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AGENDA & MINUTES SEPTEMBER-NOVEMBER 1997-1998
INVESTMENT&FINANCE COMMITTEE MEMBERS 1997/98 1. Dick Kelly Mayor City of Palm Desert 73-510 Fred Waring Drive 346-0611 Palm Desert, CA 92260 2. Ray Diaz City Manager City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 3. Dave Erwin City Attorney do Best, Best& Krieger 39-700 Bob Hope Drive, Suite 312 568-2611 Rancho Mirage, CA 92270 4. Murray Magloff Member 229 Camino Arroyo North 341-0118 Palm Desert, CA 92260 5. Carlos Ortega Executive Director of Redevelopment Agency City of Palm Desert 73-510 Fred Waring Drive 346-0611 Palm Desert, CA 92260 6. Jean Benson Mayor Pro-Tempore City of Palm Desert 73-510 Fred Waring Drive 346-0611 Palm Desert, CA 92260 7. Bill Veazie Member 42-900 Massachusetts Court 345-4075 Palm Desert, CA 92211 8. Jean Ruth Investment Manager 346-0611 City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 9. Paul Gibson Director of Finance/Treasurer 346-0611 City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 REVIEW PROCESS: City Attorney, Finance Director, City Manager, RDA Director& Project Manager STAFF: John Wohlmuth ACM/Director of Administrative Services Veronica Abarca Recording Secretary Investment& Finance Committee 1996/1997 Page 2 PRESS: 1. KMIR TV News Director 72-920 Parkview Drive Palm Desert, CA 92260 2. THE DESERT SUN 74-617 Highway 111 Palm Desert, CA 92260 3. KESQ TV 42-650 Melanie Place Palm Desert, CA 92260 4. KPSI RADIO 2100 E Tahquitz Canyon Way Palm Springs, CA 92262 revised O8/25/97 vla PRELIMINARY OFFICIAL STATEMENT— DATED NOVEMBER 18, 1997 r' ^' REFUNDING ISSUE—BOOK ENTRY ONLY NOT RATED uoau a E. In the opinion of Briggs and Morgan, Professional Association, Bond Counsel, under existing statutes, regulations, rulings o2 co o t._ and court decisions and assuming, among other matters, continuing compliance by the Authority with certain covenants, interest e m=c on the Bonds is excluded from gross income for federal income tax purposes and is exempt from present State of California EA„g personal income taxes.In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the 08c ,.. E ts federal individual or corporate alternative minimum taxes, although Bond Counsel observes it is included in adjusted current rh earnings in calculating corporate alternative minimum taxable income. Bond Counsel expresses no other opinion regarding other 3d2 federal income tax consequences relating to the accrual of receipt of interest on the Bonds. See "TAX EXEMPTION"herein. $30,670,000* oar ,c• c" PALM DESERT FINANCING AUTHORITY • a=ig E 1997 REVENUE BONDS wooN E"" " ea V (Assessment District Nos. 92-1 [Tierravista] and 94-1 [BIGHOR N] .=N w y== ���� and Community Facilities District No. 91-1 [Indian Ridge]) = o a Dated: Date of Delivery Due: October 1 (as shown below) 01-yc a iv o c The Bonds are issuable as fully registered Bonds in the denomination of$5,000 each or any integral multiple thereof,andare rn*EI d. being issued as serial Bonds. Principal of the Bonds will be payable upon presentation and surrender thereof at the corporate trust c—x c office of First Trust of California, N.A., in Los Angeles, California (the "Trustee"). Interest on the Bonds will be payable c c o= c so c._ commencing April 1, 1998, and thereafter semi-annually on October 1 and April I (each an "Interest Payment Date") in each WM o Co)c year by check of the Trustee mailed on each Interest Payment Date to the persons in whose name such Bonds are registered at H s 3 the close of business on the Record Date,which is the fifteenth (15th) of the month preceding each Interest Payment Date,or =%o';,o by wire transfer upon the written instructions of any owner of$1,000,000 or more in aggregate principal amount of the Bonds. ES• u c As DESCRIBED HEREIN, THE BONDS ARE SUBJECT TO OPTIONAL AND MANDATORY REDEMPTION PRIOR TO MATURITY. • m m SEE"REDEMPTION OF THE BONDS" HEREIN. 4),cd � - Ea• C. drrn Capitalized terms on this cover page and elsewhere herein,unless otherwise defined are defined in the Indenture authorizing maym the issuance of the Bonds. c R o The Bonds are issued for the purpose of enabling the Palm Desert Financing Authority (the"Authority") to purchase three NEs c (3) separate series of refunding Bonds (the "Local Obligations") in two (2) Assessment Districts and one (1) Community N oo'a Facilities District (the"Local Districts") of the City of Palm Desert (the"City") and to redeem the outstanding Bonds of the — c _ Local Districts as more fully described herein. See "THE LOCAL OBLIGATIONS." d e A c 3 a.E N The Bonds will be registered initially in the name of Cede&Co.,as nominee of The Depository Trust Company,New York, so In E e New York ("DTC"). Principal and interest due with respect to the Bonds arepayable directly to DTC by the Trustee. Upon m w' receipt of payments of principal and interest, DTC is obligated to,in turn,remit such principal and interest to DTC Participants, o `o-;; as defined herein, for subsequent disbursement to beneficial owners of the Bonds. 