth in the Fiscal Agent Agreement. The 2023 Bonds will be additionally secured by certain funds and accounts established and held under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.”
Debt S
ervice Reserve Fund. In order to further secure the payment of principal of and interest on the 2023 Bonds (and any series of Parity Bonds the principal of and interest on which is payable from amounts in the 2023 Reserve Fund), certain proceeds of the 2023 Bonds will be deposited into the 2023 Reserve Fund in an amount equal to the 2023 Reserve Requirement (as defined herein) . See “FINANCING PLAN – Estimated Sources and Uses of Funds” and “SECURITY FOR THE BONDS – 2023 Reserve Fund.”
Covenant to
Foreclose. The City has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Taxes. See “SECURITY FOR THE BONDS – Covenant to Foreclose.” Propert
y Ownership and Special Tax Status. The taxable property in Improvement Area No. 2 is being developed as four villages of single-family detached lots (each a “Village” and, collectively, the -4-
“IA No. 2 Villages ”). Improvement Area No. 2 is projected to be developed into 432 residential units.

The property in Improvement Area No. 2 is owned by individual homeowners, Lennar Homes of California, LLC (“Lennar Homes”), and AG Essential Housing CA 1, L.P. (the “ Landbank Owner”) all as further set forth below:

IA No.
2 Villages
Status of Development
(as of September 15, 2023)
Amber/
Parklin
Sunhaven/
Opal Greenwood Fairgrove Total
Construction and Sale Status
Closed to Homeowners 29 33 24 22 108
Completed Unclosed Homes
(including 8 models)
6 2 8 5 21
Under Construction(1) 27 27 17 21 92
Finished Lots 7 2 101 101 211
Total Projected Units 69 64 150 149 432
Permit Status
Plumbing-Only Permits Received (2) 0 0 94 91 185
Full Building Permits Received (3) 69 64 56 58 247
Total Projected Units 69 64 150 149 432
___________________________
(1) Under construction means that a full building permit has been issued and the trenching for the foundation has begun.

Represents homes in various stages of construction.
(2) Under the Growth Management Ordinance, a builder must have an RGA (as defined herein) in order to apply for a building permit on or before September 30th of the year in which the builder was allocated the RGA. If such an application is not made in a timely manner, then the RGA would expire. Pursuant to the First Amendment to the Development Agreement, the City considers the receipt of a plumbing permit as timely receipt of a permit to prevent the expiration of an RGA. (3) The receipt of a full building permit is also considered a timely receipt of a permit to prevent the expiration of an RGA.

Source: Lennar Homes.

For a des
cription of the current status of development within Improvement Area No. 2, see “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes ” and “– Status of Development.”
Appraised
Value of Property in Improvement Area No. 2. An appraisal of the property within Improvement Area No. 2, dated September 22, 2023, (the “Original Appraisal”) and an update to the Original Appraisal dated September 26, 2023 (the “Update to Original Appraisal” and, together with the Original Appraisal, the “Appraisal”), was prepared by Integra Realty Resources, Sacramento, California (the “Appraiser”) in connection with issuance of the 2023 Bonds. The purpose of the Original Appraisal was to estimate the market value of the fee simple estate, subject to the lien of the Special Taxes and overlapping liens, for all the taxable property within Improvement Area No. 2. Subject to the assumptions contained in the Original Appraisal, the Appraiser estimated that the taxable property within Improvement Area No. 2, subject to the lien of the Special Taxes and overlapping liens, had an estimated value of $163,006,149 as of a July 19, 2023 date of value.

The Apprais
er was requested to ascertain, as of September 21, 2023, whether the cumulative, or aggregate, value of the appraised properties is not less than the cumulative, or aggregate, value estimated as of the original date of value of July 19, 2023. Since the original date of value of July 19, -5-
2023, a number of homes have been completed and/or sold to individual homeowners, a number of homes have begun construction with building permits and impact fees paid. As a result of the Appraiser’s analysis, the Appraiser concluded that the cumulative, or aggregate, value, derived in the Original Appraisal, as of July 19, 2023, in accordance with the assumptions and conditions set forth in the Update to Original Appraisal as of September 21, 2023 (the current date of value), is not less than $163,006,149.

See “THE
DISTRICT AND IMPROVEMENT AREA NO. 2 – Appraised Values” for further information on the Appraisal. A complete copy of the Appraisal is attached as APPENDIX C.

Esti
mated Value-to-Lien Ratios in Improvement Area No. 2. Based on the appraised value of the taxable property within Improvement Area No. 2 of $163,006,149 and an estimated par amount of 2023 Bonds of $36,000,000,* the overall value-to-lien ratio of the taxable property within Improvement Area No. 2 is approximately 4.53 to 1.* This is an overall estimate, however, and the value-to-lien ratios of individual parcels may vary widely from this ratio. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Appraised Values.”
Market Absorption Study. In connection with the issuance of the 2023 Bonds, the City engaged Empire Economics, Inc., San Juan Capistrano, California (the “Market Absorption Consultant”) to prepare a market absorption study for the homes planned for Improvement Area No. 2, dated July 10, 2023 and revised September 22, 2023 (the “Absorption Study”). The Absorption Study sets forth the forecast of absorption under two scenarios: a benchmark scenario based on expected market conditions in the absence of the effect of a park construction- related condition of development, and a modified scenario that adjusts for the City’s development restrictions related to such condition. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes – Conditions of Approval” for a discussion of the park condition. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Market Absorption Study,” and APPENDIX D for further information related to, and a copy of, the Absorption Study.

Risk Factor
s Associated with Purchasing the 2023 Bonds. Investment in the 2023 Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the 2023 Bonds. *Preliminary; subject to change.
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FINANCING PLAN
Author
ized Facilities
The net
proceeds of the 2023 Bonds will be used to construct and/or acquire various facilities authorized to be financed by the District, including those that may be financed by the payment of capital improvement fees (collectively, “Authorized Facilities”). For a description of the Authorized Facilities, see “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Authorized Facilities.” Current
ly, the City intends to use a portion of the proceeds of the 2023 Bonds to pay a portion of the costs of school fees pursuant to the Joint Powers Agreement with the Jefferson School District and acquiring and/or constructing roads, parks and landscaping, sewer, water, reclaimed water, and storm drain improvements, among other Authorized Facilities.

Estim
ated Sources and Uses of Funds
The estim
ated proceeds from the sale of the 2023 Bonds will be used as follows:

SOURCES
Principal Amount of 2023 Bonds $
Plus/Less: [Net] Original Issue Premium/Discount
Total Sources $
USES
Deposit into Improvement Fund $
Deposit into 2023 Reserve Fund(1)
Deposit into Administrative Expense Fund
Costs of Issuance(2)
Total Uses $
(1) Equal to the 2023 Reserve Requirement with respect to the 2023 Bonds as of the Closing Date. (2) Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel, the Fiscal Agent, the Municipal Advisor, and the Special Tax Consultant ; printing the Preliminary and Final Official Statements; and Underwriter’s discount. -7-
THE 2023 BONDS
This sec
tion generally describes the terms of the 2023 Bonds contained in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX E. Capitalized terms used but not defined in this section are defined in APPENDIX E.

Author
ity for Issuance
The 2023 Bonds are i
ssued under the Act, the Resolution of Issuance and the Fiscal Agent Agreement. Under the Resolution of Issuance, the 2023 Bonds may be issued in a maximum principal amount of $38,000,000.

General
Bond Terms
Dated Dat
e, Maturity and Authorized Denominations. The 2023 Bonds will be dated their date of delivery (the “Closing Date”) and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The 2023 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple of $5,000.

Calculat
ion of Interest. Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. The 2023 Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2024 (each, an “Interest Payment Date”).

Each 2023 B
ond will bear interest f rom the Interest Payment Date next preceding its date of authentication unless:
(i) i
t is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or
(ii)
it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as defined below) preceding such Interest Payment Date, in which event it will 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 will bear interest from the Closing Date; provided,
however, that if at the time of authentication of a 2023 Bond, interest is in default thereon, such 2023 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.
“Record
Date” means the 15th day of the calendar month next preceding the applicable Interest Payment Date, whether or not such day is a Business Day.

DTC and Book
-Entry Only System. DTC will act as securities depository for the 2023 Bonds.

The 2023 Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). See APPENDIX I – “DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Payments o
f Interest and Principal. For so long as DTC is used as depository for the 2023 Bonds, principal of, premium, if any, and interest payments on the 2023 Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the 2023 Bonds, for distribution to the beneficial owners of the 2023 Bonds in accordance with the procedures adopted by DTC. -8-
Interest on the 2023 Bonds (including the final interest payment upon maturity or earlier redemption), is payable on the applicable Interest Payment Date by check of the Fiscal Agent mailed by first-class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2023 Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which will continue in effect until revoked in writing, or until such 2023 Bonds are transferred to a new Owner.

The princi
pal of the 2023 Bonds and any premium on the 2023 Bonds are payable in lawful money of the United States of America upon surrender of the 2023 Bonds at the Principal Office of the Fiscal Agent.

Redempti
on*
Optional
Redemption. The 2023 Bonds maturing on or after September 1, 20__, are subject to optional redemption as directed by the City, from sources of funds other than prepayments of Special Taxes, prior to their stated maturity on any date on or after September 1, 20__, as a whole or in part, at the redemption prices (expressed as a percentage of the principal amount of the 2023 Bonds to be redeemed) set forth below, together with accrued interest thereon to the date fixed for redemption:

Redemption Dates
Redemption
Price
September 1, ____ through August 31, ____ 103%
September 1, ____ through August 31, ____ 102
September 1, ____ through August 31, ____ 101
September 1, ____ and any date thereafter 100
Mandatory
Sinking Fund Redemption . The 2023 Bonds maturing on September 1, 20__, September 1, 20__, September 1, 20__, and September 1, 20__ (the “Term Bonds”), will also be subject to mandatory redemption in part by lot, from Sinking Fund Payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts, as set forth in the tables below; provided, however, if some but not all of the Term Bonds of a given maturity have been redeemed through optional redemption or mandatory prepayment redemption as described herein, the total amount of all future Sinking Fund Payments relating to such maturity will be reduced by the aggregate principal amount of Term Bonds of such maturity so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis in integral multiples of $5,000 as determined by the City.

Sinking Fund
Redemption Date
(September 1)
Sinking Fund
Payments
$
(maturity)
* Preliminary; subject to change.
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Sinking Fund
Redemption Date
(September 1)
Sinking Fund
Payments
$
(maturity)
Sinking Fund
Redemption Date
(September 1)
Sinking Fund
Payments
$
(maturity)
Sinking Fund
Redemption Date
(September 1)
Sinking Fund
Payments
$
(maturity)
Redempti
on from Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the 2023 Reserve Fund will be used to redeem 2023 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under the Fiscal Agent Agreement, among maturities so as to maintain substantially the same debt service profile for the 2023 Bonds as in effect prior to such redemption and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2023 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption:

Redemption Dates Redemption Price
Any Interest Payment Date on or before March 1, ____ 103% September 1, ____ and March 1, ____ 102%
September 1, ____ and March 1, ____ 101%
September 1, ____ and any Interest Payment Date thereafter 100% Any fut
ure Parity Bonds also are required to be redeemed from Special Tax Prepayments among maturities so as to maintain substantially the same debt service profile as in effect prior to such redemption. As a result, any Special Tax Prepayments will be applied to the redemption of all series of Outstanding Bonds on a pro rata basis.

Purchase in
Lieu of Redemption. In lieu of redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2023 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 2023 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2023 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement. -10-
In lieu of and following distribution of a notice of an optional redemption under the Fiscal Agent Agreement, the City will have the right to purchase or to cause the purchase of all or a portion of the 2023 Bonds in lieu of the optional redemption and to leave such 2023 Bonds outstanding.

Noti
ce of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first-class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Original Purc haser, to the Securities Depositories, and to the respective registered Owners of any 2023 Bonds designated for redemption, at their addresses appearing on the 2023 Bond registration books in the Principal Office of the Fiscal Agent; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2023 Bonds. In addition, the Fiscal Agent will file each notice of redemption with the MSRB through its EMMA system.

Howev
er, while the 2023 Bonds are subject to DTC’s book-entry system, the Fiscal Agent will be required to give notice of redemption only to DTC as provided in the letter of representations executed by the City and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the Beneficial Owners of the 2023 Bonds to be redeemed.

Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any 2023 Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption set forth in the Fiscal Agent Agreement.

Condit
ional Redemption Notice; Rescission of Redemption. Any redemption notice may be conditioned upon the receipt of moneys by the City sufficient to cause such redemption. The City has the right to rescind any notice of the optional redemption of the 2023 Bonds by written notice to the Fiscal Agent on or prior to the date fixed for redemption. Any notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2023 Bonds then called for redemption, and such cancellation will not constitute a default under the Fiscal Agent Agreement. The City and the Fiscal Agent have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Fiscal Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under the Fiscal Agent Agreement.

Select
ion of 2023 Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2023 Bonds of any maturity or any given portion thereof, the Fiscal Agent will select the 2023 Bonds to be redeemed by lot in any manner which the Fiscal Agent in its sole discretion deems appropriate.

Eff
ect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2023 Bonds so called for redemption have been deposited in the Bond Fund, such 2023 Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in the notice of redemption. All 2023 Bonds redeemed and purchased by the Fiscal Agent under th e Fiscal Agent Agreement will be canceled by the Fiscal Agent.

Regist
ration, Transfer and Exchange
The foll
owing provisions regarding the exchange and transfer of the 2023 Bonds apply only during any period in which the 2023 Bonds are not subject to DTC’s book-entry system. While the 2023 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See “APPENDIX I – DTC and the Book-Entry Only System.”
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Registr
ation. The Fiscal Agent will keep, or cause to be kept, at its Principal Of fice sufficient books for the registration and transfer of the 2023 Bonds, which will show the series number, date, amount, rate of interest and last known owner of each 2023 Bond and will at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the 2023 Bonds as provided in the Fiscal Agent Agreement.

The City and the
Fiscal Agent will treat the Owner of any 2023 Bond whose name appears on the Bond register as the absolute Owner of such 2023 Bond for any and all purposes, and the City and the Fiscal Agent will not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond register for any and all purposes.

Registr
ation of Exchange or Transfer. Any 2023 Bond may, in accordance with its terms, be transferred, upon the Bond register by the person in whose name it is registered, in person or by such person’s duly authorized attorney, upon surrender of such 2023 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent.

The 2023 Bonds may
be exchanged at the Principal Office of the Fiscal Agent solely for a like aggregate principal amount of 2023 Bonds of authorized denominations and of the same maturity.

The cost
for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange will be paid by the City. The Fiscal Agent will collect from the Owner requesting such transfer or exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. Whenever any 2023 Bond or 2023 Bonds are surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new 2023 Bond or 2023 Bonds, for a like aggregate principal amount.

No tran
sfers or exchanges of 2023 Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of 2023 Bonds for redemption or (ii) with respect to a 2023 Bond after such 2023 Bond has been selected for redemption; or (iii) between a Record Date and the succeeding Interest Payment Date.
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DEBT SERVICE SCHEDULE
Debt S
ervice Schedule. The following table presents the annual debt service (including mandatory sinking fund payments) on the 2023 Bonds, assuming there are no optional redemptions or special redemptions from Special Tax Prepayments.

Year Ending
September 1
2023 Bonds
Principal
2023 Bonds
Interest
2023 Bonds
Total
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
2053
Total:

Source: Piper Sandler & Co.

Debt S
ervice Coverage. The 2023 Bonds are being sized so that in each fiscal year there is at least 110% annual debt service coverage from Maximum Special Tax revenues, net of estimated Administrative Expenses. For Fiscal Year 2024 -25, such projected debt service coverage is 110%.

Administrative Expenses are estimated at $40,000 in Fiscal Year 2023 -24, escalating by 2% annually thereafter.
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SECURITY FOR THE BONDS
This
section generally describes the security for the Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX E. Capitalized terms used but not defined in the section are defined in APPENDIX E.

Genera
l
The 2023
Bonds and any Parity Bonds (collectively, the “Bonds”) are secured by a first pledge (which will be effected in the manner and to the extent provided in the Fiscal Agent Agreement) of all of the Special Tax Revenues and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account), and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund. Annual Administrative Expenses are funded prior to paying debt service on the Bonds. “Special Tax Revenues ” ar e defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes received by the City, including any scheduled payments thereof and any Special Tax Prepayments, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon. However, Special Tax Revenues do not include any interest in excess of the interest due on the Bonds, or any penalties collected in connection with any such foreclosure.

The Spec i
al Tax Revenues and all moneys deposited into such funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose under the Fiscal Agent Agreement.

The 2023 B
onds and all Parity Bonds, the principal of and interest on which is payable from amounts in the 2023 Reserve Fund ( “2023 Related Parity Bonds”), will be secured by a first pledge (which will be effected in the manner and to the extent provided in the Fiscal Agent Agreement ) of all moneys deposited in the 2023 Reserve Fund. See “– 2023 Reserve Fund” below.

Amount
s in the Improvement Fund (and the accounts therein, including the Remainder Taxes Account), the Administrative Expense Fund and the Costs of Issuance Fund are not pledged to the repayment of the Bonds. The Project is not pledged to the repayment of the Bonds, nor are the proceeds of any condemnation or insurance award received by the City with respect to the Project.

Limit
ed Obligation
The Bonds ar
e not general obligations of the City, but are limited obligations, payable solely from the Special Tax Revenues and the funds pledged therefor under the Fiscal Agent Agreement. Neither the faith and credit nor the taxing power of the City (except to the limited extent set forth in the Fiscal Agent Agreement) or of the State or any political subdivision thereof is pledged to the payment of the Bonds.

Special
Taxes
Covenant t
o Levy Special Taxes. The Finance Director will effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 10 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final date on which Auditor will accept the transmission of the Special Tax amounts for the parcels within Improvement Area No. 2 for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, the Finance Director shall prepare or cause to be prepared, and shall transmit to the Auditor, -14-
such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll.

Comput
ation. The Finance Director will fix and levy the amount of Special Tax es within Improvement Area No. 2 required to pay the following amounts, taking into account the balances in the applicable funds established under the Fiscal Agent Agreement:
(i)
the principal of and interest on any outstanding Bonds becoming due and pay able during the ensuing calendar year,
(ii
) any necessary replenishment or expenditure of the 2023 Reserve Fund and any other reserve account for Parity Bonds that are not 2023 Related Parity Bonds to the extent such replenishment has not been included in the computation of the Special Taxes in a previous Fiscal Year,
(ii
i) the Administrative Expenses, including amounts necessary to discharge any rebate obligation, during such year,
(iv
) an amount to cure delinquencies in the payment of principal or interest on Bonds that occurred in the previous Fiscal Year, and
(v)
any Project costs to be paid from Special Taxes to the extent that paying for such costs does not increase the Special Taxes levied on Undeveloped Property (as defined in the Rate and Method).

Duri
ng the Remainder Taxes Period, the Finance Director will fix and levy the Special Taxes at the Maximum Special Tax rate on Developed Property before considering any Capitalized Interest (as those terms are defined in the Rate and Method).
“Remai
nder Taxes Period” means the period through and including the date that is the earlier of (i) the end of the 20th Fiscal Year during which Special Taxes for facilities have been levied on the property in Improvement Area No. 2 and (ii) the date the City has fully satisfied its reimbursement obligations under the Acquisition Agreement. The first year of the Special Tax levy was Fiscal Year 2023-

24. The Spec
ial Taxes so levied shall not exceed the authorized amounts as provided in the proceedings under the Resolution of Formation.

Manner
of Collection. Except as set forth in the Ordinance, the Fiscal Agent Agreement provides that the Special Taxes will be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

Becaus
e the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the Bonds. Further, under no circumstances will the Special Tax levied against any parcel of residential property for which an occupancy permit for private residential use has been issued be increased by more than 10% as a consequence of delinquency or default by the owner of any other parcel within Improvement Area No. 2. In addition, in no event shall Special Taxes for facilities be levied for more than 80 Fiscal Years. See “BOND OWNERS’ RISKS – Property Tax Delinquencies.” -15-
Rate and Method
Genera
l. The Special Taxes will be levied and collected according to the Rate and Method, which provides the means by which the City Council may annually levy the Special Taxes within Improvement Area No. 2, up to the maximum Special Tax rates, and to determine the amount of the Special Taxes that will need to be collected each fiscal year from the “Taxable Property” within Improvement Area No. 2.

As used in this Official Statement, Special Tax refers only to the Facilities Special Tax levied under the Rate and Method; although a Services Special Tax is also authorized to be levied under the Rate and Method, the Services Special Tax is not pledged to repay the 2023 Bonds.

The fol
lowing is a summary of the provisions of the Rate and Method, which should be read in conjunction with the complete text of the Rate and Method, including its attachments, which is attached as APPENDIX B. Capitalized terms used but not defined in this section have the meanings as set forth in APPENDIX B. This section provides only a summary of the Rate and Method, and is qualified by more complete and detailed information contained in the entire Rate and Method attached as APPENDIX B.

Facili
ties Special Tax Requirement. Annually, at the time of levying the Special Tax, the person or firm designated by the City to administer the Special Taxes (the “Administrator”) will determine the minimum amount of money to be levied on Taxable Property related to the facilities component of the Rate and Method (the “Facilities Special Tax Requirement”), which will be the amount required in any Fiscal Year for the following purposes:
(i)
to pay principal and interest on Bonds when due in the calendar year which begins in such Fiscal Year,
(ii) t
o create or replenish reserve funds to the extent such replenishment has not been included in the computation of the Facilities Special Tax Requirement in a previous Fiscal Year, (ii
i) to cure any delinquencies in the payment of principal or interest on Bonds which have occurred in the prior Fiscal Year,
(iv
) to pay Administrative Expenses, and
(v) to
pay the costs of Authorized Facilities to be fu nded directly from Facilities Special Tax proceeds to the extent that paying directly for such costs does not increase the Facilities Special Taxes levied on Undeveloped Property.

Annual
Determination of Property Categories for Administration of Special Tax. Each Fiscal Year, the Administrator will (i) categorize each Parcel of Taxable Property as Developed Property, Undeveloped Property, Taxable Public Property, Taxable HOA Property, or Taxable Welfare Exemption Property, (ii) for Single Family Residential Property, determine within which Village each Parcel of Developed Property is located and the number of Residential Units on the Parcel, and (iii) determine the Facilities Special Tax Requirement for the Fiscal Year. In addition, the Administrator shall, on an ongoing basis, monitor Final Maps and condominium plans to determine if there are any proposed changes to the Expected Land Uses that would reduce the Expected Maximum Facilities Special Tax Revenues for a Village. If the Expected Maximum Special Tax Revenues will be reduced pursuant to a proposed Land Use Change, the Administrator shall apply the steps set forth in the Rate and Method, as described further below.
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In any Fiscal Year, if it is determined that:
(i)
a parcel map for property in Improvement Area No. 2 was recorded after January 1 of the prior Fiscal Year (or any other date after which the Assessor will not incorporate the newly - created Parcels into the then-current tax roll),
(ii
) because of the date the parcel map was recorded, the Assessor does not yet recognize the new Parcels created by the parcel map, and
(ii
i) one or more of the newly -created Parcels is in a different Development Class than other parcels created by the subdivision,
the A
dministrator will calculate the Special Tax for the property affected by recordation of the parcel map by determining the Special Tax that applies separately to the property within each Development Class , then applying the sum of the individual Special Taxes to the Parcel that was subdivided by recordation of the parcel map.

Maxim
um Facilities Special Tax. The table below identifies the Maximum Facilities Special Tax, before and after the Trigger Event, for Taxable Property in Improvement Area No. 2, subject to potential adjustments that may occur pursuant to the Rate and Method.

Onc
e Special Taxes have been levied on a Parcel of Developed Property, the Maximum Special Taxes applicable to that Parcel will not be reduced in future Fiscal Years regardl ess of changes in land use on the Parcel, except (i) in the event of a partial prepayment , and (ii) pursuant to Section D of the Rate and Method, which is described below. Notwithstanding the foregoing: (i) if Bonds have yet to be issued for Improvement Area No. 2, the Parcels can be assigned to the appropriate Special Tax category based on the Land Use Change, and the Administrator shall recalculate the Expected Maximum Facilities Special Tax Revenues based on the corresponding change in revenues, and (ii) the actual Special Taxes levied on a Parcel of Developed Property in any Fiscal Year may be less than the Maximum Special Taxes if lower Special Taxes are calculated pursuant to the Rate and Method.

The Ex
pected Maximum Facilities Special Tax Revenues were calculated based on the Expected Land Uses at the time the Notice of Special Tax Lien affecting the Parcels in Improvement Area No. 2 was recorded in the official records of the County. The Administrator will review Final Maps, Tentative Map revisions, and other changes to land uses proposed within Improvement Area No. 2 and compare the revised land uses to the Expected Land Uses to evaluate the impact on the Expected Maximum Facilities Special Tax Revenues. S ee the Rate and Method attached as APPENDIX B for additional details.

Trigger
Event. The term “Trigger Event” means, in any Fiscal Year, that, on or before June 30 of the prior Fiscal Year, the Administrator made a finding that (i) all Bonds secured by the levy and collection of Facilities Special Taxes in the District have been fully repaid, (ii) all Administrative Expenses from prior Fiscal Years have been paid or reimbursed to the City, (iii) the Recycled Water Facilities Costs have been fully funded, and (iv) there are no other Authorized Facilities that the City intends to fund with Facilities Special Taxes. In the first Fiscal Year in which the Administrator determines that the Trigger Event occurred in the prior Fiscal Year, and in each Fiscal Year thereafter, the Facilities Special Tax will cease to be levied, and the Maximum Services Special Tax for each Parcel will be adjusted pursuant to the Rate and Method.

Recycled
Water Facilities Cost. The term “Recycled Water Facilities Cost” means the total cost, as determined by the City, of funding the design, engineering, construction, and/or acquisition of recycled water facilities that will serve development within the District. If, in the future, the City determines that there is a preferred alternative to the recycled water facilities that were expected at the time the -17-
notice of special tax lien was recorded against the parcels in Improvement Area No. 2, the cost of such facilities will qualify as Recycled Water Facilities Costs for purposes of the Rate and Method.