11N= 0 —> c a The Bonds are secured by a first lien on and pledge of all of the Revenues and a pledge of all of the moneys in the Interest o Account and the Principal Account, including all amounts derived from the investment of such moneys. The Bonds shall be 2. o m 3 equally secured by a pledge, charge, and lien upon the Revenues and such moneys without priority for number, date of Bonds, y m w date of execution or date of delivery. See "SECURITY FOR THE BONDS" herein. v g '" '" See `BONDHOLDERS' RISK" for a discussion of the special risk factors that should be considered, in addition to the other E is u `o matters set forth herein, in evaluating the investment quality of the Bonds. d_ . " c'—v c 'o'woo MATURITY SCHEDULE* E `m c a Maturity Principal Interest e a Maturity Principal Interest.� October 1 Amount Rate Price c o e d October 1 Amount Rate Price — pa mE € 0 •Cam- d ye e o C .D_ C 0 d_C N m`vTHE BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE REVENUES. THE BONDS ARE d c-- u NOT A DEBT OR LIABILITY OF THE CITY,THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF,OTHER THAN oa Zz uH N ; THE AUTHORITY, AND WILL BE PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR.NEITHER THE CITY,THE STATE OF o_-m c CALIFORNIA NOR TILE AUTHORITY WILL BE OBLIGATED TO PAY THE PRINCIPAL OF THE BONDS, OR THE INTEREST THEREON, N m u c EXCEPT FROM THE FUNDS DESCRIBED ABOVE, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, 87, E o THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF .c�$'e OR THE INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS WILL NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY �y m OBLIGATE THE CITY,THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY FORM ,o c•0= OF TAXATION WHATEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO c co o o o, TAXING POWER. v o e The Bonds are being offered by the Underwriter when,as and if issued by the Authority and accepted by the Underwriter, el E E e E subject to the approval of legality by Briggs and Morgan, Professional Association, Minneapolis, Minnesota, Bond Counsel, m m cs E N the approval of certain matters for the Authority by Counsel to the Authority, and to the disclosure of the security for the Ie.:«01 transaction by Disclosure Counsel,Haight&Weist,a Professional Law Corporation,Scotts Valley, California.It is expected g =F.N that the Bonds will be available for delivery in New York,New York or at such other place as may be agreed by the Authority s d o d and the Underwriter on or about December 9, 1997. to(9n� c 0.9= REDWOOD SECURITIES GROUP, INC. .E c Es -. Dated December . 1997 No dealer, broker, salesperson or other person has been authorized by the Underwriter, the Authority or the city to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Bond by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority and from certain other sources which are believed to be reliable, but not guaranteed as to accuracy or completeness. The summaries and references to the Act, the Indenture and to other statutes and documents in this Official Statement ode not purport to be comprehensive or definitive, and are qualified in their entireties by reference to each such statute and documents. The information herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the City since the date hereof. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the Bonds at the level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Bonds to certain dealers and dealer banks and banks acting as agents at prices lower than the public offering prices stated on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. (THIS PAGE INTENTIONALLY LEFT BLANK) TABLE OF CONTENTS OFFICIAL STATEMENT INTRODUCTORY STATEMENT 1 GENERAL 1 THE LOCAL OBLIGATIONS OF THE LOCAL DISTRICTS 1 SECURITY FOR THE BONDS 2 LAND VALUE 2 AUTHORITY TO ISSUE 3 THE BONDS 3 LIMITED OBLIGATION 3 REDEMPTION 3 SURPLUS ASSESSMENT AND SPECIAL TAX COLLECTION TO LOCAL OBLIGATION RESERVE FUND 3 TAX EXEMPTION 4 BONDHOLDERS' RISKS 4 PROFESSIONALS INVOLVED IN OFFERING 4 ISSUANCE OF THE BONDS 4 LIMITED INFORMATION 4 THE AUTHORITY 5 AUTHORITY TO ISSUE 5 SECURITY FOR THE BONDS 5 INTRODUCTION 5 THE BONDS 6 Pledge of Revenues 6 Cash Flow Sufficiency 6 Enforcement of Local Obligations 7 Punctual Payment 7 No Other Obligations 7 No Reserve Fund Securing the Bonds 7 THE LOCAL OBLIGATIONS 7 Security for the Local Obligations 7 a)Assessment Districts 7 b)Community Facilities Districts 8 Local Obligation Reserve Fund 8 Investment Agreement 10 Value to Lien Ratio 11 Covenant to Commence Superior Court Foreclosure 11 a)Assessment Districts 11 b)Community Facilities District 12 Status of Lien 12 THE BONDS 13 GENERALLY 13 TRANSFER AND EXCHANGE OF BONDS 13 BONDS MUTILATED,DESTROYED, STOLEN OR LOST 14 THE TRUSTEE 14 FURTHER PROVISIONS OF THE INDENTURE 15 ESTIMATED SOURCES AND USES OF PROCEEDS 15 (i) BOND PROCEEDS 15 LOCAL OBLIGATION PROCEEDS 16 REDEMPTION OF THE BONDS 16 OPTIONAL REDEMPTION 16 MANDATORY REDEMPTION FROM OPTIONAL REDEMPTIONS OF LOCAL OBLIGATIONS 16 SURPLUS ASSESSMENT AND SPECIAL TAX COLLECTION TO LOCAL OBLIGATION RESERVE FUND 18 GENERAL REDEMPTION PROVISIONS 18 DEBT SERVICE SCHEDULE 19 THE LOCAL OBLIGATIONS 20 GENERALLY 20 ASSESSMENT DISTRICT No. 92-1 (TIERRAVISTA) 20 ASSESSMENT DISTRICT No. 94-1 (BIGHORN) 23 COMMUNITY FACILITIES DISTRICT No. 91-1 (INDIAN RIDGE) 28 LOCAL DELINQUENCIES 34 SPECIAL TAX DELINQUENCIES 34 METHOD OF REASSESSMENT 35 PREPAYMENT OF REASSESSMENTS 35 PREPAYMENT AND SATISFACTION OF SPECIAL TAX OBLIGATION 36 ADDITIONAL ASSESSMENTS AND SPECIAL TAXES 37 REDEMPTION PROVISIONS OF THE LOCAL OBLIGATIONS 37 AMENDMENT OR MODIFICATION OF THE LOCAL OBLIGATIONS 38 SALE OF LOCAL OBLIGATIONS BY THE AUTHORITY 39 CONCENTRATION OF OWNERSHIP 39 ASSESSED VALUE-TO-LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS 41 METHODS OF VALUATION 41 VALUE-TO-LIEN RATIO 41 FLOW OF FUNDS 43 PROGRAM FUND 43 COST OF ISSUANCE FUND 43 REVENUE FUND 43 Interest Account 43 Principal Account 43 Rebate Account 44 INVESTMENTS 44 THE CITY 45 THE CITY AND ENVIRONS 45 GOVERNING BODY 45 POPULATION 45 DIRECT AND OVERLAPPING DEBT 45 FURTHER INFORMATION 47 BOOK-ENTRY ONLY SYSTEM 47 GENERAL 47 DISCONTINUATION OF BOOK-ENTRY SYSTEM 49 TRANSFER AND EXCHANGE UPON DISCONTINUATION OF BOOK-ENTRY SYSTEM 49 BONDHOLDERS' RISKS 49 GENERAL 49 (ii) LIMITED OBLIGATION OF THE AUTHORITY 50 No RESERVE FUND SECURING THE BONDS 51 NON-ASSET BONDS RISK 51 SECONDARY MARKET 51 LOSS OF TAX EXEMPTION 52 LIMITS ON THE FORECLOSURE REMEDY 52 Generally 52 Delays in the Foreclosure Process 53 The Foreclosure Sale 54 CITY NOT REQUIRED TO FORECLOSE IN ALL CASES 55 No ANALYSIS OF PROPERTY OWNERS' ABILITY TO PAY REASSESSMENTS AND SPECIAL TAXES 56 PREPAYMENT OF REASSESSMENTS AND SPECIAL TAXES 56 ADDITIONAL LEVIES 56 BUSINESS SUBJECT TO MARKET FLUCTUATIONS 57 BANKRUPTCY 57 LAND VALUE 57 FAILURE TO DEVELOP VACANT LAND 58 ENFORCEABILITY OF REMEDIES 60 ABSENCE OF MATERIAL LITIGATION 60 TAX EXEMPTION 60 TAX COVENANTS 60 LEGAL OPINION 61 APPROVAL OF LEGALITY 61 UNDERWRITING 62 CONTINUING DISCLOSURE COVENANTS OF THE AUTHORITY 62 ANNUAL INFORMATION OF THE AUTHORITY AND THE CITY 62 EVENT REPORTS 63 CONTINUING DISCLOSURE COVENANTS OF THE DEVELOPERS 64 PROVISIONS OF ANNUAL REPORTS 65 CONTENT OF ANNUAL REPORTS 65 REPORTING OF SIGNIFICANT EVENTS 67 ASSUMPTION OF OBLIGATION 68 TERMINATION OF REPORTING OBLIGATION 68 DEFAULT 68 MISCELLANEOUS 69 APPENDIX A-SUMMARY OF DEFINED TERMS A-1 APPENDIX B-FORM OF OPINION OF BOND COUNSEL B-1 APPENDIX C-SUPPLEMENTAL INFORMATION,CITY OF PALM DESERT C-1 APPENDIX D-MAPS OF THE LOCAL DISTRICTS D-1 (iii) (THIS PAGE INTENTIONALLY LEFT BLANK) LOCATION MAP . .. ua uulce Slate Ind/en - sdlwa �� Museum El Mirage a • aa� n mlerock -ke Los Ang les • . 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'I' - Cryatala leach Q t �'6 on -44 a rwincneate time nwi j I °.R •c edr�pdrn .' MON L 1'll U 8 t wa Co ^ Ihy Elinor(' Ut - • Rancho Mirage "e, vnsen Laguna glle Mlaabn ,Aye. sinor • v°Om Bn1 9e m 4 e I San Juan Cap r 'J ----m I. oalRornitMa M©‘Hot SPrin•. SAN ante- m De R n n� O PAMPERS, 1 Indian j r0 I V R.5 Del Mil-Porn, .•' n Ma o CYn (5•. •sage HO \ o 5 m Wells _ —.—_ Doneny&& a'' uWi`�ta 7)Temecula ti• ` � LaCuinta x ace -II ♦. F Cam - -awe Net. August. • • San Clement% Pendlia a �aNa \� • • aniC q IP 1�( ham al San ChmMfa Sfl .� U.SM.C. ,pecnana » dine same aleeooa•od Area m Ind.flee. Pose O San Ono/n S.& \ Res. FallbmOk P.� I•a P.AM �•Aping; Ind Res. Roil Valerie tom••• Mecca a or Y •t' "a_yit ii^ia •ENINSULAR {Q1pene' North Shore 'sr n i ..Pal', Wald. Torres Martine -�• oat Masten San Si . Pala r wEm a a r 1 me Pes llR •Omen Bern Sa r,� Lula R uis• •..ia e - tomer • • RANGES I- Oasis• A enon Sea OCEANSID O Rey • M.&P 44 Bons I Pouma VaINy La Jolla Wrt I _ \ Stale Re ,,/ma , ® Valley R n°..A�u ma - or .�DBe �•• Carlsbot ✓W ist• CB -a R `P(Ai 6,..n a nee .. ego' �•\b1D inu..:• 5. P351141 ^. hung © eloMM CarlsbadSouth State d S.S. O na.Has Ndr"9. rl. etas South Carlsbad Sfl •' a a Sant•ara.a,.se..,�Marcos SCON�IDOyw tigp..` • L - • ily • Eneinita :O San PLLGual ettIGs� SPama ,Santa1`am Moonllant S_a O Dal Di• • Sane• GLIB EL'NO ys I Ina.RlsT.� © n.. Sin Ellly S.& V Festival . . FOR • vlYlq whs . �.- season s•a Solana Beach , 'Battlefield �•" pl � Ul •k;•tlllo Walls reY ease s Ranc O, C.1 _ , IRS SVRA an Cerd/II s.8Mar SrYnar • I P •— , `. S.H P.. • Del Mar a •Q Ona tWb• ��ary > Torrey Pines SR.A� . N 1' • Q [Samna rn•P r"- •: r weds a Toney Pines Sir• ' R c /�tcul'+•a'I� tb-.Y •qa '^V N A 5. D r E G O 1 R. d Ya 0 RNA p: F a, .4.c EER Elmore• La Jolla q% o• Sant: akesl egg•lavas'a '5 �Lpi r �, Aiii0 LppM M s REPS ITION e T iv.�yy., /w 1 Qyy�y�a'(�.' uyam Sal�Pal�• �� BORREGO : Yrms (1J • 1�, 1-. Cal•r' `tea V •\ V Pa I P � ' ®Y lapun .GESEN► lye monaMt .O 'r a�A amo •r �.SdTE `- us rvawl Br • �V,Uc�ir'•I'O PI-c e • • wlaf •_J/ s'a PARK k° Oesen Teal hates Cabrillo Nil. Mont- 0 • nP�„ t.EVELAP• P Cu^apal Impact PALM DESERT FINANCING AUTHORITY PRESIDENT AND AUTHORITY COMMISSION Richard S. Kelly, President Jean M. Benson, Vice-President Buford A. Crites,Member Robert A. Spiegel,Member Walter H. Snyder, Member PALM DESERT CITY COUNCIL Richard S. Kelly,Mayor Jean M. Benson,Mayor Pro-Tempore Buford A. Crites, Council Member Robert A. Spiegel, Council Member Walter H. Snyder Council Member CITY OF PALM DESERT STAFF Ramon A. Diaz, City Manager Carlos L. Ortega, Executive Director, Redevelopment Agency David J. Erwin, City Attorney Richard J. Folkers,Assistant City Manager/Public Works Director John M. Wohlmuth,Assistant City Manager/Administrative Services Director Sheila R. Gilligan, City Clerk/Community Affairs Director Patrick Cordon, Director of Building and Safety Phil Drell, Community Development Director Paul S. Gibson, Finance Director/Treasurer Lisa V. Constande, Environmental Conservation Manager Gloria Darling, Human Resources Manager Agnes G. Flor, Finance Operations Manager Joseph S. Gaugush, Engineering Manager Greg Holtz, Engineering Manager Teresa LaRocca, Housing Programs Coordinator Ruth A. Moore, Business Support Manager John Nagus, Community Arts Manager Paul W. Shillcock, Economic Development Manager Stephen Smith, Planning Manager Kenneth Weller, Risk Manager David Yrigoyen, Redevelopment Agency Manager Dennis M. Coleman, Redevelopment Analyst (iv) BOND COUNSEL BRIGGS AND MORGAN, PROFESSIONAL ASSOCIATION MINNEAPOLIS, MINNESOTA TRUSTEE FIRST TRUST OF CALIFORNIA, N.A. Los ANGELES, CALIFORNIA UNDERWRITER REDWOOD SECURITIES GROUP, INC. SAN FRANCISCO, CALIFORNIA DISCLOSURE COUNSEL HAIGHT&WEST A PROFESSIONAL LAW CORPORATION SCOTTS VALLEY,CALIFORNIA FINANCIAL ADVISOR MUNLSOFT MCMINNVILLE,OREGON REASSESSMENT ENGINEER MUNIFINANCIAL TEMECULA,CALIFORNIA (v) (THIS PAGE INTENTIONALLY LEFT BLANK) OFFICIAL STATEMENT $30,670,000" PALM DESERT FINANCING AUTHORITY 1997 REVENUE BONDS (ASSESSMENT DISTRICT NOS.92-1 (TIERRAVISTA)AND 94-1 (BIGHORN)AND COMMUNITY FACILITIES DISTRICT NO.91-1 (INDIAN RIDGE)) INTRODUCTORY STATEMENT This introductory Statement 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 and appendices hereto, and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. General The purpose of this Official Statement is to set forth certain information concerning the issuance and sale by the Palm Desert Financing Authority (the "Authority") of $30,670,000* of the Palm Desert Financing Authority, 1997 Revenue Bonds (Assessment District Nos. 92-1 [Tierravista] and 94-1 [BIGHORN] and Community Facilities District No. 91-1 [Indian Ridge]) (the "Bonds"). The Bonds are being issued pursuant to the Constitution and laws of the State of California (the 'State"), and particularly the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commending with Section 6584), Chapter 5, Division 7, Title 1 of the Government Code of the State (the "Act"), and an Indenture of Trust dated as of November 1, 1997 (the "Indenture"), between the Authority and First Trust of California, N.A., Los Angeles, Califomia, as trustee (the "Trustee"), to provide funds to acquire certain underlying