Fiscal Y
ear 2023-24 Maximum Facilities Special Tax Rates(1)
Special Tax Category
Maximum Facilities Special Tax
Prior to Trigger Event
Fiscal Year 2023-24
Maximum Facilities Special Tax
After Trigger Event
Fiscal Year 2023-24
Single Family Residential Property
Village 9A $4,891 per Residential Unit $0 per Residential Unit Village 9B $5,961 per Residential Unit $0 per Residential Unit Village 10A $5,117 per Residential Unit $0 per Residential Unit Village 10B $5,117 per Residential Unit $0 per Residential Unit Village 10C $5,117 per Residential Unit $0 per Residential Unit Village 11A $4,401 per Residential Unit $0 per Residential Unit Village 11B $4,401 per Residential Unit $0 per Residential Unit Other Property $47,285 per Acre $0 per Acre
Undeveloped Property $47,285 per Acre $0 per Acre
Taxable HOA Property $47,285 per Acre $0 per Acre
Taxable Public Property $47,285 per Acre $0 per Acre
Taxable Welfare Exemption Property $47,285 per Acre $0 per Acre (1) Reflects the Maximum Facilities Special Tax rates as calculated per Section D.2 of the Rate and Method. The Maximum Facilities Special Tax per Unit increases each year by 2% of the amount in effect in the prior fiscal year.

Source: Goodwin Consulting Group, Inc.
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Expected Land Uses and Expected Maximum Facilities Special Tax Revenues at Buildout Expected Maximum
Maximum Facilities Facilities Special
Expected Special Tax Prior to Trigger Event Tax Revenues Village Land Uses (1) Fiscal Year 2023-24 Fiscal Year 2023-24 9A 69 Residential Units $4,891 per Residential Unit $337,472 9B 64 Residential Units $5,961 per Residential Unit $381,496 10A 47 Residential Units $5,117 per Residential Unit $240,515 10B 41 Residential Units $5,117 per Residential Unit $209,811 10C 62 Residential Units $5,117 per Residential Unit $317,275 11A 45 Residential Units $4,401 per Residential Unit $198,059 11B 104 Residential Units $4,401 per Residential Unit $457,735 Other 0 Acres $48,231 per Acre $0
Total 432 Residential Units N/A $2,142,363
(1) Based on Attachment 1 of the Rate and Method.

Source: Goodwin Consulting Group, Inc.

Transfer
of Expected Maximum Facilities Special Tax Revenues from One Village to Another. The Expected Maximum Facilities Special Tax Revenues were determined for each Village based on the Expected Land Uses within that Village. If the expected number of Residential Units is transferred from one Village to another, the City may, in its sole discretion, allow for a corresponding transfer of Expected Maximum Facilities Special Tax Revenues between the Villages. Such a transfer shall only be allowed if (i) all adjustments are agreed to in writing by the affected property owners and the City, and (ii) there is no reduction in the total Expected Maximum Facilities Special Tax Revenues as a result of the transfer. See APPENDIX B for additional details.

Method
of Special Tax Levy. Under the Rate and Method, the Administrator will determine the Facilities Special Tax Requirement and levy the Facilities Special Tax as follows:

Step 1
: In the first 20 Fiscal Years in which a Facilities Special Tax is levied within Improvement Area No. 2, the Maximum Facilities Special Tax shall be levied on all Parcels of Developed Property. In the first 14 Fiscal Years in which Facilities Special Taxes are collected, and in the 16th, 17th, 18th, 19th and 20 th Fiscal Years in which Facilities Special Taxes are collected, Facilities Special Tax proceeds that are determined by the Administrator to be Remainder Taxes shall be deposited into the Improvement Fund to pay any costs associated with the acquisition of Authorized Facilities that were not paid with Bond proceeds or Facilities Special Taxes levied in prior Fiscal Years. Any Remainder Taxes collected in the 15th year in which Facilities Special Taxes are levied shall be available to pay for Authorized Facilities or Authorized Services as determined in the sole discretion of the City.

Beginni
ng in the 21st Fiscal Year in which a Facilities Special Tax is levied w ithin Improvement Area No. 2 and continuing until the Trigger Event, the Facilities Special Tax shall be levied Proportionately on each Parcel of Developed Property up to 100% of the Maximum Facilities Special Tax for each Parcel of Developed Property until the amount levied is equal to the Facilities Special Tax Requirement, the calculation of which will include funding for Recycled Water Facilities Costs and/or other Authorized Facilities designated for funding, as determined in the sole discretion of the City.

Aft
er the Trigger Event, the Facilities Special Tax shall no longer be levied.

Step 2: I
f additional revenue is needed after Step 1 and after applying Capitalized Interest to the Special Tax Requirement, the Facilities Special Tax shall be levied Proportionately

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on each Parcel of Undeveloped Property up to 100% of the Maximum Facilities Special Tax for each Parcel of Undeveloped Property.

Step 3: If additional revenue is needed after Step 2, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable Welfare Exemption Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable Welfare Exemption Property.

Step 4: If additional revenue is needed after Step 3, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable HOA Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable HOA Property.

Step 5: If additional revenue is needed after Step 4, the Facilities Special Tax shall be levied Proportionately on each Parcel of Taxable Public Property, up to 100% of the Maximum Facilities Special Tax for each Parcel of Taxable Public Property.

Exemptions. Any Parcel that becomes HOA Property, Public Property, or Welfare Exemption Property prior to the first series of Bonds being issued for Improvement Area No. 2 will be exempt from both the Services Special Tax and the Facilities Special Tax; the Administrator will reduce the Expected Maximum Facilities Special Tax Revenues to reflect any such exemption, and the first series of Bonds will be sized based on the reduced Expected Maximum Facilities Special Tax Revenues.

Any Parcel that becomes HOA Property, Public Property, or Welfare Exemption Property after the first series of Bonds are issued for Improvement Area No. 2 will be exempt from both the Services Special Tax and the Facilities Special Tax provided such Parcel is not Taxable HOA Property, Taxable Public Property, or Taxable Welfare Exemption Property.

In addition, no Special Taxes will be levied on:

(i) Parcels that are designated as permanent open space or common space on which no structure is permitted to be constructed,

(ii) Parcels owned by a public utility for an unmanned facility, and

(iii) Parcels subject to an easement that precludes any use on the Parcel other than that permitted by the easement.

Notwithstanding the foregoing, if a Facilities Special Tax has been levied on a Parcel in any Fiscal Year, and the entire Parcel subsequently meets the criteria in (i), (ii) or (iii) above, the Parcel will remain subject to the Facilities Special Tax levy, unless the first series of Bonds have yet to be issued for Improvement Area No. 2, in which case such property will be categorized as Public Property, and the Administrator will recalculate the Expected Maximum Facilities Special Tax Revenues based on the corresponding loss in revenues.

Partial Prepayment of Facilities Special Tax. A property owner may prepay up to 80% of the Facilities Special Tax obligation applicable to a Parcel in Improvement Area No. 2, subject to certain conditions. The Prepayment Amount is calculated based on the Bond Redemption Amount plus Redemption Premium and other costs, all as specified in “APPENDIX B – Rate and Method of Apportionment of Special Tax – Section H.”

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Covenant to Foreclose
Sale
of Property for Nonpayment of Taxes . The Fiscal Agent Agreement provides that the Special Taxes are to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described below and in the Act, is to be subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County.

Foreclosur
e Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in the payment of the Special Tax, the City may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale.

Whil
e judicial foreclosure is not mandatory under the Act, the City has covenanted in the Fiscal Agent Agreement that on or about June 30 of each Fiscal Year, the Finance Director will compare the amount of Special Taxes previously levied in Improvement Area No. 2 of the District to the amount of Special Tax Revenues received by the City, and:

Indiv
idual Delinquencies. If t he Finance Director determines that any single parcel subject to the Special Tax in Improvement Area No. 2 is delinquent in the payment of four installments of Special taxes, then the Finance Director will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the City within 90 days of such determination.

Notwi
thstanding the foregoing, the Finance Director may defer any such actions with respect to a delinquent parcel if (1) Improvement Area No. 2 is then participating in the Alternative Method of Distribution of Tax Levies and Collections described in Revenue & Taxation Code Section 4701 et seq. (referred to herein as the “Teeter Plan”), or an equivalent procedure, (2) the amount in the 2023 Reserve Fund is at least equal to the 2023 Reserve Requirement and (3) the amount in the reserve account for any Parity Bonds that are not 2023 Related Parity Bonds is at least equal to the Parity Reserve Requirement.

Aggregat
e Delinquencies. If the Finance Director determines that (i) the total amount of delinquent Special Tax for the prior Fiscal Year for the entire Improvement Area No. 2 (including the total of delinquencies above), exceeds 5% of the total Special Tax due and payable for the prior Fiscal Year, determined by reference to the latest available secured property tax roll of the County, the Finance Director shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and shall commence foreclosure proceedings within 90 days of such determination against each parcel of land in Improvement Area No. 2 with a Special Tax delinquency.

Suffi
ciency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

Sect
ion 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post -judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. -21-
However, under Section 53356.5 of the Act, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Taxes. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale.

Forecl
osure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the City to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the “FDIC”). See “BOND OWNERS’ RISKS – Bankruptcy Delays.”
Special
Tax Delinquencies; Teeter Plan. In 1949, the California Legislature enacted an alternative method for the distribution of property taxes to local agencies. This method, known as the “Teeter Plan,” is found in Sections 4701- 4717 of the California Revenue and Taxation Code. Upon adoption and implementation of this method by a county board of supervisors, local agencies for which the county collects property taxes and certain other public agencies and taxing areas located in the county receive annually the full amount of their shares of property taxes and other levies collected on the secured roll, including delinquent property taxes which have yet to be collected. While the county bears the risk of loss on unpaid delinquent taxes, it retains the penalties associated with delinquent taxes when they are paid. In turn, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk.

Once
adopted, a county ’s Teeter Plan will remain in effect in perpetuity unless the board of supervisors orders its discontinuance or unless, prior to the commencement of a fiscal year, a petition for discontinuance is received and joined in by resolutions of the governing bodies of not less than two-thirds of the participating districts in the county. An electing county may, however, decide to discontinue the Teeter Plan with respect to any levying agency in the county if the board of supervisors, by action taken not later than July 15 of a fiscal year, elects to discontinue the procedure with respect to such levying agency and the rate of secured tax delinquencies in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll by that agency.

The Boar
d of Supervisors of San Joaquin County adopted the Teeter Plan in Fiscal Year 1994 -

95. The County has elected to apply its Teeter Plan to the collection of the Special Taxes in Improvement Area No. 2. To the extent that the County ’s Teeter Plan continues in existence and is carried out as adopted, and to the extent the County does not discontinue the Teeter Plan with respect to the District, the County’s Teeter Plan may help protect owners of the 2023 Bonds from the risk of delinquencies in the payment of Special Tax.

There can
be no assurance that the County will not modify or eliminate its Teeter Plan, or choose to remove the District from its Teeter Plan, while the 2023 Bonds are outstanding.

Special
Tax Fund
Deposit
s. Under the Fiscal Agent Agreement, the Special Tax Fund is established as a separate fund to be held by the Fiscal Agent, to the credit of which the Fiscal Agent will deposit amounts received from or on behalf of the City consisting of Special Tax Revenues and amounts transferred from the Administrative Expense Fund and the Bond Fund. The City will promptly remit any Special Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund.

Notw
ithstanding the foregoing,
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(i) Speci
al Tax Revenues in an amount not to exceed the amount included in the Special Tax levy for such Fiscal Year for Administrative Expenses will be separately identified by the Finance Director and shall be deposited by the Fiscal Agent in the Administrative Expense Fund;
(ii) any
Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the Finance Director and will be disposed of by the Fiscal Agent first, for transfer to the Bond Fund to pay any past due debt service on the Bonds; second, without preference or priority, for transfer to the 2023 Reserve Fund to the extent needed to increase the amount then on deposit in the 2023 Reserve Fund up to the then 2023 Reserve Requirement and for transfer to the reserve account for any Parity Bonds that are not 2023 Related Parity Bonds to the extent needed to increase the amount then on deposit therein to the required level; and third, to be held in the Special Tax Fund for use as described in “–Disbursements” below; and (iii) any
proceeds of Special Tax Prepayments will be separately identified by the Finance Director and will be deposited by the Fiscal Agent as follows (as directed in writing by the Finance Director): (a) that portion of any Special Tax Prepayment constituting a prepayment of construction costs (which otherwise could have been included in the proceeds of Parity Bonds) will be deposited by the Fiscal Agent to the Bond Proceeds Account of the Improvement Fund and (b) the remaining Special Tax Prepayment will be deposited by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to the Fiscal Agent Agreement.

Disbur
sements. At least 7 Business Days prior to each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority:
(i) to t
he Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the 2023 Reserve Fund, any reserve account for Parity Bonds that are not 2023 Related Parity Bonds, any capitalized interest account for Parity Bonds, and the Special Tax Prepayments Account to the Bond Fund such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date and any past due principal or interest on the Bonds not theretofore paid from a transfer described in the Fiscal Agent Agreement,
(ii) wi
thout preference or priority (a) to the 2023 Reserve Fund an amount, taking into account amounts then on deposit in the 2023 Reserve Fund, such that the amount in the 2023 Reserve Fund is equal to the 2023 Reserve Requirement, and (b) to the reserve account for any Parity Bonds that are not 2023 Related Parity Bonds, taking into account amounts then on deposit in such reserve account, such that the amount in such reserve account is equal to the amount required to be on deposit therein (and in the event that amounts in the Special Tax Fund are not sufficient for the purposes of this paragraph, such amounts will be applied to the 2023 Reserve Fund and any other reserve accounts ratably based on the then-Outstanding principal amount of each applicable series of Bonds), and (iii) (A
) on each October 1, beginning on Octob er 1, 2024, and continuing through the Remainder Taxes Period, all of the moneys remaining in the Special Tax Fund will be transferred to the Remainder Taxes Account and

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(B) on each subsequent October 1 after the end of the Remainder Taxes Period, all or a portion of the moneys remaining in the Special Tax Fund will be transferred to the Remainder Taxes Account as directed by the Finance Director.

Within 15 days after the end of each Bond Year, and after the foregoing transfers have been made, the Fiscal Agent will transfer all amounts remaining on deposit in the Special Tax Fund for any lawful purpose, as directed by the City in an Officer’s Certificate.

Bond Fund

Deposits. The Fiscal Agent will hold the moneys in the Bond Fund for the benefit of the City and the Owners of the Bonds, and will disburse those funds for the payment of the principal of, and interest and any premium on, the Bonds as described below.

There is also created in the Bond Fund a separate account to be held by the Fiscal Agent, designated the “Special Tax Prepayments Account ,” to the credit of which deposits will be made as provided in the Fiscal Agent Agreement.

Disbursements. At least 10 Business Days before each Interest Payment Date, the Fiscal Agent will notify the Finance Director in writing as to the principal and premium, if any, and interest due on the Bonds on the next Interest Payment Date (whether as a result of scheduled principal of and interest on the Bonds, optional redemption of the Bonds or a mandatory sinking fund redemption). On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, due and payable on such Interest Payment Date on the Bonds.

At least 5 Business Days prior to each Interest P ayment Date, the Fiscal Agent will determine if the amounts then on deposit in the Bond Fund are sufficient to pay the Debt Service due on the Bonds on the next Interest Payment Date. In the event that amounts in the Bond Fund are insufficient for such purpose, the Fiscal Agent promptly will notify the Finance Director by telephone (and confirm in writing) of the amount of the insufficiency.

If amounts in the Bond Fund are insufficient for the purpose set forth in the preceding paragraph with respect to any Interest Payment Date, the Fiscal Agent will do the following:

(i) Withdraw from the 2023 Reserve Fund, in accordance with the provisions of the Fiscal Agent Agreement, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to the 2023 Bonds and any 2023 Related Parity Bonds. Amounts so withdrawn from the 2023 Reserve Fund will be deposited in the Bond Fund and used to pay debt service on the 2023 Bonds and any 2023 Related Parity Bonds.

(iv) Withdraw from the reserve funds, if any, established under a Supplemental Agreement related to Parity Bonds that are not 2023 Related Parity Bonds, to the extent of any funds or Permitted Investments therein, amounts to cover the amount of such Bond Fund insufficiency related to such Parity Bonds. Amounts so withdrawn from any such reserve fund will be deposited in the Bond Fund and used to pay debt service on the Parity Bonds that are not 2023 Related Parity Bonds.

If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments provided for in the second sentence of the first paragraph under “–Bond Fund – Disbursements” above, the Fiscal Agent will apply the available funds first to the payment of interest on -24-
the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, if any, and then to payment of principal due on the bonds by reason of sinking payments. The available funds in the Bond Fund will be allocated among the series of Outstanding Bonds based on the principal amount of the Outstanding Bonds without regard to the availability of moneys from the 2023 Reserve Fund or another debt service reserve account.

Disbur
sements from the Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under the Fiscal Agent Agreement, and notice to the Fiscal Agent can timely be given under the Fiscal Agent Agreement, and will be used (together with any amounts transferred pursuant to the Fiscal Agent Agreement) to redeem Bonds on the redemption date selected in accordance the Fiscal Agent Agreement.

Impr
ovement Fund
Deposit
s. Under the Fiscal Agent Agreement, the Improvement Fund is established as a separate fund to be held by the Fiscal Agent, to the credit of which the Fiscal Agent will deposit moneys, including a portion of the proceeds of the 2023 Bond, as provided in the Fiscal Agent Agreement. There are also created in the Improvement Fund the Remainder Taxes Account and the Bond Proceeds Account, to be held by the Fiscal Agent.

Moneys
in the Improvement Fund shall be disbursed, except as otherwise provided in the Fiscal Agent Agreement, for the payment or reimbursement of costs of acquisition or construction of the Authorized Facilities.

Disbur
sements Generally. Disbursements from the Improvement Fund will be made by the Fiscal Agent upon receipt of an officer's certificate in the form attached to the Fiscal Agent Agreement. Disbursements for the payment or reimbursement of costs of acquisition or construction of the Authorized Facilities will be made from the Bond Proceeds Account and the Remainder Taxes Account in the following order:

Firs
t: payments or reimbursements will be made from the Bond Proceeds Account so long as there are moneys available therein and such costs can be paid from Bond proceeds without violating the tax covenants set forth in the Fiscal Agent Agreement and Second:
payments or reimbursements will be made from the Remainder Taxes Account (1) even if Bond proceeds remain in the Bond Proceeds Account, if such payment or reimbursement would violate the tax covenants set forth in the Fiscal Agent Agreement and (2) when no Bond proceeds remain in the Bond Proceeds Account.

At
the direction of the Finance Director, and so long as such amounts have not been previously approved for payment of a cost of Authorized Facilities, the Fiscal Agent will transfer amounts from the Remainder Taxes Account to the Bond Fund to pay debt service on the Bonds, the Administrative Expense Fund to pay Administrative Expenses, the 2023 Reserve Fund to increase the amount therein to the 2023 Reserve Requirement, and the reserve account for Parity Bonds that are not 2023 Related Parity Bonds that is held by the Fiscal Agent to increase the amount therein to the Parit y Reserve Requirement.

Disbur
sements Related to Construction of Phase 1B Neighborhood Park. Construction of a neighborhood park (the “ Phase 1B Neighborhood Park”) is one condition of development in Improvement Area No. 2. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes – Conditions of Approval” for additional information related to the Phase 1B Neighborhood Park.

Notwithstanding the process for disbursements from the Improvement Fund described above under “ – -25-
Disbursements Generally,” and except as described in the last paragraph of this section, $6 million of the proceeds of the 2023 Bonds deposited in the Bond Proceeds Account on the Closing Date (the “Set- Aside Amount ”) may be disbursed from the Bond Proceeds Account upon receipt of an officer’s certificate that includes a representation that either:
(1) (
a) the Phase 1B Neighborhood Park has been constructed by Lennar Homes, (b) the Phase 1B Neighborhood Park has been inspected by the City, and (c) the City has determined that the Phase 1B Neighborhood Park has been constructed in accordance with approved plans and specifications and all applicable City standards (other than any items identified by the City that need to be addressed before the Phase 1B Neighborhood Park can be deemed complete by the City, and which the City and Lennar Homes estimate to cost no more than $100,000 in the aggregate), or
(2) t
he City has determined that each parcel of Taxable Property (as defined in the Rate and Method) in Improvement Area No. 2 has a Value that is at least three (3) times the sum of:
(a) the allocable principal amount of the Bonds then Outstanding, plus (b) the aggregate principal amount of any fixed assessment liens on the parcel, plus (c) the allocable principal amount of any and all Other District Bonds that are payable at least in part from special taxes levied on such parcel.

Upon s
atisfaction of the condition set forth in claus es (1) or ( 2) of the preceding paragraph, the City may apply the Set-Aside Amount (including any accrued interest earnings thereon, if any) on deposit in the Bond Proceeds Account for (i) the costs of Facilities described in the Certificate Regarding Use of Proceeds for the 2023 Bonds or (ii) such other costs of Facilities with respect to which the City has received an opinion of Bond Counsel to the effect that such application of the Set-Aside Amount (including any accrued interest earnings thereon, if any), in and of itself, will not adversely impact the exclusion of interest on the 2023 Bonds from gross income of the Owners of the 2023 Bonds for federal income tax purposes, and for which the City has determined such application is consistent with the requirements of the Acquisition Agreement.

For pur
poses of clause (2) above, “Value” means the market value, as of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, and, with respect to Undeveloped Property (as defined in the Rate and Method) only, not delinquent in the payment of any Special Taxes then due and owing, including with respect to such parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the Improvement Fund, as determined with respect to any parcel by reference to (i) an appraisal performed within ninety (90) days of the date of the Officer’s Certificate or (ii) in the alternative, the assessed value of the parcel and improvements thereon described in clause (i) as shown on the then current County real property tax roll available to the Finance Director. It is expressly acknowledged that, in determining the Value, the City may rely on an appraisal to determine the value of some or all of the parcels and/or the most recent County real property tax roll as to the value of some or all of the parcels.

Neither the City nor the Finance Director shall be liable to the Owners or any other person or entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition.

If
the conditions set forth in clauses (1) or (2) of the third preceding paragraph have not been satisfied by June 1, 2026, then on such date (or as soon thereafter as possible) the City will direct the Fiscal Agent to transfer the Set-Aside Amount (including any accrued interest earnings thereon, if any) on deposit in the Bond Proceeds Account to the Bond Fund and the Fiscal Agent will use such proceeds to redeem 2023 Bonds on the first optional redemption date or to pay scheduled debt service on the 2023 Bonds, as directed by the City. This mandatory transfer applies only to the Set-Aside Amount (and accrued interest) and only if the conditions set forth in clauses (1) or (2) of the third preceding paragraph have not been satisfied.
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2023 R
eserve Fund
Genera
l. In order to further secure the payment of principal of and interest on the 2023 Bonds and any series of Parity Bonds the principal of and interest on which is payable from amounts in the 2023 Reserve Fund (“2023 Related Parity Bonds”), certain proceeds of the 2023 Bonds will be deposited into a reserve fund established for the 2023 Bonds and 2023 Related Parity Bonds ( the “2023 Reserve Fund”) in an amount equal to the 2023 Reserve Requirement for the 2023 Bonds (as defined below).

See “FINANCING PLAN – Estimated Sources and Uses of Funds.” Moneys
in the 2023 Reserve Fund will be held by the Fiscal Agent for the benefit of the Owners of the 2023 Bonds and any 2023 Related Parity Bonds as a reserve for the payment of the principal of, and interest and any premium on, the 2023 Bonds and any 2023 Related Parity Bonds, and will be subject to a lien in favor of the Owners of the 2023 Bonds and any 2023 Related Parity Bonds. 2023 Reserve R
equirement. The “2023 Reserve Requirement” is defined in the Fiscal Agent Agreement to mean the amount as of any date of calculation equal to the least of (a) Maximum Annual Debt Service on the 2023 Bonds and 2023 Related Parity Bonds, if any, (b) 125% of average Annual Debt Service on the 2023 Bonds and 2023 Related Parity Bonds, if any and (c) 10% of the original principal of the 2023 Bonds and 2023 Related Parity Bonds, if any; provided, however:
(A) tha
t with respect to the calculation of clause (c), the issue price of the 2023 Bonds or any 2023 Related Parity Bonds excluding accrued interest will be used rather than the original principal amount, if (i) the net original issue discount or premium of the 2023 Bonds or any 2023 Related Parity Bonds was less than 98% or more than 102% of the original principal amount of the 2023 Bonds or any 2023 Related Parity Bonds and (ii) using the issue price would produce a lower result than using the original principal amount;
(B) that
in no event will the amount calculated hereunder exceed the amount on deposit in the 2023 Reserve Fund on the date of issuance of the 2023 Bonds (if they are the only Bonds covered by the 2023 Reserve Fund) or the most recently issued series of 2023 Related Parity Bonds (if any 2023 Related Parity Bonds are covered by the 2023 Reserve Fund) except in connection with any increase associated with the issuance of 2023 Related Parity Bonds; and (C) that
in no event will the amount required to be deposited into the 2023 Reserve Fund in connection with the issuance of a series of 2023 Related Parity Bonds exceed the maximum amount under the Tax Code that can be financed with tax-exempt bonds and invested at an unrestricted yield.

Disbur
sements. Except as otherwise provided in the Fiscal Agent Agreement , all amounts deposited in the 2023 Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the 2023 Bonds and any 2023 Related Parity Bonds or, in accordance with the Fiscal Agent Agreement, for the purpose of redeeming 2023 Bonds and any 2023 Related Parity Bonds from the Bond Fund. Whenever a transfer is made from the 2023 Reserve Fund to the Bond Fund due to a deficiency in the Bond Fund for payment of the principal of, and interest and any premium on, the 2023 Bonds and any 2023 Related Parity Bonds, the Fiscal Agent will provide written notice thereof to the Finance Direc tor, specifying the amount withdrawn.

Transfer
Upon Special Tax Prepayment . Whenever Special Taxes are prepaid and 2023 Bonds or any 2023 Related Parity Bonds are to be redeemed with the proceeds of such prepayment pursuant to the Fiscal Agent Agreement or a Supplemental Agreement related to any 2023 Related Parity

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Bonds, a proportionate amount in the 2023 Reserve Fund (determined on the basis of the principal of 2023 Bonds and 2023 Related Parity Bonds to be redeemed and the then- Outstanding principal of the 2023 Bonds and 2023 Related Parity Bonds, but in any event not in excess of the amount that will leave the balance in the 2023 Reserve Fund following the proposed redemption equal to the 2023 Reserve Requirement) will be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the 2023 Bonds pursuant to the Fiscal Agent Agreement or a Supplemental Agreement related to any 2023 Related Parity Bonds. The Finance Director will deliver to the Fiscal Agent an Officer ’s Certificate specifying any amount to be so transferred, and the Fiscal Agent may rely on any such Officer’s Certificate.

Qualified Reserve Fund Credit Instruments. The City will have the right at any time to direct the Fiscal Agent to release funds from the 2023 Reserve Fund, in whole or in part, by tendering to the Fiscal Agent: (i) a Qualified Reserve Account Credit Instrument, and (ii) an opinion of Bond Counsel stating that neither the release of such funds nor the acceptance of such Qualified Reserve Account Credit Instrument will cause interest on the 2023 Bonds or any 2023 Related Parity Bonds the interest on which is excluded from gross income of the owners thereof for federal income tax purposes to become includable in gross income for purposes of federal income taxation.

The Fiscal Agent Agreement defines “Qualified Reserve Account Credit Instrument ” as an irrevocable standby or direct-pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Fiscal Agent, provided that all of the following requirements are met at the time of acceptance thereof by the Fiscal Agent: (a) in the case of a commercial bank, the long-term credit rating of such bank at the time of delivery of the irrevocable standby or direct-pay letter of credit is at least “A” from S&P or “A” from Moody’s and, in the case of an insurance company, the claims paying ability of such insurance company at the time of delivery of the insurance policy or surety bond is at least “A” from S&P, or “A” from Moody’s or, if not rated by S&P or Moody’s but is rated by A.M. Best & Company, is rated at the time of delivery in the highest rating category by A. M.

Best & Company; (b) such letter of credit, insurance policy or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the 2023 Reserve Requirement with respect to which funds are proposed to be released; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit, insurance policy or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Bond Fund for the purpose of making payments with respect to the 2023 Bonds and any 2023 Related Parity Bonds.

Upon tender of such items to the Fiscal Agent, and upon delivery by the City to the Fiscal Agent of a written calculation of the amount permitted to be released from the 2023 Reserve Fund (upon which the Fiscal Agent may conclusively rely), the Fiscal Agent will transfer such funds from the 2023 Reserve Fund to the Improvement Fund to be used for the purposes thereof.

The Fiscal Agent will comply with all documentation relating to a Qualified Reserve Account Credit Instrument as will be required to maintain such Qualified Reserve Account Credit Instrument in full force and effect and as required to receive payments thereunder in the event and to the extent required to make any payment when and as required under this provision of the Fiscal Agent Agreement.

Upon the scheduled expiration of any Qualified Reserve Account Credit Instrument, the City will either (i) replace such Qualified Reserve Account Credit Instrument with a new Qualified Reserve Account Credit Instrument, or (ii) deposit or cause to be deposited with the Fiscal Agent an amount of funds equal to the 2023 Reserve Requirement, to be derived from the first available Special Tax Revenues.

If the 2023 Reserve Requirement is being maintained partially in cash and partially with a Qualified Reserve Account Credit Instrument, the cash will be first used to meet any deficiency which may exist from time to time in the Bond Fund with respect to the 2023 Bonds and any 2023 Related Parity Bonds.

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If the 2023 Reserve Requirement is being maintained with two or more Qualified Reserve Account Credit Instruments, any draw to meet a deficiency which may exist from time to time in the Bond Fund with respect to the 2023 Bonds and any 2023 Related Parity Bonds will be pro-rata with respect to each such instrument.

If a Qualified Reserve Account Credit Instrument is available to be drawn upon for only one or more particular series of Bonds, a separate subaccount in the 2023 Reserve Fund may be established for such series, and the calculation of the 2023 Reserve Requirement with respect to any Bonds will exclude the debt service on such issue of Bonds.

The City will have no obligation to replace a Qualified Reserve Account Credit Instrument or to fund the 2023 Reserve Fund with cash if, at any time that the 2023 Bonds are Outstanding, the Qualified Reserve Account Credit Instrument (or its provider) is downgraded or the provider becomes insolvent, if there is an unscheduled termination of the Qualified Reserve Account Credit Instrument or if for any reason insufficient amounts are available to be drawn upon under the Qualified Reserve Account Credit Instrument; provided, however, that the City will reimburse the provider, in accordance with the terms of the Qualified Reserve Account Credit Instrument, for any draws made thereon.

Other Terms Relating to 2023 Reserve Fund. See APPENDIX E for a complete description of the timing, purpose and manner of disbursements from the 2023 Reserve Fund.

Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, which in any event by their terms mature prior to the date on which such moneys are required to be paid out under the Fiscal Agent Agreement. See APPENDIX E for a definition of “Permitted Investments.”

Issuance of Future Parity Bonds for Refunding Only

Parity Bonds. In addition to the 2023 Bonds, the City may issue Refunding Bonds as Parity Bonds, in such principal amount as may be determined by the City, under a Supplemental Agreement entered into by the City and the Fiscal Agent. Any such Parity Bonds will constitute Bonds under the Fiscal Agent Agreement and will be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with the 2023 Bonds and all other Bonds Outstanding thereunder.

The City may issue such Parity Bonds subject to the specific conditions precedent set forth in the Fiscal Agent Agreement, including without limitation the following:

Compliance. Following issuance of the Parity Bonds, the City shall be in compliance with all covenants set forth i n the Fiscal Agent Agreement and all Supplemental Agreements, and issuance of the Parity Bonds shall not cause the City to exceed the bonded indebtedness limit of Improvement Area No. 2.

Same Payment Dates. The Suppl emental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on the Interest Payment Dates, and principal thereof shall be payable on September 1 (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis).

Debt Service Reserve Fund. The Supplemental Agreement providing for issuance of the Parity Bonds shall provide for (i) a deposit to the 2023 Reserve Fund in an amount necessary such that the amount deposited therein shall equal the 2023 Reserve Requirement following

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issuance of the Parity Bonds or (ii) a deposit to a reserve account for the Parity Bonds (and such other series of Parity Bonds identified by the City) so that the amount therein shall equal the Parity Reserve Requirement following the issuance of the Parity Bonds, as long as such Supplemental Agreement expressly declares that the Owners of such Parity Bonds will have no interest in or claim to the 2023 Reserve Fund and that the Owners of the 2023 Bonds covered by the 2023 Reserve Fund will have no interest in or claim to such other reserve account.

“Refunding Bonds” means bonds issued by the City for the District with respect to Improvement Area No. 2, the net proceeds of which are used to refund all or a portion of the then-Outstanding Bonds and for other lawful purposes; provided that the principal and interest on the Refunding Bonds to their final maturity date is less than the principal and interest on the Bonds being refunded to their final maturity date, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded.

Subordinate Bonds. Nothing in the Fiscal Agent Agreement prohibits the City from issuing any other bonds or otherwise incurring debt secured by a pledge of the Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement.

See APPENDIX E for additional details regarding the conditions for issuing Parity Bonds.

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THE DISTRICT AND IMPROVEMENT AREA NO. 2

Formation and Background

Formation of the District. The District was established by the City Council under the Act on July 19, 2016, following a noticed public hearing. At the time of establishment of the District, Improvement Area No. 1 and the Future Annexation Area were also established for the District, and a bonded indebtedness limit of $285,000,000 was established for the District, allocated as $70,000,000 to Improvement Area No. 1 and $215,000,000 to the Future Annexation Area.

Change Proceedings. At the request of the property owner, the City completed change proceedings on August 21, 2018, that, among other things increased the bonded indebtedness limit for the Future Annexation Area to $305,000,000.

Annexation of Improvement Area No. 2. On September 6, 2022, pursuant to the Unanimous Approvals of the owners of the property included therein, the City Council, as legislative body for the District, authorized the annexation of certain property from the Future Annexation Area into the District as Improvement Area No. 2 and authorized the incurrence of bonded indebtedness for Improvement Area No. 2 of up to $50,000,000 to finance the acquisition and construction of the Authorized Facilities, the levy the Special Taxes within Improvement Area No. 2, and the establishment of an appropriations limit for Improvement Area No. 2. See “FINANCING PLAN – Authorized Facilities” above and “–Authorized Facilities” below. Although the bonded indebtedness limit for Improvement Area No. 2 is $50,000,000 , the City has covenanted in the Fiscal Agent Agreement to only issue Parity Bonds for refunding purposes.

Thus, after the issuance of the 2023 Bonds, no amount of the remaining bond authorization for Improvement Area No. 2 will be used. See “SECURITY FOR THE BONDS – Issuance of Future Parity Bonds for Refunding Only”.

Improvement Areas; Annexation Proceedings. All of the land currently in the District is located within either Improvement Area No. 2 or Improvement Area No. 1. The property in the Future Annexation Area may be annexed into the District in the future as an additional portion of Improvement Area No. 2, in which case it will become subject to the levy of the Special Taxes, or as one or more additional improvement areas, in which case such future improvements area(s) will be separately authorized to issue special tax bonds secured only by special taxes levied within the applicable improvement area. The City does not currently have any plans to annex any parcels within the Future Annexation Area into Improvement Area No. 2.

The 2023 Bonds are secured only by the Special Taxes levied within Improvement Area No. 2. If and to the extent the Future Annexation Area is annexed as one or more additional improvement areas, there will be no cross-collateralization between or among improvement areas. For additional information on what is planned for development with respect to the land in the Future Annexation Area, see “PROPERTY OWNERSHIP AND THE DEVELOPMENT – The Tracy Hills Project.”

Description and Location

General. Improvement Area No. 2 is located in the southern portion of the City, south of the California Aqueduct, north of Interstate 580, and west of South Lammers Road.

See APPENDIX A for demographic and other information regarding the City and the County.

The Tracy Hills Project is part of the larger Tracy Hills Specific Plan, which encompasses approximately 2,732 gross acres, with 1,811 developable acres, and a various land uses, including residential estates, low density residential, medium density residential, high density residential, mixed- use business park, general highway commercial, light industrial and conservation corridors. See

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“PROPERTY OWNERSHIP AND THE DEVELOPMENT – The Tracy Hills Project” for further information regarding the Tracy Hill Specific Plan.

Improvement Area No. 1. Improvement Area No. 1 of the District (which is Phase 1A of the Tracy Hills Project) was the initial stage of development in Tracy Hills. At full build- out, Improvement Area No. 1 will include 1,203 single family detached homes, 12 acres of public parks, a 14 -acre K-8 school site, and open space. Homes in Improvement Area No. 1 are being constructed and sold by Lennar Homes, Shea Homes and Meritage Homes. Home sales in Improvement Area No. 1 began in 2019 and, as of August 1, 2023, 1,147 homes have closed to individual homeowners. Improvement Area No. 2 (which is Phase 1B of the Tracy Hills Project) represents the next stage of development of the Tracy Hills Project. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – The Tracy Hil ls Project.” Information regarding Improvement Area No. 1 is presented for reference only. Only the property in Improvement Area No. 2 is subject to the Special Tax that secures payment on the 2023 Bonds.

Boundary Map. The map showing the boundaries of Improvement Area No. 2 is set forth on the following page.

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[Insert CFD Boundary Map]

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Authorized Facilities

General. Under the Resolution of Formation adopted by the City Council, as the legislative body of the District, on July 19, 2016, the District (and each Improvement Area therein including Improvement Area No. 2) is authorized to finance all or a portion of the costs of acquisition, construction and improvement of facilities permitted under the Act and that are required as conditions of development of property in the District, the Future Annexation Area and any other property annexed to the District. The Authorized Facilities include, among others, roadway improvements, wastewater treatment facilities, water facilities, reclaimed water facilities, school facilities, drainage improvements, landscaping, open space improvements, parks and park equipment, public safety improvements, sound walls and improvements financed by various fees.

Any Facility authorized to be financed by the District and each Improvement Area may be financed through the construction and acquisition of the Facility or through the payment of fees f or such facility.

The Authorized Facilities may be located within or outside the District.

Status of Construction of Facilities. For the current status of the construction of Facilities in Improvement Area No. 2, see “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”

Debt Service Coverage

The Rate and Method is structured to produce annual Special Tax revenues from the Maximum Special Tax, net of Administrative Expenses, which, when applied to the projected debt service on the 2023 Bonds and future Parity Bonds, is anticipated to result in a debt service coverage ratio of at least 110% for the life of the 2023 Bonds and future Parity Bonds. Administrative Expenses are estimated at $40,000 in Fiscal Year 2023- 24, escalating by 2% annually thereafter. See “DEBT SERVICE SCHEDULE – Debt Service Coverage”.

The Fiscal Agent Agreement permits the issuance of future Parity Bonds for refunding purposes only. See “SECURITY FOR THE BONDS – Issuance of Future Parity Bonds for Refunding Only”.

City of Tracy Growth Management Ordinance (GMO)

On June 16, 1987, the City Council of the City adopted by ordinance a Residential Growth Management Plan, as subsequently amended (the “Growth Management Ordinance”). It provides for eligibility requirements and procedures for residential building permits for projects in the City. Under the Growth Management Ordinance, builders must obtain a residential growth allotment (“RGA”) in order to secure a residential building permit.

Currently, the Growth Management Ordinance allows RGAs to be issued for 600 to 750 building permits per year. The number of RGAs allowed in each year is based on the average of units absorbed since the year 2000. THPO and the THPO Affiliates currently predict that the annual available building permits will be 750 per year through 2028. The allocation of the RGAs is governed by the Council - approved Growth Management Ordinance guidelines (the “GMO Guidelines”), which were last modified in 2014.

The Tracy Hills Project is vested into the 2012 GMO Guidelines which provide that, in years where 750 RGAs may be allocated, The Tracy Hills Project is eligible to receive 406 RGAs, and in years where 600 RGAs may be allocated, The Tracy Hills Project is eligible to receive 325 RGAs. If owners within the Tracy Hills Project apply for less than the number of RGAs described above, the difference between the numbers of RGAs allocated and the numbers of RGAs described above will be reserved for that calendar year. The owners of the Tracy Hills Project may apply for these RGAs no later than the March 31st

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deadline set forth in the GMO Guidelines; if application is not made by that date, the RGAs will be made available for other projects. There is no sunset date for the allocation of RGAs in this manner.

As of the date of this Official Statement, all of the RGAs necessary for the planned residential development in Improvement Area No. 2 have been perfected and the Growth Management Ordinance is not expected to limit development in Improvement Area No. 2.

Market Absorption Study

In connection with the issuance of the 2023 Bonds , the City hired the Market Absorption Consultant, Empire Economics, Inc., to prepare the Absorption Study for the homes planned for Improvement Area No. 2. The Absorption Study sets forth various factors that may impact the development and sale of homes within Improvement Area No. 2. The Absorption Study also sets forth the forecast of absorption under two scenarios, which are shown in the tables below. The benchmark scenario is based on expected market conditions in the absence of the effect of the Phase 1B Neighborhood Park condition. The modified scenario adjusts for the City’s development restrictions related to the Phase 1B Neighborhood Park condition. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes – Conditions of Approval”. Generally, the modified scenario assumes (a) occupancy of 179 homes by December 31, 2023, no additional occupancies or construction activity during the January 1, 2024 through June 30, 2024 period, and acceptance of the Phase 1B Neighborhood Park and additional construction and occupancies resuming during the July 1, 2024 through September 30, 2024 period. In both scenarios, the number of occupancies during calendar year 2024 is the same, but in the modified scenario most of those occupancies occur in the fourth quarter of 2024. There can be no guarantee regarding the actual timeline for completion of the Phase 1B Neighborhood Park or that the absorption estimates set forth in the Absorption Study will be realized in light of the Phase 1B Neighborhood Park condition.

Esti
mated Absorption Schedule
(Benchmark Scenario – No Park Condition)

Year
Actual
Through
7/4/2023
Remainder
of 2023 2024 2025 2026
Estimated Escrow Closings 84 95 116 105 32
Cumulative 84 179 295 400 432
_______________
Source: Empire Economics, Inc.

Estimated Absorption Schedule
(Modified Scenario – Park Condition)

Year
Actual
Through
7/4/2023
Remainder
of 2023
1/1/2024 -
6/30/2024
7/1/2024 -
9/30/2024
10/1/2024 -
12/31/2024 2025 2026
Estimated Escrow Closings 84 95 0 11 105 105 32
Cumulative 84 179 179 190 295 400 432
_______________
Source: Empire Economics, Inc.

The City is not obligated to make, and has not undertaken to make, an independent verification of the information contained in the Absorption Study and assumes no responsibility for the accuracy or completeness of the Absorption Study.

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A copy of the Absorption Study is set forth in its entirety as APPENDIX D – Market Absorption Study.

Envir
onmental Matters

Flood Hazard Map Information. According to the Federal Emergency Management Agency ’s flood insurance rate maps (Map Panel Number 06077C-0740F, dated October 16, 2009), the developable portions of the property in Improvement Area No. 2 are located within Flood Zone X, described as areas of minimal flooding (outside of the 100 and 500 -year floodplains). Property in Improvement Area No. 2 is not subject to the Central Valley Flood Protection Plan.

Seismic Conditions. According to the Seismic Safety Commission, Improvement Area No. 2 is located within Zone 3, which is considered to be the lowest risk zone in California. There are only two zones in California: Zone 4, which is assigned to areas near major faults; and Zone 3, which is assigned to all other areas of more moderate seismic activity. In addition, Improvement Area No. 2 is not located within a Fault -Rupture Hazard Zone (formerly referred to as an Alquist -Priolo Special Study Zone), as defined by Special Publication 42 of the California Department of Conservation, Division of Mines and Geology.

Wetlands. No wetland mitigation was required for development within Improvement Area No. 2.

Petroleum Pipeline. A Phase I environmental site assessment report was prepared for the land in the District by Haley & Aldrich, dated September 2017. The report identifies two recognized environmental conditions on the property within Improvement Area No. 2 associated with the presence of an unpressurized ConocoPhillips 66 pipeline and an unpressurized Shell petroleum pipeline. Haley & Aldrich recommended abandoning the on‐site groundwater wells according to local and state regulatory guidelines; one well located within Improvement Area No. 2 has been abandoned, and the other well, which is located in the District but outside of Improvement Area No. 2, remains in use for agr icultural purposes. However, no additional assessment consisting of soil, groundwater and soil gas sampling is required for the development of the land in Improvement Area No. 2.

Explosives Testing. The Lawrence Livermore National Laboratory (“LLNL”) Experimental Test Site ( “Site 300 ”) is a restricted -access facility operated for the U.S. Department of Energy National Nuclear Security Administration (“DOE/NNSA”) by Lawrence Livermore National Security, LLC. Site 300 is located approximately 1.33 miles to the west/southwest of the Tracy Hills project. The Site 300 facility is used in the research, development, and testing of non -radioactive explosive materials to support DOE/NNSA stockpile stewardship, counterterrorism and counterproliferation programs. Site 300 has been in operation as an explosive testing and research facility since 1955.

Site 300 conducts explosive testing in both indoor and outdoor facilities. Explosive testing conducted at Site 300 is regulated by the San Joaquin Valley Air Pollution Control District (“SJVAPCD”).

Currently, Site 300 operates under a SJVAPCD air permit that allows detonations of explosives up to 100 pounds per day and 1,000 pounds per year. To minimize noise impacts to surrounding land uses, adjacent neighbors and other sensitive receptors, Site 300 constructed the Contained Firing Facility in 2000. The concrete, 28,000 square foot facility allows Site 300 to conduct explosive tests indoors.

Intermittent outdoor explosive tests (otherwise known as open detonations) are also conducted.

In the Fall of 2017, DOE/NNSA submitted a new SJVAPCD permit application and released a Draft Environmental Assessment proposing to increase the weight of explosives from the current limit of 100 lbs./day to 1,000 lbs./day, and from 1,000 lbs./year to 7,500 lbs./year. The proposed increase would allow larger single detonations and would result in more open detonations. Tracy Hills, the City and the County all submitted comment letters expressing concern and questions in regards to potential increase in noise impacts. To date, the SJVAPCD has not taken any action on the permit application.

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Fire Hazard Zone. The property in Improvement Area No. 2 is part of a Local Responsibility Area and is included in an area mapped as a Moderate Fire Hazard Severity Zone.

Appraised Values

General. The Original Appraisal was prepared to estimate the market value of the taxable land within Improvement Area No. 2 as of a July 19, 2023, date of value.

The Update to Original Appraisal was prepared to confirm the opinion of the aggregate market value of the fee simple interest in the taxable land within Improvement Area No. 2 as of a September 21, 2023, date of value, taking into account that a number of homes have been completed and/or sold to individual homeowners, a number of homes have begun construction with building permits and impact fees paid.

The properties appraised encompass all of the taxable land in Improvement Area No. 2, which are planned for development as 432 single-family detached homes.

Value Estimate. The A
ppraisal estimates that the cumulative, aggregate value of the appraised properties, as of the date of value, was not less than $163,006,149. The aggregate value is not the market value of the appraised properties in bulk. Note that the Appraisal assumes that the Phase 1B Neighborhood Park is complete and there is no value deduction for construction of the Phase 1B Neighborhood Park. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes – Conditions of Approval” for a discussion of the condition related to park construction. See “SECURITY FOR THE BONDS – Improvement Fund – Disbursements Related to Construction of Phase 1B Neighborhood Park ” for further in formation about the release of 2023 Bonds proceeds from the Improvement Fund related to construction of the Phase 1B Neighborhood Park.

Apprai
sal Methodology. The appraised propert y was valued by employing the sales comparison approach to value and land residual analysis, with respect to the Low Density Residential Lots in Villages 9 and 10. In the sales comparison approach to value, the Appraiser analyzed comparable bulk lot sales from the region and adjusted the datum for attributes that varied from the appraised property’s various lot size categories. Then, to support the reasonableness of the sales comparison approach conclusions, the Appraiser utilized a land residual analysis. The lot values indicated by each approach were then reconciled into an opinion of market value, subject to the hypothetical condition that the Phase 1B Neighborhood Park has been constructed. The market value as of the July 19, 2023, date of value was estimated by deducting the approximate remaining costs (both in- tract and infrastructure) as well as infrastructure fees to complete the lots to a finished condition. Given the lack of comparable bulk lot sales with typical lot sizes under 4,000 square feet, a sales comparison approach was not performed in the valuation of the smaller benchmark lot category of Medium Density Residential Lots in Village 11; rather, an extraction technique was employed.

The appraised property comprises various sized standard residential lots between 3,500 and 5,500 square feet. The Appraiser concluded that a parcel with approximately 5,500 square feet is an appropriate benchmark parcel for Low Density Residential Lots for use in the sales comparison approach, and that a parcel with approximately 3,500 square feet is an appropriate benchmark parcel for Medium Density Residential Lots for use in the extraction technique.

As part of the sales comparison approach, the Appraiser stated that the market data set consists of various sales that are considered reasonable indicators of market value for the fee simple interest in the single- family residential lot category of the subject property. The Appraiser concluded that the finished lot value for Low Density Residential benchmark parcels is $241,000.

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In addition, the Appraiser undertook a land residual analysis. The Appraisal indicates the land residual analysis is employed as an additional indicator of market value for the subject ’s lots. This valuation method is used in estimating land value when subdivision and development are the highest and best use of the land being appraised. All direct and indirect costs are deducted from an estimate of the anticipated gross sales price of the improved product; the resultant net sales proceeds are then discounted to present value at an anticipated rate over the development and absorption period to indicate the value of the land. The land residual analysis is conducted on a quarterly basis. As a discounted cash flow analysis, the land residual analysis consists of four primary components: revenue, absorption analysis, expenses and discount rate. Based on the land residual analysis the Appraiser concluded that the finished lot value for Low Density Residential benchmark parcels is also $241,000.

For the Medium Density Residential Lots, the Appraiser employed the extraction technique as the sole basis of valuation. Next, adjustments were applied to determine values for each lot size category, based upon lot size difference that exist from the benchmark lots. Finally, the remaining intract and infrastructure costs were accounted for. Based on the extraction technique, the Appraiser concluded that the finished lot value for Medium Density Residential parcels is $206,000.

Hypothetical Condition. A hypothetical condition is a condition contrary to known facts on the effective date of the appraisal, but is supposed for the purposes of analysis. The estimate of market value in the Appraisal is subject to the hypothetical condition that (a) the Phase 1B Neighborhood Park has been constructed by the Developer or its assignee, (b) the Phase 1B Neighborhood Park has been inspected by the City, and (c) the City has determined that the Phase 1B Neighborhood Park has been constructed in accordance with approved plans and specifications and all applicable City standards (other than any items identified by the City that need to be addressed before the Phase 1B Neighborhood Park can be deemed complete by the City, and which the City and the Developer or its assignee estimate to cost no more than $100,000 in the aggregate). Note, however, that there is no requirement that the proceeds of the 2023 Bonds actually be used to reimburse for costs of the Phase 1B Neighborhood Park.

See “SECURITY FOR THE BONDS – Improvement Fund – Disbursements Related to Construction of Phase 1B Neighborhood Park.”

Assumptions and Limiting Conditions . In addition to the conditions described above, the market value of the appraised parcels is subject to a number of other assumptions and conditions which affect the estimates as to value, which are set forth in APPENDIX C.

Accordingly, because the Appraiser arrived at an estimate of current market value based upon certain assumptions which may or may not be fulfilled, no assurance can be given that should the parcels become delinquent due to unpaid Special Taxes, and be foreclosed upon and offered for sale for the amount of the delinquency, that any bid would be received for such property or, if a bid is received, that such bid would be sufficient to pay such delinquent Special Taxes.

Limitations of Appraisal Valuation. Property values may not be evenly distributed throughout Improvement Area No. 2; thus, certain parcels may have a greater value than others. This disparity is significant because in the event of nonpayment of the Special Tax, the only remedy is to foreclose against the delinquent parcel. No assurance can be given that the foregoing valuation can or will be maintained during the period of time that the 2023 Bonds are outstanding in that the City has no control over the market value of the property within Improvement Area No. 2 or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which, through the levy of a tax or an assessment, may be on a parity with the Special Taxes.

For a description of certain risks that might affect the assumptions made in the Appraisal, see “BOND OWNERS’ RISKS” herein.

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The description herein of the Appraisal is intended for limited purposes only; the Appraisal should be read in its entirety. The conclusions reached in the Appraisal are subject to certain assumptions, conditions and qualifications which are set forth in the Appraisal. See APPENDIX C for the Appraisal Report.

Neither the City nor the Underwriter makes any representation as to the accuracy or completeness of the Appraisal.

Fiscal Year 2023-24 Special Tax Levy

The table below shows the actual Fiscal Year 2023-24 Special Tax Levy by ownership.

Table 1
Fiscal Year 2023-24 Special Tax Levy

Fiscal Year
2023-24 % of
Actual Actual
Special Tax Special
Property Owner (1) Levy Tax Levy
Individual Homeowners $472,698 22.1%
Lennar Homes $1,068,760 49.9%
AG Essential Housing CA 1 LP $600,905 28.0%
Total $2,142,363 100.0%
_____________
(1) Ownership information per the Original Appraisal , as of its July 19, 2023 date of value . As of September 15, 2023, 108 homes have closed to individual homeowners.

Sources: Integra Realty Resources; Goodwin Consulting Group, Inc.