obligations(the"Local Obligations") of the City of Palm Desert(the°City"). The Local Obligations of the Local Districts The Local Obligations consist, in part, of refunding bonds issued for three (3) Assessment Districts pursuant to the Refunding Act of 1984 for 1915 Act Improvement Bonds, being Division 11.5 of the California Streets and Highways Code, commencing with Section 9600 (hereinafter, the "Refunding Act"). The City is reassessing the assessments levied in the following Assessment Districts (hereinafter, the "Assessment Districts"): 1. City of Palm Desert, Assessment District No. 92-1 (Tierravista) 2. City of Palm Desert, Assessment District No. 94-1 (BIGHORN) The City is issuing refunding bonds secured by the reassessments (the °Reassessments") within each Assessment District, which refunding bonds constitute a portion of the Local Obligations being purchased by the Authority from proceeds of the Bonds. Preliminary, subject to change -1- The balance of the Local Obligations consisting of refunding bonds issued for Community Facilities District 91-1 (Indian Ridge) pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Mello-Roos Act"), being Sections 53311 et. seq. of the California Government Code (hereinafter, the "Community Facilities District" and together with the Assessment Districts, the "Local Districts") for the following special tax district: 1. Community Facilities District No. 91-1, Series 1992-A and Series 1995 (Indian Ridge) See "APPENDIX D - MAPS OF THE ASSESSMENT AND COMMUNITY FACILITIES DISTRICT" for information on the location of the Local Districts in the City. Security for the Bonds The Bonds are secured by a first lien on and pledge of all of the Revenues (as defined herein) and a pledge of all of the moneys in the Interest Account (as defined herein) and the Principal Account (as defined herein), including all amounts derived from the investment of such moneys. The Bonds shall be equally secured by a pledge, charge, and lien upon the Revenues and such moneys without priority for number, date of Bonds, date of execution or date of delivery. The Authority has transferred in trust and assigned to the Trustee, for the benefit of the owners from time to time of the Bonds (hereinafter, the "Owners"), all of the Revenues and all of the right, title and interest of the Authority in the Local Obligations and the Fiscal Agent Agreements (as defined herein). See "SECURITY FOR THE BONDS - Pledge of Revenues"herein. For each of the Local Districts, the Local Obligations are issued upon and secured by the unpaid Reassessments and Special Taxes together with interest thereon, and the unpaid Reassessments and Special Taxes together with interest thereon constitute a trust fund for the redemption and payment of the principal of the Local Obligations and the interest thereon. All the Local Obligations are additionally secured by the moneys in the redemption fund (the "Redemption Fund") for each Local District created pursuant to separate fiscal agent agreements executed by the Fiscal Agent and the City (hereinafter, the "Fiscal Agent Agreements"). See "SEcuRITY FOR THE BONDS- Security for the Local Obligations"herein. In the Fiscal Agent Agreements, the City has covenanted with the owners of the Local Obligations to commence judicial foreclosure proceedings under certain circumstances. See "SEcuRrry FOR THE BONDS- Covenant to Commence Superior Court Foreclosure° herein and "BONDHOLDERS' RISKS- City Not Required to Foreclose in all Cases"herein. Land Value The parcels of land within the Local Districts have an overall assessed valuation of$173,832,281 which is 5.60 to 1 assessed value to lien ratio. However, the investor should not assume that the assessed valuation is a true indicator of the market value of the parcels; the value of the parcels at a sale may be less or more than the assessed value of the property. In addition, real estate market conditions can change rapidly which could adversely affect the valuation of the parcels. See "ASSESSED VALUE TO LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS" herein. -2- Authority to Issue The Bonds are being issued under the Marks-Roos Local Bond Pooling Act of 1984 and are governed by the provisions of the Indenture. The Local Obligations are being issued pursuant to the Refunding Act of 1984 for 1915 Act Improvements Bonds and the Mello-Roos Community Facilities Act of 1982 and the terms of the Fiscal Agent Agreements. See"AUTHORITY TO ISSUE" herein. The Bonds The Bonds will be issued in fully registered form, without coupons, in the denomination of$5,000 each or in any integral multiple thereof. Principal will be payable at the principal corporate trust office of the Trustee in Los Angeles, California, upon presentation and surrender of the Bonds. Interest on the Bonds will be payable by check of the Trustee mailed on each Interest Payment Date to the Owners of record at the addresses shown on the registration books maintained by the Trustee for such purposes as of the Record Date (as defined herein), or by wire transfer on each Interest Payment Date to any Owners of$1,000,000 or more in aggregate principal amount of Bonds who has requested such transfer in written notice filed with the Trustee by the Record Date. "THE BONDS" herein. Limited Obligation The Bonds are special obligations of the Authority payable solely from the Revenues. The Owners of the Bonds shall never have the right to compel the forfeiture of any property of the Authority and the debt service on the Bonds shall not be a legal or equitable pledge, charge, lien or encumbrance upon any property of the Authority or upon any of its income, receipts or revenues except the Revenues and other funds pledged to the payment thereof in the Indenture. The Bonds are not a debt or liability of the City, the State, or any political subdivision thereof, other than the Authority, and will be payable solely from the funds provided therefor. Neither interest thereon, except from the funds described above, and neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds. The issuance of the Bonds will not directly, indirectly or contingently obligate the City, the State or any political subdivision thereof to levy or pledge any form of taxation whatever therefor or to make any appropriation for their payment. The Authority has no taxing power. Redemption As described herein, the Bonds are subject to optional and mandatory redemption prior to maturity. See"REDEMPTION OF THE BONDS" herein. Surplus Assessment and Special Tax Collection to Local Obligation Reserve Fund Because of the timing of the issuance of the Local Obligations, the City expects to receive from the property owners in the Local Districts installments of assessments and special taxes in tax year 1997- 98 higher than that which is required to pay debt service on the Local Obligations on March 2, 1998 and September 2, 1998 (as to the Assessment Districts) and April 1, 1998 and October 1, 1998 (as to the Community Facilities District). As a result, the City shall use the surplus assessments and special taxes received in each Local District to fund the Reserve Fund for each Local District in an amount not to -3- exceed the Reserve Requirement of that of that particular Local District. See "LOCAL OBLIGATION RESERVE FUND" herein. Tax Exemption In the opinion of Briggs and Morgan, Professional Association, Bond Counsel, under existing statutes, regulations, rulings and court decisions and assuming, among other matters, continuing compliance by the Authority with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from present State of California personal income taxes. In the opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes it is included in adjusted current eamings in calculating corporate alternative minimum taxable income. Bond Counsel expresses no other opinion regarding other federal income tax consequences relating to the accrual or receipt of interest on the Bonds. See"TAx EXEMPTION" herein. Bondholders'Risks For a discussion of the special risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds, see `BONDHOLDER'S RISKS" herein. Professionals Involved in Offering For identification of and information concerning the professionals involved in the preparation and issuance of the Bonds, see Page (vi) hereof. Issuance of the Bonds The Bonds are being offered by the Underwriter when, as and if issued by the Authority and accepted by the Underwriter, subject to the approval of legality by Briggs and Morgan, Professional Association, Minneapolis, Minnesota, Bond Counsel, the approval of certain matters for the Authority by Counsel of the Authority, and to the disclosure of the security for the transaction by Disclosure Counsel, Haight &Weist, a Professional Law Corporation, Scotts Valley, Califomia. It is expected that the Bonds will be available for delivery in New York, New York, or at such other place as may be agreed by the Authority and the Underwriter on or about December 9, 1997." Limited Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds, the security for the Bonds, the Authority, the Local Obligations and the Local Districts are included in this Official Statement together with summaries of certain provisions of the Indenture and the Fiscal Agent Agreements. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Indenture and the Fiscal Agent Agreements are Preliminary, subject to change -4- qualified in their entirety by reference to such document, copies of which are available for inspection at the office of the Underwriter. THE AUTHORITY The Authority was formed by the authorized execution of a Joint Exercise of Powers Agreement, dated as of January 12, 1989, by the City and the Palm Desert Redevelopment Agency (the 'Agency"), pursuant to the Act. The City Council of the City approved the formation of the joint powers Authority with the Agency by the adoption of Resolution No. 89-11 on January 26, 1989, and further, declared itself to be the Authority Commission of the Authority. The Board of Directors of the Agency also approved the formation of the joint powers Authority with the City by adoption of its Resolution No. 218 on January 26, 1989. The Authority may exercise the powers common to each of its members, or as otherwise permitted under the Act, and necessary for the accomplishment of the purposes of the Authority. One of the main powers of the Authority is the power to issue Revenue Bonds pursuant to Article 4 of the Act, to make and enter into Bond purchase agreements and to purchase obligations of the City or the Agency. The Authority has no independent staff and consequently will be dependent upon the City's officers and employees for the administration of the Bonds on its behalf. The Governing Board of the Authority is comprised of the members of the City Council of the City and the members of the Board of the Agency. The members of the City Council of the City serve as the members of the Board of the Agency. AUTHORITY TO ISSUE The Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584), Chapter 5, Division 7, Title 1 of the Govemment Code of the State of California, provides for the issuance of revenue bonds of joint exercise of powers authorities, such as the Authority, to be repaid from the proceeds of certain municipal obligations, such as the Local Obligations. The Authority was organized pursuant to the Act and the Local Obligations acquired qualify for acquisition under the terms of the Act. The Local Obligations are being issued pursuant to the Refunding Act and the Mello-Roos Act and the terms of the Fiscal Agent Agreements. SECURITY FOR THE BONDS Introduction The Bonds are being issued to purchase the Local Obligations from the City. Besides the Reserve Fund, the security for the Bonds is the payment by the City to the Authority of debt service on the Local Obligations. The City's obligation to pay the debt service on the Local Obligations is limited to the collection of the installments of the Reassessments and Special Taxes within the Local Districts, which Reassessments and Special Taxes have been assigned to the Trustee for the benefit of the Owners of the Bonds, and to foreclose on those properties which are delinquent in the payment of the Reassessments and Special Taxes. As a result of the assignment of the -5- Reassessments and Special Taxes, the ultimate security for the Bonds is the Reassessments and Special Taxes and the property upon which the Reassessments and Special Taxes are levied. Set forth below is a discussion of both the security for the Bonds, as set forth in the Indenture, and the security for the Local Obligations, as set forth in the Fiscal Agent Agreements. In the end, the discussion of the security for the Local Obligations is a discussion of the security for the Bonds. The Bonds Pledge of Revenues The Bonds are secured by a first lien on and pledge of all of the Revenues and a pledge of all of the moneys in the Interest Account and the Principal Account, including all amounts derived from the investment of such moneys. Revenues are defined in the Indenture as follows: Revenue" means: (a) all amounts payable by the City on the Local Obligations other than (i) administrative fees and expenses and indemnity against claims payable to the Authority or the Trustee and (ii) [rebate] amounts payable to the United States of America pursuant to [the Indenture]; (b) all amounts deposited and held from time to time by the Trustee in the funds and accounts established [under the Indenture], other than the Rebate