Value-to-Lien Ratios and Share of Fiscal Year 2023-24 Special Taxes

General. Based on the appraised values set forth in the Original Appraisal and the proposed principal amount of the 2023 Bonds, the overall value-to-lien ratio of the land within Improvement Area No. 2 is approximately 4.53:1.* No other community facilities districts or assessment districts currently have overlapping bonded debt affecting the property in Improvement Area No. 2.

Value-to-Lien Analysis and by Ownership and Development Status. The following table shows the approximate value- to-lien ratios allocated to the property owners, based on the appraised values and development status set forth in the Original Appraisal as of the July 19, 2023 date of value and the estimated principal amount of the 2023 Bonds.

No assurance can be given that the amounts shown in these tables will conform to those ultimately realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes.

* Preliminary; subject to change.

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Table 2
Fiscal Year 2023-24 Special Tax Levy and Appraised Values By Ownership and Development Status

Development Status and
Property
Ownership (1)
Expected
Residential
Units(2)
Actual
Fiscal Year
2023-24
Special Tax
Levy
% of
Actual
Fiscal Year
2023-24
Special
Tax
Levy
Appraised
Value (3)
Allocated
2023
Bond
Debt (4)*
Average
Value-to-
Lien*
Developed Property
Individual Homeowners 91 $472,698 22.1% $75,670,000 $7,943,151 9.53

Lennar Homes of California,
LLC
Model Homes 8 $40,741 1.9% $6,580,000 $684,604 9.61
Homes Under Construction 99 $504,044 23.5% $25,254,975 $8,469,896 2.98 Finished Lots 109 $523,975 24.5% $25,985,761 $8,804,810 2.95 Subtotal 216 $1,068,760 49.9% $57,820,735 $17,959,310 3.22

AG Essential Housing CA 1 LP
Finished Lots 125 $600,905 28.0% $29,515,413 $10,097,540 2.92

Total 432 $2,142,363 100.0% $163,006,148 $36,000,000 4.53 _____________
*Preliminary, subject to change.
(1) Based on building permits issued as of June 30, 2023, the cut -off date for Developed Property for Fiscal Year 2023-24 as defined in the Rate and Method. Ownership information per the Original Appraisal, based on the July 19, 2023 date of value. (2) Lot counts as of the July 19, 2023 date of value of the Original Appraisal. As of September 15, 2023, Lennar Homes has sold and closed an additional 17 units and acquired an additional 28 lots from the Landbank Owner. (3) Based on the July 19, 2023 date of value of the Original Appraisal. Total appraised value shown in this table differs from the Appraisal by $1 due to rounding,
(4) Allocated based on the actual Fiscal Year 2023-24 special tax levy.

Source: Integra Realty Resources; Goodwin Consulting Group, Inc

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Value-to-Lien Analysis by Value-to-Lien Category. The following table shows the approximate value-to-lien ratios in Improvement Area No. 2 allocated by value- to-lien category, based on the appraised values set forth in the Original Appraisal and the estimated principal amount of the 2023 Bonds.

No assurance can be given that the amounts shown in these tables will conform to those ultimately realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes.

Table 3
Summary of Value-to-Lien Ratios By Value-to-Lien Category*

Value-to-Lien
Category
Number of
Parcels
Appraised
Value (1)
Fiscal Year
2023-24
Actual
Special Tax
Levy (2)
Percent of
Actual
Special Tax
Levy
Allocated
2023 Bond
Debt (3)*
Average
Value-to-
Lien
Ratios*
Greater than 5:1 99 $82,250,000 $513,438 24.0% $8,627,755 9.53 3:1 to 5:1 78 $19,475,833 $365,750 17.1% $6,146,010 3.17 2:1 to 3:1 255 $61,280,315 $1,263,175 59.0% $21,226,236 2.89 Less than 2:1 0 $0 $0 0.0% $0 n/a
Total 432 $163,006,148 $2,142,363 100.0% $36,000,000 4.53 _____________
*Preliminary, subject to change.
(1) Based on the July 19, 2023 date of value of the Original Appraisal. Total appraised value shown in this table differs from the Appraisal by $1 due to rounding,
(2) Based on building permits issued as of June 30, 2023, the cut-off date for Developed Property for fiscal year 2023-24 as defined in the Rate and Method. (3) Allocated based on the actual Fiscal Year 2023-24 special tax levy.

Source: Integra Realty Resources; Piper Sandler & Co.; Goodwin Consulting Group, Inc.

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Illustrative Tax Bill. The following table shows an illustrative tax bill for a sample home in each Village in Improvement Area No. 2.

Table 4
Fiscal Year 2023-24 Illustrative Tax Bill

_____________________________
(1) Represents the average base price included in the Appraisal. (2) Based on the Fiscal Year 2022- 23 ad valorem tax rates for the tax rate area within the CFD. Ad valorem tax rates are subject to change in future years.
(3) Based on the Fiscal Year 2022-23 charges identified on the San Joaquin County-issued property tax bills. Charges subject to change in future years.
(4) Represents the maximum special tax rate in Fiscal Year 2023-24 for Developed Property.

Source: Integra Realty Resources; San Joaquin County Tax Collector’s Office, Goodwin Consulting Group, Inc.

Assumptions

Village 9A Village 9B Village 10 Village 11
Average Base Price (1)

$850,380 $989,380 $870,630 $768,658
Homeowner’s Exemption

($7,000) ($7,000) ($7,000) ($7,000)
Net Assessed Value

$843,380 $982,380 $863,630 $761,658
Ad Valorem Tax Rate (2)

Rate

Base Property Tax

1.00000% $8,434 $9,824 $8,636 $7,617
Jefferson Elem 2010 Meas J Bond

0.02410% $203 $237 $208 $184
SJ Delta Coll 2004 Meas L Bond

0.01440% $121 $141 $124 $110
Tracy USD 2006 Meas E Bond

0.01120% $94 $110 $97 $85
Total Ad Valorem Taxes

1.04970% $8,853 $10,312 $9,066 $7,995
Direct Charges (3)

Tracy Rural Fire

$80 $80 $80 $80
Water Zone 2

$2 $2 $2 $2
SJC Mosquito Abatement

$1 $1 $1 $1
SJC Mosq & Vctr Cont $9 $9 $9 $9
CSA No. 53 - Haz Waste $4 $4 $4 $4
CFD No. 2021-1 (Maint)

$612 $612 $612 $612
IA No. 2 CFD No. 2016-1 (Tracy Hills) (4) $4,891 $5,961 $5,117 $4,401 Total Direct Charges

$5,598 $6,668 $5,825 $5,109

Total Taxes and Direct Charges

$14,451 $16,980 $14,890 $13,104
Percentage of Average Base Price

1.71% 1.73% 1.72% 1.72%

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Direct and Overlapping Governmental Obligations

Overlapping Debt Statement. Contained within the boundaries of Improvement Area No. 2 are certain overlapping local agencies providing public services. Many of these local agencies have outstanding debt. The direct and overlapping debt affecting Improvement Area No. 2 as of October 1, 2023 is shown in the table below, a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. The Debt Report is included for general information purposes only.

Neither the City nor the Underwriter has reviewed the Debt Report for completeness or accuracy and neither makes any representation in connection therewith.

The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of Improvement Area No. 2 in whole or in part.

These long- term obligations are not payable from revenues of Improvement Area No. 2 (except as indicated) nor are they necessarily obligations secured by land within Improvement Area No. 2. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The contents of the Debt Report are as follows: (1) the first column indicates the public agencies that have outstanding debt as of the date of the Debt Report and whose territory overlaps Improvement Area No. 2; (2) the second column s hows the percentage of the assessed valuation of the overlapping public agency identified in column 1 which is represented by property located within Improvement Area No. 2; and (3) the third column is an apportionment of the dollar amount of each public agency ’s outstanding debt (which amount is not shown in the table) to property in Improvement Area No. 2, as determined by multiplying the total outstanding debt of each agency by the percentage of the public agency’s assessed valuation represented in column 2.

Table 5
Direct and Overlapping Governmental Obligations
As of October 1, 2023

2023-24 Assessed Valuation: $70,963,347 (Land & Improvements)

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 10/1/23 San Joaquin Delta Community College District General Obligation Bonds 0.061% $ 98,418 Tracy Unified School District General Obligation Bonds 0.384 1 00,106 Jefferson School District General Obligation Bonds 1.519 665,769 City of Tracy Community Facilities District No. 2016-1, I.A . No. 2 100.000 0 (1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $864,293

OVERLAPPING GENERAL FUND DEBT:

San Joaquin County General Fund Obligations 0.065% $ 35,947 City of Tracy General Fund Obligations 0.411 139,260 TOTAL OVERLAPPING GENERAL FUND DEBT $175,207

COMBINED TOTAL DEBT $ 1,039,500 (2)
(1) Excludes issue to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Ratios to 2023-24 Assessed Valuation:

Direct Debt ($0) ........................................................................ 0.00% Total Direct and Overlapping Tax and Assessment Debt ......... 1.22% Combined Total Debt ................................................................. 1.46%

Source: California Municipal Statistics, Inc.

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Potential Consequences of Special Tax Delinquencies

Special Tax Collection History. Fiscal Year 2023- 24 is the first year that the Special Taxes were levied in Improvement Area No. 2, with the first of two installments due on November 10, 2023 and considered delinquent after December 10, 2023. As such, no delinquency information is currently available with respect to Special Taxes for Improvement Area No. 2.

Consequences of Future Special Tax Delinquencies. Delinquencies in the payment of property taxes (including the Special Taxes) with respect to property in Improvement Area No. 2 could result in draws on the 2023 Reserve Fund established for the 2023 Bonds, and perhaps, ultimately, a default in the payment on the 2023 Bonds. See “BOND OWNERS’ RISKS.”

The Board of Supervisors of San Joaquin County adopted the Teeter Plan in Fiscal Year 1994 -

95. The County has elected to apply its Teeter Plan to the collection of the Special Taxes in Improvement Area No. 2. To the extent that the County ’s Teeter Plan continues in existence and is carried out as adopted, and to the extent the County does not discontinue the Teeter Plan with respect to the District, the County’s Teeter Plan may help protect owners of the 2023 Bonds from the risk of delinquencies in the payment of Special Tax. There can be no assurance that the County will not modify or eliminate its Teeter Plan, or choose to remove the District from its Teeter Plan, while the 2023 Bonds are outstanding.

See “SECURITY FOR THE BONDS – Covenant to Foreclose – Special Tax Delinquencies; Teeter Plan” for additional information.

Special Tax Enforcement and Collection Procedures. The City could receive additional funds for the payment of debt service through foreclosures sales of delinquent property, but no assurance can be given as to the amount of foreclosure sale proceeds or when foreclosure sale proceeds would be received. The City has covenanted in the Fiscal Agent Agreement to take certain enforcement actions and commence and pursue foreclosure proceedings against delinquent parcels under the terms and conditions described herein. See “SECURITY FOR THE BONDS – Covenant to Foreclose” and “BOND OWNERS’ RISKS.”

Foreclosure actions would include, among other steps, formal City Council action to authorize commencement of foreclosure proceedings, mailing multiple demand letters to the record owners of the delinquent parcels advising them of the consequences of failing to pay the applicable Special Taxes and contacting secured lenders to obtain payment. If these efforts were unsuccessful, they would be followed (as needed) by the filing of an action to foreclose in superior court against each parcel that remained delinquent.

Limitations on Increases in Special Tax Levy. If owners are delinquent in the payment of Special Taxes, the City may not increase Special Tax levies to make up for delinquencies for prior Fiscal Years above the Maximum Special Tax rates specified for each category of property within Improvement Area No. 2. See “SECURITY FOR THE BONDS –Rate and Method.” In addition, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults.

In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the 2023 Bonds. See “BOND OWNERS’ RISKS.”

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PROPERTY OWNERSHIP AND THE DEVELOPMENT

The information provided in this section has been included because it may be considered relevant to an informed evaluation and analysis of the 2023 Bonds and Improvement Area No. 2. No assurance can be given, however, that the proposed development of the property within the Tracy Hills Project and Improvement Area No. 2 will occur in a timely manner or in the configuration or to the density described herein, or that Lennar Homes, the Landbank Owner, any owners or affiliates thereof, or any other property owner described herein will or will not retain ownership of its respective property within the Tracy Hills Project or Improvement Area No. 2. Neither the 2023 Bonds nor any of the Special Taxes are personal obligations of any property owner within Improvement Area No. 2. The 2023 Bonds are secured solely by the Special Taxes levied on property within Improvement Area No. 2 and amounts on deposit in certain of the funds and accounts maintained by the Fiscal Agent under the Fiscal Agent Agreement.

The Master Developer and Subsidiaries

The Tracy Hills Project Owner . The property in Improvement Area No. 2 is part of the larger master-planned community known as “Tracy Hills” (the “ Tracy Hills Project” or the “THPO Property”) being master -planned by The Tracy Hills Project Owner, LLC, a Delaware limited liability company (“THPO”) and developed by merchant builders. For the property that has not yet been conveyed to merchant builders, THPO holds title to property through various affiliated owners (the “THPO Affiliates”).

Each THPO Affiliate is, or will be, a Delaware limited liability company, whose sole member is Tracy Hills Holding Company, LLC (“Tracy Hills Holding Company”). Tracy Hills Holding Company is a Delaware limited liability company whose sole member is THHC Manager, LLC (“ THHC Manager”).

THHC Manager is a Delaware limited liability company whose sole member is THPO.

Integral Communities. THPO, the THPO Affiliates, Tracy Hills Holding Company and THHC Manager are entities managed by the principals of Integral Communities. The principals of Integral Communities have over 150 years of combined experience in the real estate development business.

Many of the principals spent more than a decade growing Western Pacific Housing into a successful western states home building and development company. Recognized as the 12th-largest homebuilder in the country at one time, Western Pacific was later sold to D.R. Horton for in excess of $1 billion in market capitalization. Following the sale to D.R. Horton, the five principals formed Integral Communities.

Integral Communities creates new opportunities from underutilized or undeveloped parcels of land through value- added land planning, with projects that include for -sale, apartment, mixed- use and residential multi-family opportunities. Previous projects of Integral Communities include, among others, the following:

• Gateway Station - Newark, CA (580 residential units sold to Lennar Homes). • Dublin Ranch Sub Area 3 - Dublin, CA (437 residential units sold to Lennar Homes). • Dublin Ranch Lot 3 - Dublin, CA (123 residential units sold to Lennar Homes). • Centre Pointe - Milpitas, CA (241 residential units sold to D.R. Horton). • Houret - Milpitas, CA (114 residential units sold to The New Home Company). • Riverdale – Long Beach, CA (131 residential units as a joint venture with Brandywine Homes).
• Torian – Newark, CA (547 residential units sold to William Lyon Homes). • Palmilla - Brentwood, CA (400 residential units sold to Pulte and William Lyon Homes). • Montecito Vista - San Jose, CA (284 residential units sold to Taylor Morrison and Lennar Homes).
• The Fields - Milpitas, CA (1,185 for-sale and for-rent multifamily residential units as a joint venture with Lyon Living).

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Further information regarding Integral Communities is available from its website at integralcommunities.com. This internet address is included for reference only, and the information on the internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement.

The Tracy Hills Project

The Tracy Hills Project is part of the larger Tracy Hills Specific Plan (“TH Specific Plan”). The TH Specific Plan, which encompasses approximately 2,732 gross acres, with 1,811 developable acres, approved the development of various land uses, including residential estates, low density residential, medium density residential, high density residential, mixed- use business park, general highway commercial, light industrial and conservation corridors.

The TH Specific Plan land assemblage began in the mid- 1980s by a local land broker. As the project was processed through the City of Tracy, additional properties were added to create the current boundaries of the TH Specific Plan.

The TH Specific Plan was added to the City of Tracy’s General Plan in 1993. The original TH Specific Plan and EIR were approved and annexed into the City of Tracy in 1998. The Growth Management Ordinance effectively placed a moratorium on residential development in the TH Specific Plan until 2012. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – City of Tracy Growth Management Ordinance (GMO).”

THPO purchased the THPO Property – a portion of the TH Specific Plan - in late 2012. Due to the passage of time, the TH Specific Plan needed to be updated and modernized, and a Subsequent Environmental Impact Report was prepared. This culminated with City of Tracy approval of a new Tracy Hills Specific Plan (the “ Revised TH Specific Plan”), a Subsequent Environmental Impact Report, a Development Agreement covering the THPO Property (as amended, the “ Development Agreement”), and a large lot and small lot tentative subdivision map in April of 2016.

The THPO Property (including the land in Improvement Area No. 2) is composed of approximately 1,853 gross acres of the Revised TH Specific Plan.

THPO has conveyed all of the THPO Property to THPO Affiliates, and, in some cases, the THPO Affiliates have conveyed the THPO Property to merchant builders. THPO and the THPO Affiliates intend to sell the Tracy Hills Project in six phases, as described below:

Phase 1A: Phase 1A (the residential portion of which is in Improvement Area No. 1 of the District) is to be developed as 1,203 single family detached units, 50 acres of Mixed Use Business Park, 12 acres of public parks, a 14- acre K-8 school site, and open space. All of the residential portion of Phase 1A was conveyed to merchant builders. As of August 1, 2023, merchant builders have constructed, sold, and closed on 1,147 homes in Phase 1A. The Mixed-Use Business Park (which is not part of the District but is identified as future annexation area) is still owned by a THPO Affiliate and is anticipated to be sold to commercial/multifamily developers in the future.

Phase 1B: Phase 1B is expected to be developed as 432 single family detached units, 5 acres of public parks, 135.6 acres of Mixed Use Business Park, 9.2 acres of high density residential (125 units), 29 acres of general highway commercial, and open space. The residential portion of Phase 1B was annexed to the District as Improvement Area No. 2. See “–Development Plan for Improvement Area No. 2” below for more information.

Phase 1C: Phase 1C is expected to be developed as 291 single family detached units,

2.35 acres of public park, and open space. All of Phase 1C is either owned by or under contract

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with Lennar Homes. Lots and housing commencement are subject to the housing market. Phase 1C is ident ified as future annexation area for the District, but has not yet been annexed to the District.

Phase 2: Phase 2 is expected to be developed as 1,466 units of single family detached units, 3.87 acres of general highway commercial, a 15- acre school site, 32 acres of public park, and open space. All of Phase 2 is either owned by or under contract with Lennar Homes. Phase 2 will be sold to Lennar Homes in phases, with Phase 2A having already closed to Lennar Homes.

Lots and housing commencement are subject to the housing market. Phase 2 is identified as future annexation area for the District, but has not yet been annexed to the District.

Phase 3: Phase 3 is expected to be developed as 1,23 0 units of single family detached units, a 19- acre school site, 31 acres of public park, and open space. All of Phase 3 is under contract to be acquired by Lennar Homes. Phase 3 will be sold to Lennar Homes in phases. Lots and housing commencement are subject to the housing market. Phase 3 is identified as future annexation area for the District, but has not yet been annexed to the District.

Phase 4: Phase 4 is expected to be developed as 329 units of single family detached units, 4 acres of public park, 29 acres of mixed use business park, and open space. All of Phase 4 is under contract to be acquired by Lennar Homes. Lots and housing commencement are subject to the housing market. Phase 4 is identified as future annexation area for the District, but has not yet been annexed to the District.

Only the single- family residential portion of Phase 1B was annexed into the District as Improvement Area No. 2 and only the property in Improvement Area No. 2 (i.e., the single -family residential portion of Phase 1B) is subject to the Special Tax that secures payment on the 2023 Bonds.

The property that is anticipated to be developed as the high density and Mixed-Use Business P
ark portion of Phase 1B and Phases 1A, 1C, 2, 3, and 4, are not subject to the lien of Special Tax and will not be subject to a Special Tax securing the 2023 Bonds or any Parity Bonds in the future (unless annexed to Improvement Area No. 2, which is not currently contemplated by THPO).

Acquis
ition Agreement

In connection with the formation of the District, THPO entered into the Master Acquisition Agreement dated July 19, 2016, by and between THPO and the City (the “ Acquisition Agreement”).

The Acquisition Agreement authorized the financing of various infrastructure improvements and capital improvement fees for the entirety of the District.

Under the Acquisition Agreement, THPO may assign the Acquisition Agreement in part to the applicable THPO Affiliate or a merchant builder in connection with the development of the applicable phase. On May 24, 2023, THPO assigned the Acquisition Agreement to Lennar Homes as to Improvement Area No. 2 in recognition that Lennar Homes will be constructing all of the improvements associated with the development of Improvement Area No. 2.

The Rate and Method provides that the funding of improvement costs can also be made from collections of the Special Tax available as the “pay -as-you-go” component of Special Taxes, also described herein as the Remainder Taxes. The Remainder Taxes will provide for funding of the cost of the authorized improvements. Under the Acquisition Agreements and the Rate and Method, Remainder Taxes collected in years 1- 14 and in years 16- 20 from Improvement Area No. 2 are available to fund

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Authorized Facilities. Remainder Taxes collected in year 15 are available to fund Authorized Facilities or Authorized Services at the discretion of the City.

Development Plan for Improvement Area No. 2

General. The taxable property in Improvement Area No. 2 is projected to be developed as 432 residential units. Improvement Area No. 2 also includes a neighborhood park, open space, and HOA property.

Improvement Area No. 2 is being developed in four villages (each a “Village” and collectively the “IA No. 2 Villages”) of single-family detached lots: Village 9A (69 units); Village 9B (64 units); Village 10 (150 units); and Village 11 (149 units).

The entirety of Improvement Area No. 2 has been sold to Lennar Homes of California, LLC (“Lennar Homes”). On December 23, 2020, Tracy Phase IB, LLC and Lennar Homes entered into a Purchase and Sale Agreement and Joint Escrow Instructions (as amended from time to time, the “Lennar PSA”) for the purchase of the IA No. 2 Villages. On December 29, 2020, Lennar Homes closed on the purchase of the IA No. 2 Villages.

Lennar Homes will build all the off -site and in- tract improvements required to develop Improvement Area No. 2.

Lennar Homes

General. The IA No. 2 Villages will be developed by Lennar Homes, which is based in Irvine, California. Lennar Homes has been in the business of developing residential real estate communities in California since 1996. Lennar Homes is wholly -owned by U.S. Home, LLC, a Delaware limited liability company (“U.S. Home”). U.S. Home is wholly -owned by Lennar Corporation, which is based in Miami, Florida. Founded in 1954, Lennar Corporation completed its initial public offering in 1971 and listed its common stock on the New York Stock Exchange in 1972. Lennar Corporation’s Class A and Class B common stock are listed on the New York Stock Exchange under the symbols “LEN” and “LEN.B.” respectively. Lennar Corporation is one of the largest homebuilders in the United States based on home sales revenues and net earnings, and operates under a number of brand names, including Lennar Homes and U.S. Home. Lennar Corporation primarily develops residential communities both within the Lennar family of builders and through consolidated and unconsolidated partnerships in which Lennar Corporation maintains an interest.

Lennar Corporation is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the SEC. Such filings, particularly the Annual Report on Form 10 -K and its most recent Quarterly Report on Form 10- Q, set forth, among other things, certain data relative to the consolidated results of operations and financial position of Lennar Corporation and its consolidated subsidiaries, including Lennar Homes, as of such dates.

The SEC maintains a website that contains reports, proxy and other information statements and other information regarding registrants that file electronically with the SEC, including Lennar Corporation.

The address of such website is www.sec.gov. All documents filed by Lennar Corporation pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.

Copies of Lennar Corporation’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Lennar Corporation’s website at www.lennar.com.

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The internet addresses referenced in the paragraphs above are included for reference purposes only and the information on these internet sites are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these internet sites.

Backbone and In -Tract Improvements. Lennar Homes is required to construct all backbone and in-tract improvements required in connection with the development of the property in Improvement Area No. 2. Lennar Homes has retained ICGC, LLC, a Delaware limited liability company, as the general contractor to construct all necessary backbone and in- tract improvements. All of the backbone and in- tract improvements are complete except for the Phase 1B Neighborhood Park, the HOA facility (pool and restrooms), and last phase of the Lammers Road connection to Corral Hollow Road (consisting of retaining walls and last lift of asphalt).

Conditions of Approval . Certain facilities required as conditions of developing Improvement Area No. 2 are further described below:

A. Phase 1B Neighborhood Park.

Completion and Acc
eptance Condition. Before final inspection or occupancy of the 180th dwelling unit (whichever occurs first, except for up to fifteen model homes), the Phase 1B Neighborhood Park must be completed and accepted by the City Council. If the Phase 1B Neighborhood Park is not completed and accepted by the City Council before final inspection or occupancy of the 180th dwelling unit (whichever occurs first, except for up to fifteen model homes), no further building permits (except for plumbing only building permits) will be issued until the Phase 1B Neighborhood Park is completed and accepted by the City Council.

Current Construction Timeline. The improvement plans for the Phase 1B Neighborhood Park were approved by the City Council on September 19, 2023. Accordingly, Lennar Homes expects to commence construction on the Phase 1B Neighborhood Park immediately following execution of the plans, which is anticipated to be in the first week of October, 2023. Weather permitting, Lennar Homes expects that it will take approximately 7 months from commencement of construction to complete the Phase 1B Neighborhood Park and another 2- 3 months for acceptance by the City Council (the “Estimated Park Acceptance Timeline”).

Timing Implications for Development in
Improvement Area No. 2 . As of September 15,
2023, there have been final inspections on 122 non-model dwelling units and more than 247 full building permits issued. Lennar Homes projects that it will reach the 179th final inspection of non- model units by late November or early December 2023 (herein, the “ Park Condition Date”). Lennar Homes and the City have different interpretations of the park condition and how it will impact development of the homes in Improvement Area No. 2. The City interprets the condition described above to mean that construction of remaining units—even on a unit for which a building permit has already been received prior to the Park Condition Date—must be halted after the 179th unit until the Phase 1B Neighborhood Park is completed and accepted by the City Council. On the other hand, Lennar Homes believes that if the Phase 1B Neighborhood Park is not accepted by the Park Condition Date, the City has the authority not to issue any additional building permits until the Phase 1B Neighborhood Park has been completed and accepted by the City Council, but that the City remains obligated to continue inspections and approvals for any units that had previously received building permits. Lennar Homes and the City will meet and confer on the interpretation of the condition . Lennar Homes may request a modification to the condition, such as increasing the number of units that trigger the condition, or some other change, but there can be no guarantee that such relief would be granted.

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Although Lennar Homes hopes to reach agreement with the City on the park condition prior to the Park Condition Date, Lennar Homes intends to diligently construct the Phase 1B Neighborhood Park and continue construction on homes to the extent allowed during the construction of the Phase 1B Neighborhood Park. Lennar Homes understands that the Absorption Study includes a modified estimate of the project absorption that accounts for the Estimated Park Acceptance Timeline under the City’s interpretation of the park condition. Lennar Homes further understands that, based on this modified estimate, even if there is an interruption in completing homes during park construction, the calendar year absorption estimates of homes as estimated by the Market Absorption Consultant both with and without any delays is the same, although the Market Absorption Consultant reports that, under the modified scenario, most of the calendar year 2024 occupancies would occur in the fourth quarter of calendar year 2024.