Account; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established [under the Indenture], other than the Rebate Account. Any advances made by the City to the Authority out of the Local Obligation Reserve Funds due to delinquent Reassessments and Special Taxes are Revenues. The Bonds shall be equally secured by a pledge, charge, and lien upon the Revenues and such moneys without priority for number, date of Bonds, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge, charge and lien upon the Revenues and such moneys. The Authority has transferred in trust and assigned to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the right, title and interest of the Authority in the Local Obligations and the Fiscal Agent Agreements. The Trustee shall be entitled to and shall receive all of the Revenues and any Revenues collected or received by the Authority shall be deemed to be held and to have been collected or received by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall entitled to and shall take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Local Obligations and the Fiscal Agent Agreements. Cash Flow Sufficiency On the date of issuance of the Bonds, the Underwriter will deliver to the Authority a certificate verifying that the regularly scheduled debt service payable on the Local Obligations, when combined with -6- other Revenues payable to the Authority as the result of investment of the Local Obligation Reserve Funds and other funds,will be sufficient to pay debt service on the Bonds. Enforcement of Local Obligations The Trustee, as assignee of the Authority's rights pursuant to the Indenture, shall receive all amounts due from the City pursuant to the Local Obligations and the Fiscal Agent Agreements and, subject to its rights under the Indenture, shall diligently enforce, and take all steps, actions and proceedings reasonably necessary for the enforcement of all of the rights of the Authority thereunder and for the enforcement of all of the obligations of the City. Punctual Payment The Authority shall punctually pay or cause to be paid the principal, interest and premium (if any) to become due in respect of all Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Revenues and other assets pledged for such payment as provided in the Indenture. No Other Obligations The Authority has covenanted that no additional Bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in part. No Reserve Fund Securing the Bonds There is no reserve fund funded out of the proceeds of the Bonds, and as a result, there is no reserve fund securing the Bonds. However, each issue of Local Obligations is secured by a Local Obligation Reserve Fund which is available to advance moneys to the Authority, as the owner of the Local Obligations, in the event that there are delinquencies in the payment of any of the Reassessments or Special Taxes. Any advance from the Local Obligation Reserve Funds constitutes Revenues and shall be used to make payment on the Bonds. As such, the Local Obligation Reserve Funds provide a source of Revenues to the Authority in the event that Revenues derived for the Reassessments or Special Taxes are not collected in full. The Local Obligations Security for the Local Obligations a) Assessment Districts The Local Obligations for each Assessment District are issued upon and secured by the unpaid Reassessments together with interest thereon, and the unpaid Reassessments together with interest thereon constitute a trust fund for the redemption and payment of the principal of the Assessment District's portion of the Local Obligations and the interest thereon. All the Local Obligations are additionally secured by the moneys in the Local Obligation Reserve Fund and the redemption fund for each Assessment District created pursuant to the Fiscal Agent Agreements. Principal and interest on the Local Obligations are payable exclusively out of the redemption funds created pursuant to the Fiscal Agent Agreements. The unpaid Reassessments, together with interest on the declining balances, will be collected in annual installments on the tax roll on which general taxes on real property are collected and are payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do said general taxes, and the properties upon which the Reassessments were levied are subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. b) Community Facilities Districts The Local Obligations for the Community Facilities District are issued upon and are secured by a Special Tax that is levied according to the rate and method