There can be no guarantee regarding the actual timeline for completion of the Phase 1B Neighborhood Park or that the absorption estimates set forth in the Absorption Study will be realized in light of the Phase 1B Neighborhood Park condition.

See “SECURITY FOR THE BO NDS – Improvement Fund – Disbursements Related to Construction of Phase 1B Neighborhood Park” for further information about the release of 2023 Bonds proceeds from the Improvement Fund related to construction of the Phase 1B Neighborhood Park.

B. Trees Adjacent to I-580. Before the issuance of the 300th building permit, Lennar Homes must plant trees in the easement adjacent to Highway I-580. As of the date of this Official Statement, this obligation has been completed.

C. School Facilities. Certificates of compliance from each of the Jefferson School District (“JSD”) and the Tracy Unified School District (“TUSD”) are required as a condition of receipt of a building permit. The certificates of compliance are issued if the mitigation payments under the resp ective agreements with JSD and TUSD are paid. As of the date of this Official Statement, c ertificates of compliance have been provided for all 432 lots in Improvement Area No. 2.

D. Fair Share of Repaving Costs . The amount of $50,000 is due for the first 144 homes constructed in Improvement Area No. 2. As of the date of this Official Statement, this amount has been paid.

E. Subdivision Improvement Agreements and Bonding. Lennar Homes was required to post bonds and collateral with the City, and execute any applicable Subdivision Improvement Agreements in connection with the final approval of the tract maps for the IA No. 2 Villages. As of the date of this Official Statement, this obligation has been completed.

Buyer RGAs. As of September 14, 2023, Lennar Homes has received RGAs for all 432 units and has perfected all RGAs with plumbing-only or full building permits for all 432 units in the Improvement Area.

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Tract Map Status. Final maps creating all 432 residential lots for the IA No. 2 Villages have been recorded, as shown below:

Tract Map Status for the IA No. 2 Villages in Improvement Area No. 2 (as of September 15, 2023)

Village Tract Map
Projected
Number of
Units

Date of Recordation
Village 9A 4083 69 November 17, 2021

Village 9B 4084 64
November 17, 2021
(as amended February 10,
2023)

Village 10 4085 62 April 26, 2022
4112 88 April 13, 2023

Village 11 4086 45 May 6, 2022
4114 104 April 13, 2023
Totals: 432

Details of each IA No. 2 Village are as follows. The projected sales prices shown in the tables below are as of September 15, 2023, and may differ from the projected sales prices shown in the Absorption Study, which was based on information provided in early July. Sales prices are subject to change, are all inclusive, and exclude any incentives and selling concessions or price reductions which may be offered.

Village 9A – Amber/Parklin
(Tract No. 4083)
(as of September 15, 2023)
50 x 90 Typical Lot Size

Floor Plan
Square
Footage
Total
Number of
Planned
Units(1) Base Sales Price
Plan 1 2,173 17 $799,880
Plan 2 2,278 17 $827,880
Plan 3 2,476 17 $876,880
Plan 4 2,688 18 $896,880
Totals 69
______________________________
(1) Lennar Homes has completed construction of two Village 9A model homes located in this Village.

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Village 9B – Sunhaven/Opal
(Tract No. 4084)
(as of September 15, 2023)
50 x 100 Typical Lot Size

Floor Plan
Square
Footage
Total
Number of
Planned
Units(1) Base Sales Price
Plan 1 2,502 16 $891,880
Plan 2 3,196 16 $989,880
Plan 3 3,269 16 $1,014,880
Plan 4 3,543 16 $1,070,880
Totals 64
______________________________
(1) Lennar Homes has completed construction of two Village 9B model homes located in this Village.

Village 10 - Greenwood
(Tract Nos. 4085 and 4112)
(as of September 15, 2023)
50 x 80 Typical Lot Size

Floor Plan
Square
Footage
Total
Number of
Planned
Units(1) Base Sales Price
Plan 1 2,452 38 $834,880
Plan 2 2,580 37 $863,880
Plan 3 2,700 38 $881,880
Plan 4 2,869 37 $901,880
Totals 150
______________________________
(1) Lennar Homes has completed construction of two Village 10 model homes located in this Village.

Village 11 - Fairgrove
(Tract Nos. 4086 and 4114)
(as of September 15, 2023)
40 x 70 Typical Lot Size

Floor Plan
Square
Footage
Total
Number of
Planned
Units(1)
Base Sales
Price
Plan 1 1,945 37 $714,880
Plan 2 2,140 37 $764,880
Plan 3 2,287 38 $789,880
Plan 4 2,416 37 $809,880
Totals 149
___________________________
(1) Lennar Homes has completed construction of two Village 11 model homes located in this Village.

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Landbank Arrangement

Lennar Homes sold 365 of the 432 lots located in Improvement Area No. 2 (the “Improvement Area No. 2 Lots”) to AG Essential Housing CA 4, L.P., a Delaware limited partnership (“ AG4”) in order to set up a land banking structure.

To facilitate the land banking structure for the Improvement Area No. 2 Lots, as well as for an additional 346 lots in several other projects (the “Non-Improvement Area No. 2 Lots”), Lennar Homes and AG4 entered into that certain Option Agreement, dated February 26, 2021 (the “ Lennar Option Agreement”) whereby Lennar Homes has the option, but not the obligation, to purchase the 365 Improvement Area No. 2 Lots (as well as the 346 Non-Improvement Area No. 2 Lots) from AG4 pursuant to a takedown schedule agreed upon between Lennar Homes and AG4.

Lennar Homes and AG4 further memorialized their rights and obligations under the Lennar Option Agreement by recording that certain Memorandum of Option Agreement in the Official Records of San Joaquin County on February 26, 2021, as Instrument No. 2021-036899 (the “Original Memo of Lennar Option”).

In addition to the Option Agreement, Lennar Homes and AG4 entered into a Construction Agreement (“Lennar Construction Agreement ”) granting Lennar Homes the right to enter upon the Improvement Area No. 2 Lots (and the Non-Improvement Area No. 2 Lots) for the purpose of, among other things, constructing model homes, dwelling units and related subdivision improvements on the Improvement Area No. 2 Lots (and Non -Improvement Area No. 2 Lots) before Lennar Homes acquires the Improvement Area No. 2 Lots (and Non-Improvement Area No. 2 Lots) from AG4.

On September 23, 2021, AG4 conveyed the Improvement Area No. 2 Lots and the Non- Improvement Area No. 2 Lots that had not yet been conveyed to Lennar Homes to AG Essential Housing CA 1, L.P., a Delaware limited partnership (the “ Landbank Owner”). Further, AG4 assigned, and the Landbank Owner assumed, all of AG4’s obligations under the Lennar Option Agreement and the Lennar Construction Agreement. In connection therewith, Lennar Homes and the Landbank Owner memorialized their rights and obligations under the Lennar Option Agreement by recording that certain Amended and Restated Memorandum of Option Agreement in the Official Records of San Joaquin County on September 24, 2021, as Instrument No. 2021-160747 (the “Amended Memo of Lennar Option”).

Lennar Homes’ planned development of the Improvement Area No. 2 Lots includes the construction of 365 single-family residential homes and the sale of such homes to individual homebuyers.

Pursuant to the terms and conditions of the Lennar Option Agreement, Lennar Homes is required to, among other things, cause the completion and satisfaction of the certain on-site and offsite improvements to the Improvement Area No. 2 Lots. During the term of the Lennar Option Agreement, Lennar Homes is obligated to pay all taxes on the Improvement Area No. 2 Lots (and Non-Improvement Area No. 2 Lots), including the Special Taxes.

Under the terms of the Lennar Option Agreement, the Landbank Owner agreed to provide Lennar Homes the exclusive right and option to purchase the Improvement Area No. 2 Lots and the Non- Improvement Area No. 2 Lots in consideration for (a) an initial option payment, which payment has been made to the Landbank Owner; (b) the covenants of Lennar Homes to timely pay the option payments under the Lennar Option Agreement on a monthly basis in arrears; and (c) upon exercise of the option, the payment of the purchase price for each set of lots acquired.

The Improvement Area No. 2 Lots and the Non-Improvement Area No. 2 Lots must be purchased in certain groups and in a specified order, although Lennar Homes may acquire more lots than scheduled and at earlier times so long as the identified lots are acquired by the applicable takedown date. In addition, pursuant to the Lennar Option Agreement and the Lennar Construction Agreement and with some

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limitations, the Landbank Owner has granted Lennar Homes a license to enter upon the property to construct homes before it acquires the lots from the Landbank Owner. It is Lennar Homes’ intention to substantially complete all horizontal and vertical development on the lots it acquires prior to the applicable takedown.

The failure to acquire the lots in the specified order will result in the payment of a premium in addition to the purchase price. Under the Lennar Option Agreement, the Improvement Area No. 2 Lots must be acquired pursuant to the following schedule, although the Lennar Option Agreement contains provision allowing for one-month extensions on acquisition of lots subject to the payment of an extension fee and other conditions:

Takedown Schedule
Under Lennar Option Agreement
(Improvement Area No. 2 Lots Only)
(as of September 15, 2023)

Acquisition
Date Village 9A Village 9B Village 10 Village 11
Cumulative
Number of Lots
Acquired
Status as of
September
15, 2023
4/10/22 4 4 4 4 16 Acquired
5/10/22 0 0 0 0 16 Acquired
6/10/22 4 4 4 4 32 Acquired
7/10/22 4 4 4 4 48 Acquired
8/10/22 4 4 4 4 64 Acquired
9/10/22 4 4 4 4 80 Acquired
10/10/22 4 4 4 4 96 Acquired
11/10/22 4 4 4 4 112 Acquired
12/10/22 4 4 4 4 128 Acquired
1/10/23 4 4 4 4 144 Acquired
2/10/23 4 4 4 4 160 Acquired
3/10/23 4 4 4 4 176 Acquired
4/10/23 4 4 4 4 192 Acquired
5/10/23 4 4 4 4 208 Acquired
6/10/23 4 4 4 4 224 Acquired
7/10/23 4 4 4 4 240 Acquired
8/10/23 4 4 4 4 256 Acquired
9/10/23 4 -- 4 4 268 Acquired
10/10/23 1 -- 4 4 277
11/10/23 -- -- 4 4 285
12/10/23 -- -- 4 4 293
1/10/24 -- -- 4 4 301
2/10/24 -- -- 4 4 309
3/10/24 -- -- 4 4 317
4/10/24 -- -- 4 4 325
5/10/24 -- -- 4 4 333
6/10/24 -- -- 16 16 365
69 64 116 116 365(1)
___________________________
(1) Only 365 of the planned 432 lots are subject to the land banking arrangement.

The option under the Lennar Option Agreement expires on the earlier of (i) the last date permitted for the final takedown specified on the takedown schedule (for both the Improvement Area No. 2 Lots and the non-Improvement Area No. 2 Lots) and the expiration of any applicable cure period, or (ii) the date Lennar Homes has acquired all of the Improvement Area No. 2 Lots and Non- Improvement Area No. 2 Lots in accordance with the Lennar Option Agreement. The failure to timely acquire lots could result

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in the termination of the option and Lennar Homes will no longer have a right to purchase any of the remaining units under the Lennar Option Agreement.

The Lennar Option Agreement covers both the Improvement Area No. 2 Lots and the Non - Improvement Area No. 2 Lots, and the failure by Lennar Homes to acquire the Non -Improvement Area No. 2 Lots in a timely manner could result in a termination of the entirety of the Option Agreement, including the right to acquire the Improvement Area No. 2 Lots. In the event that Lennar Homes does not exercise its option on the Improvement Area No. 2 Lots or the right to purchase the Improvement Area No. 2 Lots expires or is terminated, the Landbank Owner being an investor only and not a homebuilder, would likely attempt to sell such Improvement Area No. 2 Lots to another merchant builder.

Under the Lennar Construction Agreement, Lennar Homes has agreed to use commercially reasonable efforts to construct all of the on -site and off -site improvements and obtain the requisite governmental permits and approvals necessary to create finished lots on the Improvement Area No. 2 Lots and the Non-Improvement Area No. 2 Lots. The Lennar Construction Agreement contains various dates for completion of work in phases.

During the term of the Lennar Option Agreement and the Lennar Construction Agreement, Lennar Homes is obligated to pay all taxes on the Improvement Area No. 2 Lots and the Non-Improvement Area No. 2 Lots.

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Status of Development

Lennar Homes held a grand opening for Amber/Parklin and Sunhaven/Opal on September 17, 2022 and for Greenwood and Fairgrove on January 14, 2023. Set forth below is the status of construction of the units in each of the product lines being developed by Lennar Homes, as of September 15, 2023:

IA No. 2 Villages
Status of Development
(as of September 15, 2023)

Amber/
Parklin
Sunhaven/
Opal

Greenwood

Fairgrove

Total

Construction and Sale Status
Closed to Homeowners 29 33 24 22 108
Completed Unclosed Homes
(including 8 models)
6 2 8 5 21

Under Construction(1)

27 27 17 21 92
Finished Lots 7 2 101 101 211
Total Projected Units 69 64 150 149 432

Permit Status
Plumbing-Only Permits Received (2) 0 0 94 91 185

Full Building Permits Received (3) 69 64 56 58 247
Total Projected Units 69 64 150 149 432

___________________________
(1) Under construction means that a full building permit has been issued and the trenching for the foundation has begun.

Represents homes in various stages of construction.
(2) Under the Growth Management Ordinance, a builder must have an RGA in order to apply for a building permit on or before September 30th of the year in which the builder was allocated the RGA. If such an application is not made in a timely manner, then the RGA would expire. Pursuant to the First Amendment to the Development Agreement, the City considers the receipt of a plumbing permit as timely receipt of a permit to prevent the expiration of an RGA. (3) The receipt of a full building permit is also considered a timely receipt of a permit to prevent the expiration of an RGA. For purposes of the Rate and Method, a parcel is considered Developed Property if it has a full building permit, not a plumbing permit or a foundation-only building permit.

Source: Lennar Homes.

In addition to the 108 homes closed to individual homeowners as of September 15, 2023, 36 homes were under contract to be sold to homeowners as of such date.

Lennar Homes anticipates buildout of the IA No. 2 Villages according to the following schedule:

• Village 9A: August 2024
• Village 9B: June 2024
• Village 10: May 2026
• Village 11: June 2026

The anticipated buildout shown above is subject to change, and there can be no guarantee that the IA No. 2 Villages will be developed according to that schedule.

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Home Construction Financing Plan

Lennar intends to finance the development of the IA No. 2 Villages using internal sources (equity and home sales proceeds). Through September 1, 2023, Lennar Homes has expended approximately $189,935,182 on the development of the IA No. 2 Villages, including land acquisition, site development, home building, marketing, and sales. Lennar anticipates expending an additional $113,452,695 to complete the development of the IA No. 2 Villages. A summary of the costs incurred and anticipated are set forth in the table below:

Total Budget
Costs Incurred Through
September 1, 2023
September 2, 2023
through Buildout
Land(1) $90,635,579 $66,396,655 $24,238,924
Site Construction $65,091,103 $56,311,234 $8,779,869
Direct Home Construction $134,250,535 $64,985,023 $69,265,512 Sales and Marketing $13,410,659 $2,242,270 $11,168,390
Total Projected Costs $303,387,876 $189,935,182 $113,452,695 (1) Represents anticipated payments to the Landbank Owner for the purchase of the Improvement Area No. 2 Lots pursuant to the Option Agreement.

Although Lennar Homes expects to have sufficient funds available to complete its development in Improvement Area No. 2 in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development costs will be available from Lennar Homes or any other source when needed. Neither Lennar Homes, nor any of its related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in Improvement Area No. 2. Any contributions by Lennar Homes to fund the costs of such development are entirely voluntary.

If and to the extent that internal funding, including but not limited to home sales revenues, are inadequate to pay the costs to complete the planned development by Lennar Homes within Improvement Area No. 2 and other financing by Lennar Homes is not put into place, there could be a shortfall in the funds required to complete the planned development by Lennar Homes in Improvement Area No. 2.

BOND OWNERS’ RISKS

The purchase of the 2023 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2023 Bonds.

Limited Obligation of the City to Pay Debt Service

The City has no obligation to pay principal of and interest on the 2023 Bonds if Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the 2023 Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies.

The City is not obligated to advance funds to pay debt service on the 2023 Bonds.

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Concentration of Ownership

As of the July 19, 2023 date of value of the Original Appraisal, Lennar Homes (including through its contractual agreements with the Landbank Owner) is responsible for approximately 77.9% of the Fiscal Year 2023-24 Special Tax levy. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Value- to-Lien Ratios and Share of Fiscal Year 2023- 24 Special Taxes” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Status of Development.”

The owners of property in Improvement Area No. 2 are not personally obligated to pay the Special Tax attributable to their property. Rather, the Special Tax is an obligation only against the parcel of property, secured by the amount which could be realized in a foreclosure proceeding against the property, and not by any promise of the owner to pay. If the value of the property is not sufficient, taking into account other obligations also constituting a lien against the property, the City, Fiscal Agent and owners of the 2023 Bonds have no recourse against the owner, such as filing a lawsuit to collect money.

Failure of Lennar Homes or any future merchant builder or future owner of significant property subject to the Special Taxes in Improvement Area No. 2 to pay installments of Special Taxes when due could cause the depletion of the 2023 Reserve Funds prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax and, consequently, result in the delinquency rate reaching a level that would cause an insufficiency in collection of the Special Tax for the City to pay debt service with respect to the 2023 Bonds.

Future Property Development

Continuing development of the parcels in Improvement Area No. 2 may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of the developer, water or electricity shortages, discovery on the undeveloped property of any plants or animals in their habitat that have been listed as endangered species, changes in laws, and other factors outside the control of the owners of land in Improvement Area No. 2. Development in Improvement Area No. 2 may also be affected by development in surrounding areas, which may compete with the property in Improvement Area No. 2.

Potential Early Redemption of Bonds from Prepayments

Property owners within Improvement Area No. 2, inc luding Lennar Homes and individual homeowners, are permitted to prepay up to 80% of the Special Tax obligation applicable to a Parcel in Improvement Area No. 2, subject to certain conditions. Such prepayments will result in a redemption of the 2023 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 2023 Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such 2023 Bonds.

Levy and Collection of the Special Tax

General. The principal source of payment of principal of and interest on the 2023 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within Improvement Area No. 2.

Limitation on Maximum Special Tax Rate. The annual levy of the Special Tax is subject to the maximum annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2023 Bonds.

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No Relationship Between Property Value and Special Tax Levy. Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the 2023 Bonds, and certainly not a direct relationship.

Factors that Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:

Transfers to Governmental Entities. The number of parcels of Taxable Property could be reduced through the acquisition of Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. See “–Exempt Properties” below.

Property Tax Delinquencies. Failure of the owners of Taxable Property to pay property taxes (and, consequently, the Special Tax), or delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Special Tax revenues. See “–Property Tax Delinquencies” below.

Delays Following Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE BONDS – Covenant to Foreclose” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.

If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2023 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City of the proceeds of sale if the 2023 Reserve Fund is depleted . See “SECURITY FOR THE BONDS – Covenant to Foreclose.”

The ability of the City to collect interest and penalties specified by State law and to foreclose against properties having delinquent Special Tax installments may be limit ed in certain respects with regard to properties in which a federal governmental agency has or obtains an interest. See “ – FDIC/Federal Government Interests in Properties” below.

Other laws generally affecting creditors ’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six -month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment, and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service.

Property Tax Delinquencies

General. Delinquencies in the payment of property taxes and, consequently, the Special Taxes, can occur because the owners of delinquent parcels may not have received property tax bills from the

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County in a timely manner, including situations in which the County initially sent property tax bills to the property developer or merchant builder at a time when the parcels in question had already been sold to individual homeowners. Delinquencies can also reflect economic difficulties and duress by the property owner.

Numerous future delinquencies by the owners of Taxable Property in Improvement Area No. 2 in the payment of property taxes (and, consequently, the Special Taxes, which are collected on the ordinary property tax bills) when due could result in a deficiency in Special Tax revenues necessary to pay debt service on the 2023 Bonds, which could in turn result in the depletion of the 2023 Reserve Fund, prior to reimbursement from the resale of foreclosed property or payment of the delinquent Special Tax. In that event, there could be a delay or failure in payments of the principal of and int erest on the 2023 Bonds.

See “SECURITY FOR THE BONDS – 2023 Reserve Fund,” and “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Potential Consequences of Special Tax Delinquencies.”

Measures to Mitigate Consequences of Continuing Delinquencies. The City intends to take certain actions designed to mitigate the impact of future delinquencies, including: enforcing the lien of the Special Taxes through collection procedures that will include foreclosure actions under certain circumstances (see “SECURITY FOR THE 2023 BONDS – Covenant to Foreclose”); and increasing the levy of Special Taxes against non-delinquent property owners in Improvement Area No. 2 to the extent permitted under the Rate and Method and the Act , and to the extent the Special Taxes are not already being levied at the maximum Special Tax rate. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Potential Consequences of Special Tax Delinquencies.”

Limitations on Increases in Special Tax Levy. If property owners are delinquent in the payment of the Special Tax, the City may not increase Special Tax levies to make up for delinquencies for prior fiscal years above the maximum annual Special Tax rates specified in the Rate and Method.

In addition, the City’s ability to increase Special Tax levies on residential property to make up for delinquencies for prior Fiscal Years is limited by Section 53321(d) of the Act, which provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults.

In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the 2023 Bonds.

Risks Related to High Loan to Value Ratios

Once homes have been constructed in Improvement Area No. 2, future decline in home values could result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies are likely to increase. Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes.

It is possible that laws could be enacted in the future to assist homeowners in default in the payment of mortgages and property taxes. It is further possible that federal laws could be enacted that would adversely impact the ability of the City to foreclose on parcels with delinquent Special Taxes. No assurance can be given that any such laws will be enacted, or if enacted will be effective in assisting affected homeowners.

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Payment of Special Tax is not a Personal Obligation of the Property Owners

An owner of Taxable Property is not personally obligated to pay the Special Taxes. Rather, the Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Special Tax and a foreclosure sale by the City, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the City has no recourse against the owner.

Appraised Values

The Appraisal summariz ed in APPENDIX C estimates the market value of the property that is currently taxable property within Improvement Area No. 2. This market value is merely the opinion of the Appraiser as of the date of value set forth in the Appraisal, and is subject to the assumptions and limiting conditions stated in the Appraisal. The City has not sought an updated opinion of value by the Appraiser subsequent to the date of value of the Appraisal, or an opinion of the value of the Taxable Property by any other appraiser. A different opinion of value might be rendered by a different appraiser.

The opinion of value assumes a sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.

In addition, the opinion of value is made as of the date of value set forth in the Appraisal, based upon facts and circumstances existing as of the date of value. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from the facts and circumstances at the time the Appraisal was prepared.

No assurance can be given that any of the taxable property in Improvement Area No. 2 could be sold for the estimated market value contained in the Appraisal if that property should become delinquent in the payment of Special Taxes and be foreclosed upon.

Property Values

The value of taxable property within Improvement Area No. 2 is a critical factor in determining the investment quality of the 2023 Bonds. If a property owner defaults in the payment of the Special Tax, the City’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic and other factors beyond the City’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, landslides, wildfires, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.

The following is a discussion of specific risk factors that could affect the value of property in Improvement Area No. 2.

Prolonged Economic Downturn. Land values are affected by economic conditions and to the extent that an economic downturn is prolonged, property values could decline or remain flat for an indefinite period. Declines in home values in Improvement Area No. 2 could also result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies are likely to increase. Bankruptcy by homeowners with delinquent Special Taxes would del ay the commencement and completion of foreclosure proceedings.

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Natural Disasters. The value of the taxable property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the taxable property and the continued habitability and enjoyment of such private improvements.

The areas in and surrounding Improvement Area No. 2, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes and landslides. Other natural disasters could include, without limitation, floods, landslides, wildfires, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear. See “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Environmental Matters” for additional details on certain environmental matters.

Drought. With respect to droughts specifically, California has a history of suffering periodic drought conditions. Most recently, on May 10, 2021, the governor proclaimed a State of Emergency for 41 of the State’s 58 counties (including San Joaquin County, where the District is located), citing above -average temperatures and dry conditions. In April 2022, the governor extended the State of Emergency to all counties in the State and asked all Californians to voluntarily reduce water usage by 15%. While some drought -related water restrictions were eased in May 2023, no assurance can be given that drought conditions will not continue in future years or, subside only to return in the future, potentially impacting the development of property in Improvement Area No. 2, the value of Taxable Property within Improvement Area No. 2, or economic activity within Improvement Area No. 2.

Wildfire. In recent years, drought conditions in the State (see “– D rought above”) have led
to increased risk of wildfire. In particular, certain electrical operators in the State have seen their distribution/transmission lines cause billions of dollars in property damage and the loss of lives.

Although the land in Improvement Area No. 2 is not in a high- risk area (or a special fire hazard severity zone) for wildfires, landslides, floods, or tornadoes, natural disasters such as these are unpredictable and may occur anywhere throughout the State, with devastating consequences, including resulting in significant delinquencies in the payment of Special Taxes, and reduction in the value of the parcels. No assurance can be given that wildfires will not erupt in the developments being undertaken in Improvement Area No. 2 and negatively impact development of property in the Improvement Area No. 2 in the future.

Legal Requ
irements. Other events that may affect the value of taxable property include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives (to the extent not prohibited from being applicable to the Tracy Hills project through the Development Agreement), local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures.

Hazardous Substances. One of the most serious risks in terms of the potential reduction in the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar.

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Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.

The property values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel.

Although the City is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the City is not aware of them.

Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but that may in the future be so classified.

Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of Taxable Property that is realizable upon a delinquency.

For particular environmental matters that may impact the value of land within Improvement Area No. 2, including the presence of a petroleum pipeline, which is unpressurized, within Improvement Area No. 2 and the District ’s proximity to Site 300, see “ THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Environmental Matters.”

Increasing Mortgage Interest Rates. Between approximately November 2021 and September 2023, mortgage interest rates for 30- year mortgage loans have increased from approximately 3.1% to over 7.0%. Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the residential units in Improvement Area No. 2 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 Improvement Area No. 2 as described herein.

Other Factors. Other factors that could adversely affect property values in Improvement Area No. 2 include, among others, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, and destruction of property caused by man -made disasters.

Other Possible Claims Upon the Value of Taxable Property

While the Special Taxes are secured by the taxable property , the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims.

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The tables in the sections entitled “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Direct and Overlapping Governmental Obligations” and “– Illustrative Tax Bill,” show the presently outstanding amount of governmental obligations, the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. The tables do not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property.

In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2023 Bonds.

The principal of and interest on the 2023 Bonds are payable from the Special Tax authorized to be collected within Improvement Area No. 2, and payment of the Special Tax is secured by a lien on taxable real property within Improvement Area No. 2. 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 Improvement Area No. 2. 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 if unpaid. The City, the County and certain other public agencies are authorized by the Act to form 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 Improvement Area No. 2. Finally, although the Special Taxes will generally have priority over non-governmental liens on a parcel of property in Improvement Area No. 2, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See “BOND OWNERS’ RISKS– Bankruptcy Delays” below.

Exempt Properties

Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within Improvement Area No. 2 acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See “SECURITY FOR THE BONDS – Rate and Method.”

In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.

FDIC/Federal Government Interests in Properties

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

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.

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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 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 a 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.

The City has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the 2023 Bonds are outstanding.

FDIC. In the event that any financial institution making any loan which is secured by real property within Improvement Area No. 2 is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the City to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited.

The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property ’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC ’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent.

The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act

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and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC ’s federal immunity.

The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes.

The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within Improvement Area No. 2 in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the 2023 Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2023 Bonds.

Depletion of 2023 Reserve Fund

The 2023 Reserve Fund is to be maintained at an amount equal to the 2023 Reserve Requirement. See “SECURITY FOR THE BONDS – 2023 Reserve Fund.” The 2023 Reserve Fund will be used to pay principal of and interest on the 2023 Bonds (and any 2023 Related Parity Bonds) if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within Improvement Area No. 2. If the 2023 Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the owners of the 2023 Bonds (and any 2023 Related Parity Bonds) under the Fiscal Agent Agreement.

However, because the Special Tax levy is limited to the maximum annual Special Tax rates, it is possible that no replenishment would be possible if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts . Thus , it is possible that the 2023 Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes.

Bankruptcy Delays

The payment of the Special Tax and the ability of the City to foreclose the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors ’ rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the 2023 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 or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2023 Bonds.

In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non- payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2023 Bonds and the possibility of delinquent Special Taxes not being paid in full.

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The chances are increased that the 2023 Reserve Fund established for the 2023 Bonds 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 2023 Reserve Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the 2023 Bonds on a timely basis.

Cyber Security

The City, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the City ’s efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City or the District, or the administration of the 2023 Bonds. The City is also reliant on other entities and service providers in connection with the administration of the 2023 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, the District and these other entities will not be affected by cyber threats and attacks in a manner that may affect the Bond owners.

Disclosure to Future Purchasers

The City has recorded a notice of the Special Tax lien in the Office of the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in Improvement Area No. 2 or the lending of money secured by property in Improvement Area No. 2. The Act requires the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

No Acceleration Provisions

The 2023 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2023 Bonds or the Fiscal Agent Agreement.

Under the Fiscal Agent Agreement, a Bondholder is given the right for the equal benefit and protection of all Bondowners similarly situated to pursue certain remedies. See “APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement.” So long as the 2023 Bonds are in book-entry form, DTC will be the sole bondholder and will be entitled to exercise all rights and remedies of bondholders.

Impact of Certain Events on Tax Exemption

As discussed under the caption “TAX MATTERS,” interest on the 2023 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the 2023 Bonds were issued as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the 2023 Bonds were to become includable in gross income for purposes of federal income taxation, the 2023 Bonds would continue to

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remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Taxes. See “THE 2023 BONDS – Redemption.”

Future legislative proposals, if enacted into law, clarification of the Tax Code (defined herein) or court decisions may cause interest on the 2023 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 Bondowners from realizing the full current benefit of the tax status of such interest.

IRS Audit of Tax-Exempt Bond Issues

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2023 Bonds will be selected for audit by the IRS. It is also possible that the market value of such 2023 Bonds might be affected as a result of such an audit of such 2023 Bonds (or by an audit of similar bonds or securities).

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 o f creating cash- flow problems in the payment of outstanding obligations such as the 2023 Bonds.

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

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

The Special Taxes and the 2023 Bonds were each authorized by not less than a two-thirds vote of the landowners within Improvement Area No. 2 who constituted the qualified electors at the time of such voted authorization. The City believes, therefore, that issuance of the 2023 Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.

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

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For example, in August 2014, in City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City of San Diego to authorize the levying of special taxes on hotels city-wide pursuant to a city charter ordinance creating a convention center facilities district which specifically defined the electorate to consist solely of (1) the owners of real property in the city on which a hotel is located, and (2) the lessees of real property owned by a governmental entity on which a hotel is located. The court held that such landowners and lessees are neither “qualified electors” of the city for purposes of Articles XIII A, Section 4 of the California Constitution, nor a proper “electorate” under Article XIIIC, Section 2(d) of the California Constitution. The court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) of the Act (which was the nature of the voter approval through which the District and Improvement Area No. 2 were formed) violates the California Constitution in districts that lack sufficient registered voters to conduct an election among registered voters. Accordingly, this case should have no effect on the levy of the Special Taxes by the City.

The City cannot predict the ultimate outcome or effect of any such judicial scrutiny, legislative actions, or future initiatives. These initiatives, and any future initiatives, may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter -approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the 2023 Bonds.

Public Health Emergencies

In recent years, public health authorities have warned of threats posed by outbreaks of disease and other public health threats. Pandemic diseases arising in the future could have significant adverse health and financial impacts throughout the world, leading to loss of jobs and personal financial hardships, and/or actions by federal, State and local governmental authorities to contain or mitigate the effects of an outbreak.

Taxpayer assistance measures may include deferral of due dates of property taxes, which was an assistance program during the COVID- 19 pandemic, and with or without a deferral some taxpayers may be unable to make their property and Special Tax payments. No assurance can be given that the property tax payment dates will not be deferred in the future, which may cause a delay in the receipt of Special Taxes. In addition, home values may be affected by a reduction in demand stemming from personal finances, or general widespread economic circumstances resulting from pandemic diseases.

Secondary Market for Bonds

There can be no guarantee that there will be a secondary market for the 2023 Bonds or, if a secondary market exists, that any 2023 Bonds can be sold for any particular price. Prices of bond issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.

No assurance can be given that the market price for the 2023 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the Internal Revenue Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2023 Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the 2023 Bonds or obligations that present similar tax issues as the 2023 Bonds.

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LEGAL MATTERS

Legal Opinions

The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the 2023 Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX F.

Jones Hall, A Professional Law Corporation, San Francisco, California, has served as Bond Counsel and Disclosure Counsel to the City. Stradling Yocca Carlson & Rauth, A Professional Corporation, Newport Beach, California, is serving as counsel to the Underwriter.

No Litigation

At the time of delivery of the 2023 Bonds , the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the City has been served with process or threatened, which:

• in any way questions the powers of the City Council, City or District (including Improvement Area No. 2 therein), or

• in any way questions the validity of any proceeding taken by the City Council in connection with the issuance of the 2023 Bonds, or

• wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the purchase contract with respect to the 2023 Bonds, or

• which, in any way, could adversely affect the validity or enforceability of the resolutions of the City Council adopted in connection with the formation of the District and Improvement Area No. 2 or the issuance of the 2023 Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate or the purchase contract with respect to the 2023 Bonds, or

• to the knowledge of the City, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the 2023 Bonds for federal income tax purposes, or

• in any other way questions the status of the 2023 Bonds under State tax laws or regulations.

TAX MATTERS

Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2023 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2023 Bonds may be subject to the corporate alternative minimum tax.

The opinions set forth in the preceding paragraph are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the 2023 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such

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interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2023 Bonds.

Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2023 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2023 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “bond premium” for purposes of federal income taxes and State of California personal income taxes.

Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight -line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2023 Bonds to determine t axable gain upon disposition (including sale, redemption, or payment on maturity) of such 2023 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2023 Bonds who purchase the 2023 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2023 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2023 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2023 Bonds is sold to the public.

Under the Tax Code, bond premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the 2023 Bond’ s maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2023 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2023 Bond is amortized each year over the term to maturity of the 2023 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight -line interpolations between compounding dates). Amortized 2023 Bond premium is not deductible for federal income tax purposes.

Owners of premium 2023 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2023 Bonds.

California Tax Status. In the further opinion of Bond Counsel, interest on the 2023 Bonds is exempt from California personal income taxes.

Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2023 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2023 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.

The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2023 Bonds, or as to the consequences of owning or receiving interest on the 2023 Bonds, as of any future date. Prospective purchasers of the 2023 Bonds should consult their own tax advisors

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regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Owners of the 2023 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2023 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2023 Bonds, the ownership, sale or disposition of the 2023 Bonds, or the amount, accrual or receipt of interest on the 2023 Bonds.

CONTINUING DISCLOSURE

City Continuing Disclosure. The City will covenant for the benefit of owners of the 2023 Bonds to provide certain financial information and operating data relating to Improvement Area No. 2 and the 2023 Bonds by not later than nine months after the end of the City’s fiscal year (currently March 31 based on the City’s fiscal year end of June 30) (the “Annual Report”) and to provide notices of the occurrence of certain listed events.

These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in APPENDIX G.

The City, on its own behalf and on behalf of related entities, has entered into a number of prior continuing disclosure undertakings under the Rule in connection with the issuance of long -term obligations, and has provided annual financial information and event notices in accordance with those undertakings. During the past five years , the City or its related entities have failed to comply with prior undertakings as follows:

• The audited financial statements for Fiscal Year s 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22 were filed up to approximately 3 months late; and

• Certain operating and financial data for Fiscal Years 2017-18, 2018-19, 2019 -20, and 2020-21 were filed up to approximately 75 days late.

• Certain information was omitted from the operating and financial data filed for Fiscal Years 2017-18 and 2019-20 because it was unavailable at the time the filing was due, but that information was subsequently filed when it became available.

Lennar Homes Continuing Disclosure. The Underwriter does not consider Lennar Homes to be an “obligated person” with respect to the Bonds for purposes of the Rule. Notwithstanding the foregoing, to provide updated information with respect to the development within Improvement Area No. 2, Lennar Homes will execute a continuing disclosure certificate, the form of which is set forth in APPENDIX H (the “Developer Continuing Disclosure Certificate”), pursuant to which it will covenant to provide semiannual reports until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Certificate. The semiannual reports to be provided by Lennar Homes will contain updates regarding the development within the District as outlined in Section 4 of the Developer Continuing Disclosure Certificate. In addition to its semiannual reports, Lennar Homes will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate.

Lennar Homes’ obligations under the Developer Continuing Disclosure Certificate will terminate upon the earliest to occur of: (a) the legal defeasance, prior redemption, or payment in full of all the 2023 Bonds; or (b) at such time the property in Improvement Area No. 2 subject to the Developer Continuing

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Disclosure Certificate is fewer than 185 residential lots (or property that will be subdivided into fewer than 185 residential lots).

To the actual knowledge of Lennar Homes, other than as disclosed in this Official Statement, in the last five years, Lennar Homes has not failed to comply in any material respects with its previous continuing disclosure undertakings, specifically regarding its requirement to provide developer periodic reports or to provide notice of occurrence of enumerated events. However, (i) in connection with a continuing disclosure obligation entered into with respect to the $12,850,000 County of El Dorado District No. 2014-1 (Carson Creek) Special Tax Bonds Series 2016, Lennar Homes was late in filing the periodic reports due on April 1, 2017 and October 1, 2017; the oversight was discovered in late January, 2018, and Lennar Homes promptly filed a curative report on February 1, 2018; (ii) in connection with the $16,780,000 California Municipal Finance Authority Special Tax Revenue Bonds BOLD Program Series 2020B, Lennar Homes inadvertently failed to file the initial semi-annual report by the due date of May 1, 2021, but filed a curative report on May 21, 2021; and (iii) in connection with the $5,795,000 City of Rancho Cordova Grantline 208 Community Facilities District No. 2018 -1 Special Tax Bonds, Series 2021B, Lennar Homes inadvertently failed to file the initial annual report by the due date of April 1, 2022, but filed a curative report on September 21, 2022.

NO RATING

The City has not obtained a credit rating on the 2023 Bonds. Nothing should be assumed from any credit rating that the City may obtain for other purposes. Prospective purchasers of the 2023 Bonds are required to make independent determinations as to the credit quality of the 2023 Bonds and their appropriateness as an investment.

UNDERWRITING

The 2023 Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”), at a purchase price of $________ (which represents the aggregate principal amount of the 2023 Bonds ($________), plus an original issue premium /less an original issue discount of $_________, less an Underwriter’s discount of $________).

The purchase agreement relating to the 2023 Bonds provides that the Underwriter will purchase all of the 2023 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.

The Underwriter may offer and sell the 2023 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

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PROFESSIONAL FEES

In connection with the issuance of the 2023 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2023 Bonds. Those professionals include:

• the Underwriter;
• Jones Hall, A Professional Law Corporation, as Bond Counsel and Disclosure Counsel; • Stradling Yocca Carlson & Rauth, A Professional Corporation, as Underwriter’s Counsel; • A portion of the fees of CSG Advisors Incorporated, as municipal advisor; • A portion of the fees of Goodwin Consulting Group, Inc., as special tax consultant; and • U.S. Bank Trust Company, National Association, as Fiscal Agent.

EXECUTION

The execution and delivery of the Official Statement has been duly authorized by the City Council, acting as the legislative body of the District.

CITY OF TRACY

By:

Finance Director

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APPENDIX A

GENERAL INFORMATION ABOUT THE CITY OF TRACY

AND SAN JOAQUIN COUNTY

The following information concerning the City of Tracy (the “City”) and San Joaquin County (the “County”) are included only for the purpose of supplying general information regarding the community.

The 2023 Bonds are not a debt of the City, the County, the State of California (the “State”) or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor.

Population

Population figures for the City, the County and the State for the last five years are shown in the following table.

CITY OF TRACY, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Population Estimates
Calendar Years 2019 through 2023 as of January 1

Calendar
Year
City of
Tracy
San Joaquin
County
State of
California
2019 94,326 764,373 39,605,361
2020 95,861 773,505 39,648,938
2021 93,837 780,515 39,286,510
2022 94,830 782,811 39,286,510
2023 95,615 786,145 38,940,231

Source: State Department of Finance estimates.

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Employment and Industry

The City is included in the Stockton Metropolitan Statistical Area (“ MSA”), which includes all of the County. The unemployment rate in the County was 6.4% in June 2023, up from a revised 6.0% in May 2023, and above the year-ago estimate of 5.1%. This compares with an unadjusted unemployment rate of 4.9% for California and 3.8% for the nation during the same period.

Set forth below is data from calendar years 2018 to 2022 reflecting the County’s civilian labor force, employment and unemployment. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City.

STOCKTON-LODI MSA
(San Joaquin County)
Annual Average Labor Force and Employment by Industry
Calendar Years 2018 through 2022
(March 2022 Benchmark)

2018 2019 2020 2021 2022
Civilian Labor Force (1) 324,100 327,100 335,400 336,900 344,400 Employment 304,300 307,700 296,900 308,000 326,400
Unemployment 19,800 19,500 38,500 28,900 18,100
Unemployment Rate 6.1% 5.9% 11.5% 8.6% 5.2%
Wage and Salary Employment: (2)
Agriculture 15,600 15,400 14,600 14,200 13,700
Mining and Logging 100 100 100 100 0
Construction 12,800 13,100 13,000 13,900 15,100
Manufacturing 20,600 20,600 20,300 21,400 22,600
Wholesale Trade 11,800 11,700 10,600 10,800 11,400
Retail Trade 26,700 26,200 24,600 26,200 26,900
Transportation, Warehousing and Utilities 28,400 31,300 38,800 43,000 48,800 Information 1,800 1,600 1,200 1,200 1,200
Finance and Insurance 4,800 4,700 4,600 4,700 4,600
Professional and Business Services 19,600 20,200 21,300 22,500 24,100 Educational and Health Services 38,800 39,100 37,300 38,000 39,800 Leisure and Hospitality 22,000 22,600 18,500 21,300 24,500 Other Services 7,600 7,800 6,800 7,300 8,000
Federal Government 3,100 3,200 3,300 3,100 3,100
State Government 6,700 6,800 6,800 6,000 5,500
Local Government 33,700 34,900 33,000 32,900 34,100
Total, All Industries (3) 257,000 262,500 257,800 269,900 286,900

(1) Labor force data is by place of residence; includes self -employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self -employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.

Source: State of California Employment Development Department.

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Largest Employers

The following table lists the major employers within the County, listed in alphabetical order without regard to the number of employees, as of August 2023.

SAN JOAQUIN COUNTY
Major Employers
As of August 2023

Employer Name Location Industry
A Sambado & Sons Inc Linden Nuts-Edible
Adventist Health Lodi Memorial Lodi Hospitals
Amazon Fulfillment Ctr Stockton Mail Order Fulfillment Service Ashley Lane LP Stockton Real Estate
Blue Shield of California Lodi Insurance
Dameron Hospital Stockton Hospitals
Deuel Vocational Instn Fire Tracy Fire Departments
Foster Care Svc Stockton Government Offices-County
Leprino Foods Co Tracy Cheese Processors (mfrs)
Lodi Health Home Health Agency Lodi Home Health Service NA Chaderjian Youth Stockton State Govt-Correctional Institutions Pacific Coast Producers Lodi Canning (mfrs)
Prima Frutta Packing Inc Linden Fruit & Produce Packers Safeway Distribution Ctr Tracy Distribution Centers (whls) San Joaquin County CA Pubc Stockton Government Offices-County San Joaquin County Human Svc Stockton Government Offices-County San Joaquin County Sch Stockton School Districts
San Joaquin General Hospital French Camp Hospitals
San Joaquin Sheriff's Office French Camp Government Offices-County Sjgov Stockton Government Offices-County
St Joseph's Regional Health Stockton Health Services
Stockton Police Dept Stockton Police Departments
Stockton Unified School Dist Stockton School Districts
Walmart Supercenter Stockton Department Stores
Waste Management-Lodi Transfer Lodi Consultants-Business NEC

Source: State of California Employment Development Department, extracted from The America’s Labor Market Information System ( ALMIS) Employer Database, 2023 2nd Edition.

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The following table lists the twenty -five principal employers within the City, by number of employees, as of June 30, 2022.

CITY OF TRACY
Principal Employers
As of June 30, 2022

Employer Name Number of Employees
Amazon.com Services LLC 4,332
FedEx Ground Package System, Inc 1,607
Amazon.com Services LLC 1,297
Amazon.com Services LLC 1,043
Taylor Farms Pacific Inc 748
The Home Depot #5641 700
Medline Industries LP 668
Walmart #2025 410
Leprino Foods 341
DHL Supply Chain 293
Costco Wholesale #658 252
DHL Supply Chain 226
The Home Depot #1020 225
Pacific Medical Inc 208
Crate & Barrel 201
International Paper 192
Texas Roadhouse 171
Target Stores T738 163
Zinus Inc 155
Glassfab Tempering 145
The Permanente Medical 145
Winco Foods #103 140
Restoration Hardware #903 134
Y R C 131
Crate & Barrel 129

Source: City of Tracy Annual Comprehensive Financial Report for fiscal year ended June 30, 2022.

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Commercial Activity

Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables.

Total taxable sales during the first quarter of calendar year 2023 in the City were $1,309,475,633, a 9.04% decrease over the total taxable sales of $1,439,686,491 reported during the first quarter of calendar year 2022.

CITY OF TRACY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets

Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions

2018 1,192 $1,489,764 1,921 $2,319,543
2019 1,224 1,473,584 2,000 2,694,120
2020 1,395 1,479,810 2,284 2,854,012
2021 1,238 4,160,817 2,082 5,868,567
2022 1,251 4,289,057 2,128 6,088,638

Source: State Department of Tax and Fee Administration.

Total taxable sales during the first quarter of calendar year 2023 in the County were $4,998,299,326, a 8.78% decrease over the total taxable sales of $5,479,470,571 reported during the first quarter of calendar year 2022.

SAN JOAQUIN COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets

Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions

2018 9,660 $8,855,169 15,437 $13,457,721
2019 9,978 9,073,238 16,144 14,383,854
2020 11,188 10,215,896 18,358 15,752,225
2021 10,642 15,153,915 17,665 22,306,576
2022 10,884 15,321,466 18,100 23,424,941

Source: State Department of Tax and Fee Administration.

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Effective Buying Income

“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after -tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner -occupants of non- farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.

According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”

The following table summarizes the median household effective buying income for the City, the County, the State and the United States for the period 2019 through 2023.

CITY OF TRACY AND SAN JOAQUIN COUNTY
Median Household Effective Buying Income
2019 through 2023

2019 2020 2021 2022 2023

City of Tracy $73,172 $76,142 $78,492 $89,938 $90,240
San Joaquin County 55,534 58,141 59,914 68,971 68,912
California 62,637 65,870 67,956 77,058 77,175
United States 52,841 55,303 56,790 64,448 65,326

Source: Claritas, LLC.

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Building Activity

The tables below summarize building activity in the City and the County for the past five available years.

CITY OF TRACY
Building Permit Activity
For Calendar Years 2018 through 2022
(Dollars in Thousands)

2018 2019 2020 2021 2022
Permit Valuation
New Single-family $214,928.9 $223,795.2 $239,658.3 $244,205.8 $213,664.4 New Multi-family 84,832.3 0.0 0.0 945.7 3,015.3
Res. Alterations/Additions 6,058.5 9,178.8 4,504.7 4,558.9 5,413.8 Total Residential $305,819.7 $232,974.0 $244,163.0 $249,710.4 $222,093.5

New Commercial $331,633.7 $189,205.1 $168,307.4 $105,916.9 $122,513.0 New Industrial 74,814.4 13,881.6 526,301.0 60.8 0.0
New Other 8,265.5 7,006.5 4,828.5 9,099.3 13,843.7
Com. Alterations/Additions 60,479.7 60,676.8 62,904.6 80,618.6 84,684.1 Total Nonresidential $475,193.3 $270,770.0 $762,341.5 $195,695.6 $221,040.8

New Dwelling Units
Single Family 534 551 692 670 502
Multiple Family 507 0 0 2 23
TOTAL 1,041 551 692 672 525

Source: Construction Industry Research Board, Building Permit Summary.

SAN JOAQUIN COUNTY
Building Permit Activity
For Calendar Years 2018 through 2022
(Dollars in Thousands)

2018 2019 2020 2021 2022
Permit Valuation
New Single-family $883,071.1 $843,700.9 $870,859.6 $1,179,358.0 $1,281,631.4 New Multi-family 99,601.4 57,271.1 38,411.8 69,775.2 88,457.7 Res. Alterations/Additions 95,073.4 98,681.9 40,144.4 108,647.1 182,338.5 Total Residential $1,077,745.9 $999,654.0 $949,415.8 $1,357,780.3 $1,552,427.6

New Commercial $498,359.0 $380,383.3 $255,761.2 $272,617.0 $641,696.7 New Industrial 240,073.7 120,003.8 534,199.5 43,401.3 249,724.2 New Other 31,904.4 61,991.7 33,112.3 58,264.9 107,863.0 Com. Alterations/Additions 249,142.4 363,840.9 135,285.4 272,064.7 450,649.8 Total Nonresidential $1,019,479.5 $926,219.7 $958,358.4 $646,347.9 $1,449,933.7

New Dwelling Units
Single Family 2,765 2,564 2,843 3,665 3,168
Multiple Family 293 461 245 178 338
TOTAL 2,594 3,025 3,088 3,843 3,506

Source: Construction Industry Research Board, Building Permit Summary.

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APPENDIX B

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES
FOR IMPROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1
(TRACY HILLS)

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APPENDIX C

APPRAISAL REPORT AND UPDATE

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APPENDIX D

MARKET ABSORPTION STUDY

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APPENDIX E

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

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APPENDIX F

FORM OF OPINION OF BOND COUNSEL

_________, 2023

City Council
City of Tracy
333 Civic Center Plaza
Tracy, California 95376

OPINION: $_______ I
mprovement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) Special Tax Bonds, Series 2023

Members of the Council:

We have acted as bond counsel to the City of Tracy (the “City”) in connection with the issuance by the City of the special tax bonds captioned above, dated as of the date first written above (the "Bonds").

In such capacity, we have examined such law and such certified proceedings, certifications, opinions and other documents as we have deemed necessary to render this opinion.

The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being sections 53311 et seq. of the California Government Code (the “Act”), a resolution of the City Council adopted on _______, 2023 (the “Resolution”), and 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”).

Under the Fiscal Agent Agreement, the City has pledged certain revenues (“Special Tax Revenues”) for the payment of principal, premium (if any) and interest on the Bonds when due.

Regarding questions of fact material to our opinion, we have relied on representations of the City contained in the Fiscal Agent Agreement, and on the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.

Regarding certain questions of law material to our opinion, we have assumed the correctness of certain legal conclusions contained in the written opinions of the City Attorney, and others, without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The City is a duly created and validly existing municipal corporation and general law city with the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein, and issue the Bonds.

2. The Fiscal Agent Agreement has been duly authorized, executed and delivered by the City, and constitutes a valid and binding obligation of the City, enforceable against the City.

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3. The Fiscal Agent Agreement creates a valid lien on the Special Tax Revenues and other funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with other bonds (if any) issued or to be issued in accordance with the Fiscal Agent Agreement.

4. The Bonds have been duly authorized and executed by the City and are valid and binding limited obligations of the City, payable solely from the Special Tax Revenues and other funds provided therefor in the Fiscal Agent Agreement.

5. 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. It should be noted however that interest on the Bonds may be subject to the corporate alternative minimum tax. The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The City has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the Bonds.

6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.

We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Fiscal Agent Agreement are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity.

This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a par ticular result, and are not binding on the Internal Revenue Service or the courts; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations, covenants and opinions referenced above. Our engagement with respect to this matter has terminated as of the date hereof.

Respectfully submitted,

A Professional Law Corporation

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APPENDIX G

FORM OF ISSUER CONTINUING DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE

$________
IMPROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1 (TRACY HILLS)
SPECIAL TAX BONDS, SERIES 2023

This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by the City of Tracy (the “City”) in connection with the issuance of the bonds captioned above (the “2023 Bonds”). The 2023 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 hereby covenants and agrees as follows:

Section 1. Purpos e of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2023 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Defin itions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual
Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Annual Report Date” means the date that is nine months after the end of the City ’s fiscal year (currently March 31 based on the City’s fiscal year end of June 30).

“Dissemination Agent” means Goodwin Consulting Group, Inc., or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“District” means the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills).

“Improvement Area No. 2” means Improvement Area No. 2 of the District.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.

“Official Statement” means the final official statement dated ______________, 2023, executed by the District in connection with the issuance of the 2023 Bonds.

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“Participating Underwriter” means Piper Sandler & Co., the original underwriter of the 2023 Bonds required to comply with the Rule in connection with offering of the 2023 Bonds.

“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time.

Section 3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing March 31, 2024, with the report for the 2022-23 fiscal year (provided that such initial Annual Report due March 31, 2024 need consist only of a copy of the Official Statement for the Bonds), provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 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(c).

(b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide a notice to the MSRB, in a timely manner, in an electronic format as prescribed by the MSRB.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the City, file a report with the City and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Annual Reports .

The City ’s Annual Report shall contain or
incorporate by reference the following documents and information:

(a) The C
ity’s audited financial statements for the most recently completed fiscal year, 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, together with the following statement:

THE CITY’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURIT IES EXCHANGE COMMISSION STAFF ’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY, OTHER THAN SPECIAL TAX REVENUES, ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE 2023 BONDS, AND THE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES.

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INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE 2023 BONDS.

If the City ’s audited financial statements are not available by the time the Annual Report is required to be filed, the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) To the extent not included in the audited financial statements, the following information:

(i) Total assessed value (per the San Joaquin County Assessor ’s records) of all parcels currently subject to the Special Tax within Improvement Area No. 2, showing the total secured assessed valuation for all property subject to the Special Tax.

(ii) Tables showing (1) the top 10 Special Tax payers within Improvement Area No. 2 for the current Fiscal Year, including for each Special Tax payer the maximum annual Special Tax, actual Special Tax levy, assessed value and assessed value-to-lien ratio, and (2) assessed value-to-lien ratios for Developed Property owned by individual homeowners in the aggregate (based on assessed values (per the San Joaquin County Assessor ’s records)) , Developed Property owned by developers/merchant builders, and Undeveloped Property (as those terms are defined in the rate and method of apportionment for the District).

(iii) The amount of prepayments of the Special Tax for the prior Fiscal Year.

(iv) A table showing a history of special tax collections and delinquencies within Improvement Area No. 2.

(v) Any change to the County’s Teeter Plan affecting Improvement Area No. 2.

(vi) The principal amount of the 2023 Bonds outstanding and the balance in the 2023 Reserve Fund (along with a statement of the 2023 Reserve Requirement) as of the September 30 next preceding the Annual Report Date, including the issuance date and principal amount of any additional bonds or obligations issued under the Fiscal Agent Agreement on a parity with the 2023 Bonds.

(vii) Any changes to the Rate and Method of Apportionment of Special Tax for Improvement Area No. 2.

(c) In addition to any of the information expressly required to be provided under paragraph (b) above, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

(d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB ’s Internet web site or filed with the Securities and Exchange Commission. The District shall clearly identify each such other document so included by reference.

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Section 5. Reporting of Listed Events.

(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2023 Bonds:

(1) Principal and interest payment delinquencies.

(2) Non-payment related defaults, if material.

(3) Unscheduled draws on debt service reserves reflecting financial difficulties.

(4) Unscheduled draws on credit enhancements reflecting financial difficulties.

(5) Substitution of credit or liquidity providers, or their failure to perform.

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the 2023 Bonds, or other material events affecting the tax status of the 2023 Bonds.

(7) Modifications to rights of security holders, if material.

(8) Bond calls, if material, and tender offers.

(9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities, if material.

(11) Rating changes.

(12) Bankruptcy, insolvency, receivership or similar event of the City.

(13) The consummation of a merger, consolidation, or acquisition involving the City, or the sale of all or substantially all of the assets of the City (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 r elating to any such actions, other than pursuant to its terms, if material.

(14) Appointment of a successor or additional Fiscal Agent or the change of name of the Fiscal Agent, if material.

(15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material.

(16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties.

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(b) Upon the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected bonds under the Fiscal Agent Agreement.

(c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14), and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the 2023 Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event ’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above.

(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City.

(e) For purposes of Section 5(a)(15) and (16), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule.

Section 6. Identifying Information for Filings with the MSRB.

All documents provided to the MSRB
under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Term
ination 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 2023 Bonds. If such termination occurs prior to the final maturity of the 2023 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

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 such Agent, with or without appointing a successor Dissemination Agent.

Section 9. Amend ment; 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:

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(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 2023 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 2023 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 2023 Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the 2023 Bonds.

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

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c).

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. Defaul
t. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the 2023 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 t his Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees

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to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys ’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent ’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Fiscal Agent, the 2023 Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2023 Bonds.

Section 13. Beneficiaries.

This Disclosure Certificate shall inure solely to the benefit of the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the 2023 Bonds, and shall create no rights in any other person or entity.

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

Date:
__________, 2023

CITY OF TRACY

By:

Sara Cowell,
Finance Director

AGREED AND ACCEPTED:

Goodwin Consulting Group, Inc.,
as Dissemination Agent

By:

Name:

Title:

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APPENDIX H

FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE
(Lennar Homes)

$________
IMPROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1 (TRACY HILLS)
SPECIAL TAX BONDS, SERIES 2023

Dated: ______________, 2023

This Continuing Disclosure Certificate (Lennar Homes) (this “Disclosure Certificate”) is executed and delivered by Lennar Homes of California, LLC, a California limited liability company (the “Developer”), in connection with the issuance by the City of Tracy (the “City”) of the bonds captioned above (the “2023 Bonds”). The 2023 Bonds are being issued under a Fiscal Agent Agreement dated as of November 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 Developer covenants and agrees as follows:

Section 1. Pu rpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the holders and beneficial owners of the 2023 Bonds.

Section 2. Defin
itions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Aff
iliate” means any person presently directly (or indirectly through one or more intermediaries) under managerial control of the Developer, and about whom information could be material to potential investors in their investment decision regarding the 2023 Bonds (including without limitation information relevant to the proposed development of the Property or to the Developer’s 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 2023 Bonds, containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner ’s development and financing plans with r espect to the District), whereby such Major Owner agrees to provide semi -annual reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area No. 2 owned by such Major Owner and 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 Developer, with the written consent of the City, and which has filed with the Developer and the City a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.

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“District” means the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills).

“Improvement Area No. 2” means Improvement Area No. 2 of the District.

“Landbank Owner” means AG Essential Housing CA 1, L.P., a Delaware limited partnership, the landbank for the Developer pursuant to the Option Agreement.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

“Major Owner” means, as of any Report Date, a Person that, together with the Person’s Affiliates, owns 185 or more residential lots (or property intended to be subdivided into 185 or more residential lots) in Improvement Area No. 2.

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information.

“Official Statement” means the final Official Statement dated ______________, 2023, executed by the City in connection with the issuance of the 2023 Bonds.

“Option Agreement ” means the Option Agreement dated February 26, 2021, between the Developer and the Landbank Owner (as the assignee of the original party).

“Participating Underwriter” means Piper Sandler & Co., the original underwriter of the 2023 Bonds.

“Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

“Property” means (i) the property owned by the Developer in Improvement Area No. 2 as of the Report Date, (ii) during the term of the Option Agreement, the property owned by the Landbank Owner as of the Report Date, and (iii) the property in Improvement Area No. 2 that the Developer 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.

“Report Date” means (a) September 30 of each year, and (b) March 31 of each year.

“Semi-Annual Report” means any Semi -Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Special Taxes” means the special taxes for facilities levied by the City on the Property.

Section 3. Pr
ovision of Semi-Annual Reports.

(a) The Developer shall, or upon written direction of the Developer the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2024, provide to the MSRB, in an electronic format as prescribed by the MSRB, a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Developer shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Developer). The Developer 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 Developer), Participating Underwriter and the City to the effect that such Semi-Annual

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Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate.

The Dissemination Agent, the Participating Underwriter and the City m ay conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.

(b) If the Dissemination Agent 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 Developer that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Developer 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 Developer does not provide, or cause the Dissemination Agent to provide, a Semi -Annual Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall provide a notice to the MSRB, in an electronic format as prescribed by the MSRB.

(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 Developer (if the Dissemination Agent is other than the Developer), the City and the Participating Underwriter certifying that the Semi -Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Co
ntent of Semi-Annual Reports. The Developer’s Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit A, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Developer 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 Developer shall clearly identify each such other document so included by reference.

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

Section 5. Repo
rting of Significant Events.

(a) So long as the Developer’s obligations under this Disclosure Certificate have not been terminated pursuant to Section 7 herein, the Developer 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 Developer and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Developer;

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(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property prior to the delinquency date, to the extent s uch failure is not promptly cured by the Developer upon discovery thereof;

(iii) filing of a lawsuit against the Developer or, if known, an Affiliate of the Developer, seeking damages which, if successful, could have a material and adverse impact on the Developer’s ability to pay Special Taxes prior to delinquency or to sell or develop the Property;

(iv) material damage to or destruction of any of the improvements on the Property; and

(v) any payment default or other material default by the Developer that continues to exist beyond any applicable notice and cure periods on any loan with respect to the construction of improvements on the Property.

(b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall as soon as possible determine if such event would be material under applicable Federal securities law.

(c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Developer shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the City and the Participating Underwriter.

Section 6. Identifying Information for Filings with the MSRB.

All documents provided to the MSRB
under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Du
ration of Reporting Obligation.

(a) All of the Developer’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following:

(i) upon the legal defeasance, prior redemption or payment in full of all the 2023 Bonds, or

(ii) when the Property is fewer than 185 residential lots (or property that will be subdivided into fewer than 185 residential lots), or

(iii) the date on which the Developer prepays in full all of the Special Taxes attributable to the Property.

The Developer 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 Developer hereunder with respect to the property conveyed to such Major Owner may be assumed by such Major Owner and the Developer’s obligations hereunder with respect to the property conveyed will be terminated. In order to effect such assumption, such Major Owner shall enter into an Assumption Agreement in form and substance equivalent to this Disclosure Certificate or as otherwise satisfactory to the City and the Participating Underwriter. However, a Major Owner shall not be required to enter

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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 2023 Bonds, and under which the property conveyed to such Major Owner will become subject to future Semi-Annual Reports.

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

Section 9. Am endment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):

(a) if
the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, or change in law;

(b) the proposed amendment or waiver either (i) is approved by holders of the 2023 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 2023 Bonds.

Section 10. Addit
ional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Semi- Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer 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. Defaul
t. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Fiscal Agent shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the 2023 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer 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 Developer to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duti
es, 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 Developer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including

H-6
attorneys’ fees) of defending against any claim of liability, but excluding (i) losses, expenses and liabilities due to the Dissemination Agent’s, and its officers, directors, employees, and agents’ negligence or willful misconduct, or failure to perform its duties hereunder, and (ii) losses, expenses and liabilities due to the failure of the City to pay the fees and expenses of the Dissemination Agent. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent ’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Developer, the Fiscal Agent, the 2023 Bond owners, or any other party.

The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2023 Bonds, but shall be assumed by a Major Owner from and after the date of such assumption when property is sold to a Major Owner and such Major Owner enters into an assumption agreement.

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

To the
Issuer: City of Tracy
333 Civic Plaza
Tracy, CA 95376
Email: [email protected]

To the Participating Underwriter: Piper Sandler & Co.
2321 Rosecrans Avenue
El Segundo, California 90245
Email: [email protected]

To the Developer: Lennar Homes of California, LLC
2603 Camino Ramon, Suite 525
San Ramon, California 94583
Attn: Chad Kiltz
Email: [email protected]
[email protected]

Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

Section 14. Bene
ficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Developer (its successors and assigns), the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the 2023 Bonds, and shall create no rights in any other person or entity. All obligations of the Developer hereunder shall be assumed by any legal successor to the obligations of the Developer as a result of a sale, merger, consolidation or other reorganization.

Section 15. Counter
parts. 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.

H-7

LENNAR HOMES OF CALIFORNIA, LLC,
A California limited liability company

By:

Name: ______________________________

Title:

H-8

EXHIBIT A

SEMI-ANNUAL REPORT

[MARCH 31, ____ / SEPTEMBER 30, _____]

$________
IMPROVEMENT AREA NO. 2

OF THE CITY OF TRACY
COMMUNITY FACILITIES DISTRICT NO. 2016-1 (TRACY HILLS)
SPECIAL TAX BONDS, SERIES 2023

This Semi -Annual Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (Lennar Homes) (the “Disclosure Certificate”) dated as of [closing date], 2023, executed by the undersigned (the “Developer”) in connection with the issuance by the City of Tracy (the “City”) of the bonds captioned above (the “2023 Bonds”) for Improvement Area No. 2 (“Improvement Area No. 2”) of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) (the “District”).

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

I. Property Ownership and Development

The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Semi-Annual Report).

A. Description of the Property currently owned by the Developer in Improvement Area No. 2 of the District (the “Property”), in substance and form similar to such information in the Official Statement for the 2023 Bonds:

________________________________________________________________________ ________________________________________________________________________

B. Updated information regarding land development and home construction activities with respect to the Property described in the Official Statement for the 2023 Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

________________________________________________________________________ ________________________________________________________________________

C. Status of building permits and any material changes to the description of land use or development entitlements for the Property described in the Official Statement for the 2023 Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

________________________________________________________________________ ________________________________________________________________________

H-9
D. Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area No. 2 by the Developer or sales of land to other property owners (other than individual homeowners).
________________________________________________________________________ ________________________________________________________________________

II. Legal and Financial Status of Developer

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 Developer or the financial condition and financing plan of the Developer that would materially and adversely interfere with its ability to complete the development plan with respect to the Property described in the Official Statement. To the extent that the ownership of the Developer has changed, describe all material terms of the new ownership structure.

________________________________________________________________________ ________________________________________________________________________

III. Change in Development or Financing Plans

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

IV. Official Statement Updates

Unless such information has previously been included or incorporated by reference in a Semi - Annual Report, describe any other significant changes in the information relating to the Developer or the Property contained in the Official Statement under the headings “THE DISTRICT AND IMPROVEMENT AREA NO. 2 – Environmental Matters”, “PROPERTY OWNERSHIP AND THE DEVELOPMENT – Lennar Homes”, “– Landbank Arrangement”, “– Status of Development” , or “ – Home Construction Financing Plan” that would materially and adversely interfere with the Developer’s ability to develop and sell the Property as described in the Official Statement.
________________________________________________________________________ ________________________________________________________________________

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V. Status of Tax Payments

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

________________________________________________________________________ ________________________________________________________________________

VI. Other Material Information

In addition to any of the information expressly required above, provide such further information, if any, with respect to the Property and the Developer 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 Developer, the undersigned Authorized Representative, based on actual knowledge after reasonable inquiry of employees of Developer and its affiliates, hereby certifies that this Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by the Developer under the Disclosure Certificate.

ANY OTHER STATEMENTS REGARDING THE DEVELOPER, THE DEVELOPMENT OF THE PROPERTY, THE DEVELOPER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE 2023

BONDS, OTHER THAN STATEMENTS MADE BY THE DEVELOPER IN AN OFFICIAL RELEASE, OR

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

THE DEVELOPER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.

Dated:

LENNAR HOMES OF CALIFORNIA, LLC,
A California limited liability company

By:

Name:

Title:

I-1

APPENDIX I

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the 2023 Bonds, payment of principal, interest and other payments on the 2023 Bonds (herein, the “Securities”) to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Securities and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations ca n be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the issuer of the Securities (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Securities (the “Agent”) takes any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Securities, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Securities, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Securities, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”) will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully -registered securities registered in the name of Cede & Co. (DTC’ s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world ’s largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non- U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’ s participants (“Direct Participants”) deposit with DTC.

DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants ’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned 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

I-2
registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC ’s records. The ownership interest of each actual purchaser of each Security ( “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase.

Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

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

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

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

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC ’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date.

The Omnibus Proxy assigns Cede & Co. ’s consenting or voting rights to those Direct Participant s to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

I-3

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

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

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

11. The information in this section concerning DTC and DTC ’s book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

Agenda Version
Attachment B

FISCAL AGENT AGREEMENT
by and be
tween the
CITY

OF TRACY
and
U.S.

BANK TRUST COMPANY, NATIONAL ASSOCIATION
as Fiscal Agent
Dated
as of October 1, 2023
Rel
ating to:
$___________
Improvement Area No. 2 of the
City of Tracy
Community Facilities District No. 2016-1 (Tracy Hills)
Special Tax Bonds, Series 2023
i

TABLE OF CONTENTS

ARTICLE I

AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Agreement ............................................................................................ 2 Section 1.02. Agreement for Benefit of Owners of the Bonds ............................................................... 2 Section 1.03. Definitions ........................................................................................................................ 2

ARTICLE II

THE BONDS
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................................................................................................................ 18 Section 2.05. Execution and Authentication of Bonds ......................................................................... 18 Section 2.06. Transfer or Exchange of Bonds ..................................................................................... 18 Section 2.07. Bond Register ................................................................................................................ 19 Section 2.08. Temporary Bonds .......................................................................................................... 19 Section 2.09. Bonds Mutilated, Lost, Destroyed or Stolen .................................................................. 19 Section 2.10. Book-Entry Only System ................................................................................................ 20

ARTICLE III

ISSUANCE OF BONDS
Section 3.01. Issuance and Delivery of 2023 Bonds ........................................................................... 22 Section 3.02. Pledge of Special Tax Revenues ................................................................................... 22 Section 3.03. Limited Obligation .......................................................................................................... 22 Section 3.04. No Acceleration .............................................................................................................. 22 Section 3.05. Validity of Bonds ............................................................................................................ 23 Section 3.06. Parity Bonds ................................................................................................................... 23

ARTICLE IV

PROCEEDS, FUNDS AND ACCOUNTS
Section 4.01. Application of 2023 Bond Proceeds ............................................................................... 24 Section 4.02. Costs of Issuance Fund ................................................................................................. 24 Section 4.03. 2023 Reserve Fund ....................................................................................................... 25 Section 4.04. Bond Fund...................................................................................................................... 27 Section 4.05. Special Tax Fund ........................................................................................................... 29 Section 4.06. Administrative Expense Fund ........................................................................................ 31 Section 4.07. Improvement Fund ......................................................................................................... 31

ARTICLE V

COVENANTS
Section 5.01. Collection of Special Tax Revenues .............................................................................. 35 Section 5.02. Covenant to Foreclose ................................................................................................... 36 Section 5.03. Punctual Payment .......................................................................................................... 37 Section 5.04. Extension of Time for Payment ...................................................................................... 37 Section 5.05. Against Encumbrances .................................................................................................. 37 Section 5.06. Books and Records ........................................................................................................ 37 Section 5.07. Protection of Security and Rights of Owners ................................................................. 38 Section 5.08. Further Assurances ........................................................................................................ 38 Section 5.09. Private Activity Bond Limitations .................................................................................... 38 Section 5.10. Federal Guarantee Prohibition ....................................................................................... 38 Section 5.11. Rebate Requirement ...................................................................................................... 38 Section 5.12. No Arbitrage ................................................................................................................... 38 Section 5.13. Yield of the 2023 Bonds ................................................................................................. 38 Section 5.14. Maintenance of Tax-Exemption; Record Retention; Compliance with Tax Certificates .................................................................................................................. 39 Section 5.15. Continuing Disclosure .................................................................................................... 39 Section 5.16. Limits on Special Tax Waivers and Bond Tenders ........................................................ 39 ii

Section 5.17. City Bid at Foreclosure Sale .......................................................................................... 39 Section 5.18. Amendment of Rate and Method .................................................................................... 39 Section 5.19. Determination of Required Coverage ............................................................................. 40

ARTICLE VI
INVESTMENTS; LIABILITY OF THE CITY
Section 6.01. Deposit and Investment of Moneys in Funds ................................................................. 41 Section 6.02. Liability of City ................................................................................................................ 42 Section 6.03. Employment of Agents by City ....................................................................................... 43

ARTICLE VII

THE FISCAL AGENT
Section 7.01. The Fiscal Agent ............................................................................................................ 44 Section 7.02. Liability of Fiscal Agent .................................................................................................. 45 Section 7.03. Information; Books and Accounts .................................................................................. 46 Section 7.04. Notice to Fiscal Agent .................................................................................................... 46 Section 7.05. Compensation, Indemnification...................................................................................... 47

ARTICLE VIII

MODIFICATION OR AMENDMENT
Section 8.01. Amendments Permitted ................................................................................................. 49 Section 8.02. Owners’ Meetings .......................................................................................................... 50 Section 8.03. Procedure for Amendment with Written Consent of Owners ......................................... 50 Section 8.04. Disqualified Bonds ......................................................................................................... 50 Section 8.05. Effect of Supplemental Agreement ................................................................................ 51 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments ............................. 51 Section 8.07. Amendatory Endorsement of Bonds .............................................................................. 51

ARTICLE IX

MISCELLANEOUS
Section 9.01. Benefits of Agreement Limited to Parties ...................................................................... 52 Section 9.02. Successor and Predecessor .......................................................................................... 52 Section 9.03. Discharge of Agreement ................................................................................................ 52 Section 9.04. Execution of Documents and Proof of Ownership by Owners ....................................... 53 Section 9.05. Waiver of Personal Liability ............................................................................................ 53 Section 9.06. Notices to and Demands on the City and Fiscal Agent ................................................. 54 Section 9.07. Partial Invalidity .............................................................................................................. 54 Section 9.08. Unclaimed Moneys ........................................................................................................ 54 Section 9.09. Applicable Law ............................................................................................................... 54 Section 9.10. Conflict with Act.............................................................................................................. 54 Section 9.11. Conclusive Evidence of Regularity ................................................................................ 54 Section 9.12. Payment on Business Day ............................................................................................. 55 Section 9.13. State Reporting Requirements....................................................................................... 55 Section 9.14. Counterparts .................................................................................................................. 56

EXHIBIT A: FORM OF 2023 BOND
EXHIBIT B: OFFICER’S CERTIFICATE REQUESTING DISBURSEMENT FROM

IMPROVEMENT FUND
EXHIBIT C: OFFICER’S CERTIFICATE REQUESTING DISBURSEMENT FROM

COSTS OF ISSUANCE FUND
EXHIBIT D: OFFICER’S CERTIFICATE REQUESTING DISBURSEMENT FROM

ADMINISTRATIVE EXPENSE FUND

1 FISCAL AGENT AGREEMENT

THIS FISCAL AGENT AGREEMENT (the “Agreement”) is made, entered into and dated as of October 1, 2023, by and between the CITY OF TRACY, a municipal corporation and general law city organized and existing under the laws of the State of California (the “City”) for and on behalf of the "City of Tracy Community Facilities District No. 2016-1 (Tracy Hills)" (the “CFD”) with respect to its “Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016- 1 (Tracy Hills)" (“Improvement Area No. 2”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America with a corporate trust office located in San Francisco, California, as fiscal agent (the “Fiscal Agent”).

WITNESSETH:

WHEREAS, the City Council of the City has formed the CFD, including Improvement Area No. 2, under the provisions of the Mel lo-Roos Community Facilities Act of 1982, as amended (section 53311 et seq. of the California Government Code) (the “Act”); and

WHEREAS, the City Council, as the legislative body with respect to the CFD, is authorized under the Act to levy special taxes within Improvement Area No. 2 to pay for the costs of facilities and to authorize the issuance of bonds secured by said special taxes under the Act; and

WHEREAS, on ________, 2023, the City Council adopted Resolution No. 2023-____ (the “Resolution”) authorizing the issuance of special tax bonds (the “ 2023 Bonds”) on behalf of the CFD with respect to Improvement Area No. 2; and

WHEREAS, it is in the public interest and for the benefit of the City, the CFD, Improvement Area No. 2 and the persons responsible for the payment of special taxes that the City enter into this Agreement to provide for the issuance of the Bonds (as defined below) hereunder to finance the acquisition and construction of faci lities for the City and to provide for 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, the City has determined that all things necessary to cause the 2023 Bonds, when authenticated by the Fiscal Agent and issued as provided in the Act, the Resolution and this Agreement, to be legal, valid, binding and limited obligations in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Agreement and the creation, authorization, execution and issuance 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:
2 ARTICLE I

AUTHORITY AND DEFINITIONS

Section 1.01. Authority for this Agreement . This Agreement is entered into pursuant to the Act (as herein defined) and the Resolution.

Section 1.02. Agreement for Benefit of Owners of the Bonds. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the City shall be for the equal benefit, protection and security of the Owners of the Bonds. 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.

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.

“Acquisition Agreement” means that certain Mas
ter Acquisition Agreement Relating to:

City of Tracy Community Facilities District No. 2016-1 (Tracy Hills), dated as of July 19, 2016, by and between the City and The Tracy Hills Project Owner, LLC, as assigned pursuant to an Assignment and Assumption Agreement, dated as of May 24, 2023, by and between The Tracy Hills Project Owner, LLC andthe Developer.

“Act” means the Mello- R
oos Community Facilities Act of 1982, as amended, being sections 53311 et seq. of the California Government Code.

“Administrative Expenses” means costs directly related to the administration of the CFD consisting of: the actual costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by a City employee or consultant or both) and the actual costs of collecting the Special Taxes (whether by the County or otherwise); the actual costs of remitting the Special Taxes to the Fiscal Agent; actual costs of the Fiscal Agent (including its legal counsel) in the discharge of its duties under this Agreement; the actual costs of the City or its designee of complying with the disclosure provisions of the Act and this Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Owners of the Bonds and the Original Purchaser; costs of the dissemination agent, whether for the City or another party that has undertaken to provide continuing disclosure; the actual costs of the City or its designee related to an appeal of the Special Tax; any amounts required to be rebated to the federal government; an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative overhead related thereto . Administrative Expenses shall also include amounts advanced by the City for any administrative purpose of the CFD, including costs related to prepayments of Special Taxes, recordings related to such prepayments and satisfaction of Special Taxes, amounts advanced to ensure maintenance of tax exemption, and the costs of prosecuting foreclosure of delinquent Special Taxes, which amounts advanced are subject to reimbursement from other sources, including proceeds of foreclosure. 3 “Administrative Expense Fund” means the fund designated the “Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) Administrative Expense Fund" established and administered under Section 4.06.

“Agreement”
means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof.

“Annexation Resolution” means Resolution No. 2022
-130, adopted by the City Council on
September 6, 2022, approving the annexation of property to the CFD and designating the property as Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016- 1 (Tracy Hills).

“Annual Debt Service” means, for each Bond Year, the sum of (i) the interest due on th e Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year).

“Auditor” means the auditor/controller of the County, or such other official at the County who is responsible for preparing property tax bills.

“Authorized Officer” means the May or, City Manager, Assistant City Manager, Finance Director, City Clerk or any other officer or employee authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer.

“Bond" or "
Bonds ” means the 2023 Bonds and, if the context requires, any Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement.

“Bond Counsel” means Jones Hall, A Professional Law Corporation or any other 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 designated the “Improvement Area No. 2 of the City of Tracy, Community Facilities District No. 2016-1 (Tracy Hills) Special Tax Bonds, Bond Fund” established and administered under Section 4.04.

“Bond Proceeds Account” means the account of that name within the Improvement Fund to be established and administered by the Fiscal Agent under Section 4.07.

“Bond Year”
means the one- year period beginning on September 2nd in each year and ending on September 1 in the following year, except that the first Bond Year shall begin on the Closing Date and shall end on September 1, 2024.

“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the state in which the Fiscal Agent has its principal corporate trust office are authorized or obligated by law or executive order to be closed.

“CDIAC” means the Cal
ifornia Debt and Investment Advisory Commission of the Office of the State Treasurer, or any successor agency, board or commission.

4 “CFD” means the "City of Tracy Community Facilities District No. 2016-1 (Tracy Hills)" formed under the Resolution of Formation.

“City” means the City of Tracy, and any successor thereto.

“City Attorney ”
means any attorney or firm of attorneys employed by the City in the capacity of general counsel.

“City Council” means the City Council of the City, in its capac ity as the legislative body of
the CFD.

“Closing Date”
means the date upon which there is a physical delivery of the applicable series of Bonds in exchange for the amount representing the purchase price of such Bonds by the Original Purchaser.

“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate executed by the City and dated the date of issuance and delivery of the 2023 Bonds, as originally executed 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, delivery and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, appraisal costs, filing and recording fees, fees and expenses of counsel to the City, initial fees and charges of the Fiscal Agent including its first annual administration fees and its legal fees and charges, including the allocated costs of in- house attorneys, expenses incurred by the City in connection with the issuance of the Bonds, Bond (underwriter’s) discount, legal fees and charges, including bond counsel, and counsel to any financial consultant, financial consultant’s fees, charges for execution, 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 designated the “Improvement Area No. 2 of the
City of Tracy, Community Facilities District No. 2016-1 (Tracy Hills) Special Tax Bonds, Costs of Issuance Fund” established and administered under Section 4.02.

“County” means the County of San Joaquin, California.

“Dated Date” means __
______, 2023, the dated date of the 2023 Bonds, which is the Closing Date for the 2023 Bonds.

“Debt Service ”
means the scheduled amount of interest and amortization of principal payable on the 2023 Bonds under Sections 2.02 and 2.03 and the scheduled amount of interest and amortization of principal payable on any Parity Bonds during the period of computation, in each case excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period.

“Depository” means (a) initially, DTC, and (b) any other Securities Depository acting as Depository for book-entry under Section 2.10.

“Developer” means Lennar Homes of California, LLC, a California limited liability company, and its successors and assigns.

5 “DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.

“Fair Market Value” means with respect to the Bonds the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security —State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a 10% beneficial interest if the return paid by such fund is without regard to the source of the investment.

“Federal Securities” means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; and (b) any obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.

“Finance Director” means the official of th
e City, or such official's designee, who acts in
the capacity as the chief financial officer of the City, including the controller or other financial officer.

“Fiscal Agent” means U.S. Bank Trust Company, National Association , the Fiscal Agent appointed by the City and 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.

“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 Area No. 2”
means “Improvement Area No. 2 of the City of Tracy
Community Facilities District No. 2016-1 (Tracy Hills)” designated by the City Council pursuant to the Annexation Resolution.

“Improvement Fund” means the fund designated “Improvement Area No. 2 of the City of
Tracy, Community Facilities District No. 2016-1 (Tracy Hills), Special Tax Bonds, Improvement Fund,” established under Section 4.07.

“Independent Financial Consultant ” means any consultant or firm of such consultants appointed by the City or the Treasurer, and who, or each of whom:

(i)
is judged by the Treasurer to have experience in matters relating to the issuance and/or administration of bonds under the Act;
6 (ii) is in fact independent and not under the domination of the City;

(iii) does not have any substantial interest, direct or indirect, with or in the City, or any owner of real property in Improvement Area No. 2, or any real property in Improvement Area No. 2; and

(iv) is not connected with the City as an officer or employee of the City, but who may be regularly retained to make reports to the City.

“Interest Payment Date”
means each March 1 and September 1 of every calendar year, commencing with March 1, 2024.

“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” means Moody’s Investors Service, Inc., and its successors.

“MSRB” m eans the Municipal Securities Rulemaking Board, through its EMMA system, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent.

“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 Council of the City levying the Special Taxes, including but not limited to Ordinance No. 1260 introduced by the City Council on August 21, 2018, and adopted by the City Council on September 4, 2018.

“Original Purchaser” means Piper Sandler & Co., the first purchaser of the 2023 Bonds from the City.

“Other District Bonds” has the meaning given that term in Section 3.06.

“Outstanding”
when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City under this Agreement or any Supplemental Agreement.

“Owner” or “Bondowner”
means any person who shall be the registered owner of any Outstanding Bond.

“Parity Bonds” means additional bonds issued and payable on a parity with the Bonds under Section 3.06.

“Parity Reserve Requirement” means the amount as of any date of calculation equal to the least of (a) Maximum Annual Debt Service on any Parity Bonds that are covered by t he reserve account for the Parity Bonds , (b) 125% of average Annual Debt Service on any Parity 7 Bonds that are covered by the reserve account for the Parity Bonds , and (c) 10% of the outstanding principal of any Parity Bonds that are covered by the reserve account for the Parity Bonds; provided, however:

(A) that with respect to the calculation of clause (c), the issue price of any Parity Bonds that are covered by the reserve account for the Parity Bonds excluding accrued interest shall be used rather than the outstanding principal amount, if (i) the net original issue discount or premium of any such Parity Bonds was less than 98% or more than 102% of the original principal amount of any such Parity Bonds and (ii) using the issue price would produce a lower result than using the outstanding principal amount;

(B) that in no event shall the amount calculated hereunder exceed the amount on deposit in the reserve account for the Parity Bonds on the date of issuance of the most recently issued series of Parity Bonds that are covered by the reserve account for the Parity Bonds except in connection with any increase associated with the issuance of Parity Bonds that will be covered by the reserve account for the Parity Bonds; and

(C) that in no event shall the amount required to be deposited into the reserve account for the Parity Bonds in connection with the issuance of a series of Parity Bonds exceed the maximum amount under the Tax Code that can be financed with tax -exempt bonds and invested an unrestricted yield.

“Participating Underwriter” shall have the meaning ascribed thereto in the Continuing Disclosure Certificate.

“Permitted Investments” means the following, but only to the extent that the same are acquired at Fair Market Value:

(a) Federal
Securities.

(b) any of the following direct or indirect obligations of the following agencies of the United States of America: (i) direct obligations of the Export-Import Bank; (ii) certificates of beneficial ownership issued by the Farmers Home Administration; (iii) participation certificates issued by the General Services Administration; (iv) mortgage- backed bonds or pass -through obligations issued and guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Housing Administration; (v) project notes issued by the United States Department of Housing and Urban Development; and (vi) public housing notes and bonds guaranteed by the United States of America;

(c) interest-bearing demand or time deposits (including certificates of deposit), including those placed by a third party pursuant to a separate agreement between the City and the Fiscal Agent, banking deposit products, trust funds, trust accounts, overnight bank deposits, interest bearing deposits, interest bearing money market accounts or deposit accounts in federal or state chartered savings and loan associations or in federal or State of California banks (including the Fiscal Agent, its parent, if any, and affiliates), provided that (i) the unsecured short -term obligations of such commercial bank or savings and loan association shall be rated in the highest short-term rating category by any Rating Agency, or (ii) such demand 8 or time deposits shall be fully insured by the Federal Deposit Insurance Corporation;

(d) commercial paper rated at the time of purchase in the highest short - term rating category by any Rating Agency, issued by corporations which are organized and operating within the United States of America, and which matures not more than 180 days following the date of investment therein;

(e) bankers acceptances, consisting of bills of exchange or time drafts drawn on and accepted by a commercial bank, including its parent (if any), affiliates and subsidiaries, whose short-term obligations are rated in the highest short-term rating category by any Rating Agency, or whose long-term obligations are rated A or better by any Rating Agency, which mature not more than 270 days following the date of investment therein;

(f) obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by any Rating Agency, or (b) fully secured as to the payment of principal and interest by Federal Securities;

(g) obligations issued by any corporation organized and operating within the United States of America having assets in excess of $500,000,000, which obligations are rated A or better by any Rating Agency;

(h) money market mutual funds (including money market funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory, transfer agency, custodial or other management services for which it receives and retains a fee for such services to the fund) which invest in Federal Securities or which are rated in the highest short -term rating category by any Rating Agency including those funds for which the Fiscal Agent or an affiliate receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise; and

(i) any investment agreement representing general unsecured obligations of a financial institution rated A or better by any Rating Agency, by the terms of which the Fiscal Agent is permitted to withdraw all amounts invested therein in the event any such rating falls below A.

(j) the Local Agency Investment Fund established pursuant to Section 16429.1 of the Government Code of the State of California, provided, however, that the Fiscal Agent shall be permitted to make investments and withdrawals in its own name and the Fiscal Agent may restrict investments in the such fund if necessary to keep moneys available for the purposes of this Fiscal Agent Agreement.

(k) the California Asset Management Program.

“Principal Office ”
means such corporate trust office of the Fiscal Agent as may be designated from time to time by written notice from the Fiscal Agent to the City, initially being at the address set forth in Section 9.06, or such other office designated by the Fiscal Agent from time to time.
9 “Proceeds” when used with reference to the Bonds, means the face amount of the Bonds, plus any accrued interest and premium, less any original issue and/or underwriter’s discount.

“Project” means those items described as the “Facilities” in the Resolution of Formation.

"Qualified Reserve Ac count Credit Instrument" means an irrevocable standby or direct- pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Fiscal Agent, provided that all of the following requirements are met at the time of acceptance thereof by the Fiscal Agent: (a) in the case of a commercial bank, the long-term credit rating of such bank at the time of delivery of the irrevocable standby or direct- pay letter of credit is at least "A" from S&P or "A" from Moody’s and, in the c ase of an insurance company, the claims paying ability of such insurance company at the time of delivery of the insurance policy or surety bond is at least "A" from S&P, or "A" from Moody’s or, if not rated by S&P or Moody’s but is rated by A.M. Best & Company, is rated at the time of delivery in the highest rating category by A.M. Best & Company; (b) such letter of credit, insurance policy or surety bond has a term of at least 12 months; (c) such letter of credit or surety bond has a stated amount at least equal to the portion of the 2023 Reserve Requirement with respect to which funds are proposed to be released; and (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit, insurance policy or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Bond Fund for the purpose of making payments with respect to the 2023 Bonds and any 2023 Related Parity Bonds.

“Rate and Method” means the Rate and Method of Apportionment of Special Taxes for Improvement Area No. 2 set forth in the Annexation Resolution.

“Record Date” means the fifteenth day of the calendar month next preceding the applicable Interest Payment Date, whether or not such day is a Business Day.

“Refunding Bonds” means bonds issued by th
e City for the CFD with respect to
Improvement Area No. 2, the net proceeds of which are used to refund all or a portion of the then- Outstanding Bonds and for other lawful purposes; provided that the principal and interest on the Refunding Bonds to their final maturity date is less than the principal and interest on the Bonds being refunded to their final maturity date, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded.

“Regulations”
means temporary and permanent regulations promulgated under the Tax Code.

“Remainder Taxes” means the Special Taxes available for disbursement pursuant to Section 4.05(B)(iii).

“Remainder Taxes Account” means the account of that name within the Improvement Fund to be established and administered by the Fiscal Agent under Section 4.07.

“Remainder Taxes Period” means the period through and including the date that is the earlier of (i) the end of the 20th Fiscal Year during which Special Taxes have been levied on the property in Improvement Area No. 2 and (ii) the date the City has fully satisfied its reimbursement obligations under the Acquisition Agreement.

10 “Resolution” or “Resolution of Issuance” has the meaning given that term in the recitals hereof.

“Resolution of Change” means Resolution No. 2018-169, adop ted by the City Council on August 21, 2018, confirming certain changes to the proceedings for the CFD.

“Resolution of Formation” means Resolution No. 2016-157 , adopted by the City Council on July 19, 2016, forming the CFD, as amended by the Resolution of Change.

“Resolution of Intention” means Resolution No. 2016 -111 adopted by the City Council on June 7, 2016, indicating the intention of the City to form the CFD.

“Resolution of Necessity” means Resolution No. 2016
-158 adopted by the City Council on
July 19, 2016, as amended by the Resolution of Change.

“S&P” means S&P Global, a division of McGraw-Hill, and its successors and assigns.

“Securities Depositories” means DTC 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.

“Set-Aside
Amount” means the amount of $6,000,000 of the Proceeds of the 2023 Bonds deposited in the Bond Proceeds Account on the Closing Date.

“Special Tax Fund” means the special fund designated “Improvement Area No. 2 of the City of Tracy , Community Facilities District No. 2016-1 ( Tracy Hills ), Special Tax Fund” established and administered under Section 4.05.

“Special Tax Prepayments” means the proceeds of any Special Tax prepayments received by the City , as calculated pursuant to the Rate and Method, less any administrative fees or penalties collected as part of any such prepayment.

“Special Tax Prepayments Account” means the account by that name established within the Bond Fund under Section 4.04(A).

“Special Tax Revenues”
means the proceeds of the Special Taxes received by the City, including any scheduled payments thereof and any Special Tax Prepayments, interest thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon, but shall not include any interest in excess of the interest due on the Bonds or any penalties collected in connection with any such foreclosure.

“Special Taxes ”
means the Facilities Special Tax levied by the City Council within Improvement Area No. 2 under the Act, the Rate and Method, the Ordinance and this Agreement.

“State” means the State of California.

“Supplemental Agreement” means an agreement the execution of which is authorized by a resolution which has been duly adopted by the City under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that such agreement is specifically authorized hereunder.
11 “Tax Code” means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code.

“Tax Consultant” means an independent financial or tax consultant retained by th e City for
the purpose of computing the Special Taxes.

“Term Bonds” means the (i) 2023 Bond s maturing on September 1, 202__, (ii) the 2023 Bonds maturing on September 1, 20__, (iii) the 2023 Bonds maturing on September 1, 20__, (iv) the 2023 Bonds maturing on September 1, 20__ and (v) any Bonds designated as term bonds in a Supplemental Agreement.

“2023 Bonds”
means the Bonds so designated and authorized to be issued under Section

2.01 hereof.

“2023 Related Parity Bonds” means any series of Parity Bonds for which (i) the Proceeds are deposited into the 2023 Reserve Fund so that the balance therein is equal to the 2023 Reserve Requirement following issuance of such Parity Bonds and (ii) the related Supplemental Agreement specifies that the 2023 Reserve Fund shall act as a reserve for the payment of the principal of, and interest and any premium on, such series of Parity Bonds.

“2023 Reserve Fund” means the fund designated the “Improvement Area No. 2 of the City of Tracy, Community Facilities District No. 2016-1 ( Tracy Hills), Special Tax Bonds, Reserve Fund” established and administered under Section 4.03.

“2023 Reserve R equirement” means the amount as of any date of calculation equal to the least of (a) Maximum Annual Debt Service on the 2023 Bonds and 2023 Related Parity Bonds, if any, (b) 125% of average Annual Debt Service on the 2023 Bonds and 2023 Related Parity Bonds, if any and (c) 10% of the original principal of the 2023 Bonds and 2023 Related Parity Bonds, if any; provided, however:

(A) th
at with respect to the calculation of clause (c), the issue price of the 2023 Bonds or any 2023 Related Parity Bonds excluding accrued interest shall be used rather than the original principal amount, if (i) the net original issue discount or premium of the 2023 Bonds or any 2023 Related Parity Bonds was less than 98% or more than 102% of the original principal amount of the 2023 Bonds or any 2023 Related Parity Bonds and (ii) using the issue price would produce a lower result than using the original principal amount;

(B) that in no event shall the amount calculated hereunder exceed the amount on deposit in the 2023 Reserve Fund on the date of issuance of the 2023 Bonds (if they are the only Bonds covered by the 2023 Reserve Fund) or the most recently issued series of 2023 Related Parity Bonds (if any 2023 Related Parity Bonds are covered by the 2023 Reserve Fund) except in connection with any increase associated w ith the iss uance of 2023 Related Parity Bonds; and

(C) that in no event shall the amount required to be deposited into the 2023 Reserve Fund in connection with the issuance of a series of 2023 Related Parity Bonds 12 exceed the maximum amount under the Tax Code that can be financed with tax -exempt bonds and invested at an unrestricted yield.

13 ARTICLE II

THE BONDS

Section 2.01. Principal Amount; Designation. Bonds in the aggregate principal amount of $50,000,000 are hereby authorized to be issued by the City for the CFD with respect to Improvement Area No. 2 under and subject to the terms of the Act, the Annexation Resolution, the Resolution, this Agreement and other applicable laws of the State of California. For the avoidance of doubt, Refunding Bonds shall not count against the limit set forth in the previous sentence.

The 2023 Bonds shall be designated as the “Improvement Area No. 2 of the City of Tracy Community Facilities District No. 2016-1 (Tracy Hills) Special Tax Bonds, Series 2023,” and shall be in the initial principal amount of $_________.

Section 2.02. Terms of the 2023 Bonds.

(A) Form; Denominations. The 2023 Bonds shall be issued as fully registered Bonds without coupons. The 2023 Bonds shall be lettered and numbered in a customary manner as determined by the City. The 2023 Bonds shall be issued in the denominations of $5,000 or any integral multiple of $5,000 in excess thereof.

(B) Date of 2023 Bonds. The 2023 Bonds shall be dated the Closing Date.

(C) CUSIP Identification Numbers. “CUSIP” identification numbers may, at the election of the Original Purchas er of the Bonds, be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice.

(D) Maturities; Interest Rates. The 2023 Bonds shall mature and become payable on each September 1, and shall bear interest at the rates per annum indicated in the below table.

Maturity
(September 1)
Principal
Amount
Interest
Rate

* Term Bond

(E) Interest. The 2023 Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest on all Bonds 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

14 (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or

(ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or

(iii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Dated Date;

provided, however, that if at the time of authentication of a 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.

(F) Method of Payment. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption), is payable on the applicable Interest Payment Date by check of the Fiscal Agent mailed by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by wire transfer to an account located in the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds delivered to the Fiscal Agent prior to the applicable Record Date, which shall continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner.

The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America upon surrender of the Bonds at the Principal Office of the Fiscal Agent. All Bonds paid by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds and, upon request of the City, issue a certificate of destruction of such Bonds to the City.

Section 2.03. Redemption.

(A) Redemption Provisions.

(i) Optional Redemption. The 2023 Bonds maturing on or after September 1, 20__ are subject to optional redemption as directed by the City, from sources of funds other than prepayments of Special Taxes, prior to their stated maturity on any date on or after September 1, 20__, as a whole or in part, at a redemption price (expressed as a percentage of the principal amount of the 2023 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:

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

(ii) Mandatory Sinking Fund Redemption. The Term Bond maturing on September 1, 20__, is subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the 15 principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts all as set forth in the following table:

Sinking Fund
Redemption Date
(September 1)

Sinking Fund
Payments
20__ $
20__
20__ (maturity)

The Term Bond maturing on September 1, 20__, is subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts all as set forth in the following table:

Sinking Fund
Redemption Date
(September 1)

Sinking Fund
Payments
20__ $
20__
20__
20__
20__ (maturity)

The Term Bond maturing on September 1, 20__, is subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts all as set forth in the following table:

Sinking Fund
Redemption Date
(September 1)

Sinking Fund
Payments
20__ $
20__
20__
20__
20__ (maturity)

The Term Bond maturing on September 1, 20__, is subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redemption date, without premium, in the aggregate respective principal amounts all as set forth in the following table:

16 Sinking Fund
Redemption Date
(September 1)

Sinking Fund
Payments
20__ $
20__
20__
20__
20__ (maturity)

The Term Bond maturing on September 1, 20__, is subject to mandatory redemption in part by lot, from sinking fund payments made by the City from the Bond Fund, at a redemption price equal to the principal amount thereof to be redeemed, plus accrued interest to the redem ption date, without premium, in the aggregate respective principal amounts all as set forth in the following table:

Sinking Fund
Redemption Date
(September 1)

Sinking Fund
Payments
20__ $
20__
20__
20__
20__ (maturity)

Provided, however, if some but not all of the Term Bonds of a given maturity have been redeemed under subsection (i) above or subsection (iii) below, the total amount of all future Sinking Fund Payments relating to such maturity shall be reduced by the aggregate principal amount of Term Bonds of such maturity so redeemed, to be allocated among such Sinking Fund Payments on a pro rata basis in integral multiples of $5,000 as determined by the City, notice of which shall be given by the City to the Fiscal Agent and the notice shall include a revised sinking fund schedule.

(iii) Redemption from Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the 2023 Reserve Fund pursuant to Section 4.03(F) shall be used to redeem 2023 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), among series and maturities so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2023 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption:

Redemption Dates
Redemption
Price
Any Interest Payment Date on or before March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102
September 1, 20__ and March 1, 20__ 101
September 1, 20__ and any Interest Payment Date thereafter 100

(B) Notice to Fiscal Agent. The City shall give the Fiscal Agent written notice of its intention to redeem Bonds under subsection (A)(i) and (A)(iii) not less than 45 days prior to the 17 applicable redemption date or such lesser number of days as shall be acceptable to the Fiscal Agent.

(C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section

2.03(A), moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2023 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 2023 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2023 Bonds were to be redeemed in accordance with this Agreement.

(D) Redemption Procedure by Fiscal Agent.

(i) Notices. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, or posted, at least twenty (20) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; 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. In addition, the Fiscal Agent shall file each notice of redemption with the MSRB through its EMMA system.

(ii) Contents of Notices. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption shall state as to any Bond called in part the principal amount thereof to be redeemed, and 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 mailing any such redemption notice and any expenses incurred by the Fiscal Agent in connection therewith shall be paid by the City.

Any redemption notice may be conditioned upon the receipt of moneys by the City sufficient to cause such redemption. The City has the right to rescind any notice of the optional redemption of Bonds by written notice to the Fiscal Agent on or prior to the date fixed for redemption. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute a default under this Agreement. The City and the Fiscal Agent have no liability to the Owners or any other party related to or arising from such rescission of redemption.

The Fiscal Agent shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section.

(iii) Selection of Bonds for Redemption. Whenever provision is made in this Agreement for the redemption of less than all of the Bonds of any maturity or any given portion thereof, the Fiscal Agent shall select the Bonds to be redeemed by lot in any manner which the Fiscal Agent in its sole discretion deems appropriate.

(iv) New Bonds. Upon surrender of Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at 18 the expense of the Cit y, a new Bond or Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds of such registered Owner.

(E) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the Bonds so called for redemption shall have been deposited in the Bond Fund, such Bonds so called shall cease to be entitled to any benefit under this Agr eement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in the notice of redemption. All Bonds redeemed and purchased by the Fiscal Agent under this Section 2.03 shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds in accordance with the Fiscal Agent’s retention policy then in effect.

Section 2.04. Form of Bonds . The 2023 Bonds, the Fiscal Agent’s certificate of authentication and the assignment, to appear thereon, shall be substantially in the forms, respectively, 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, the Resolution and the Act.

Section 2.05. Execution and Authentication of Bonds.

(A) Execution. The Bonds shall be executed on behalf of the City by the manual or facsimile signatures of its Mayor and its City Clerk who are in office on the date of execution 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 Bonds to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the Owner. Any Bond may be signed and attested on behalf of the City 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.

(B) Authentication. Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, 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 the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement.

Section 2.06. Transfer or Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept under the provisions of Section 2.07 by the person in whose name it is registered, in person or by such person’s duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Bonds may be exchanged at the Principal Office of the Fiscal Agent solely for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer or exchange shall be paid by the City . The Fiscal Agent shall collect from the Owner requesting such transfer or exchange any tax or other governmental charge required to be paid with respect to such transfer or exchange. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount. No transfers or exchanges of Bonds shall be required to be made (i) fifteen days prior to the date establ ished by the Fiscal Agent for selection of Bonds for 19 redemption or (ii) with respect to a Bond after such Bond has been selected for redemption; or (iii) between a Record Date and the succeeding Interest Payment Date.

Section 2.07. Bond Register . The Fiscal Agent will 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, date, amount, rate of interest and last known 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. The City and the Fiscal Agent will treat the Owner of any Bond whose name appears on the Bond register as the absolute Owner of such Bond for any and all purposes, and the City and the Fiscal Agent shall not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the Owner as it appears in the Bond register for any and all purposes.

Section 2.08. 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 authorized 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.

Section 2.09. Bonds Mutilated, Lost, Destroyed or Stolen.

(A) Mutilated. If any Bond shall become mutilated, at the expense of the Owner of such Bond, the City 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 by it and destroyed by the Fiscal Agent, in accordance with the Fiscal Agent’s retention policy then in effect.

(B) Destroyed or Stolen. If any Bond shall be lost, destroyed or stolen, the City 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, at the expense of the Owner, but only following provision by the Owner to the Fiscal Agent of indemnity for the City and the Fiscal Agent satisfactory to the Fiscal Agent and the City. The City may require payment of a sum not exceeding the actual cost of preparing each a replacement Bond delivered under this Section and the City and the Fiscal Agent may require payment 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 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the City 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 under this Agreement. 20 (C) Additional Stock. If the Fiscal Agent has an insufficient stock of unauthenticated printed Bonds for such purpose, it shall communicate with the Finance Director with respect to the printing of an additional stock of Bonds, in such quantities and as otherwise approved in writing by the Finance Director.

Section 2.10. Book-Entry Only System. DTC shall act as the initial Depository for the Bonds. One Bond for each maturity of the Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form).

Upon initial execution, authentication, and delivery, the ownership of the Bonds shall be registered in the Bond register kept by the Fiscal Agent for the Bonds in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in writing.

The Authorized Officers of the City and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Agreement to qualify the Bonds for the Depository's book -entry system, including the execution of the Depository's required representation letter.

With respect to Bonds registered in the Bond register in the name of Cede & Co., as nominee of DTC, neither the City nor the Agent shall have any responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds Bonds as Depository f rom time to time (the “DTC Participants”) or to any person for which a DTC Participant acquires an interest in the Bonds (the “Beneficial Owners”). Without limiting the immediately preceding sentence, neither the City nor the Fiscal Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any Bonds to be redeemed in the event the City elects to redeem the Bonds, in part, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the Bonds in part, (iv) the payments to any DTC Participant, any Beneficial Owner, or any person, other than DTC, of any amount with respect to the principal of or interest or premium on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds.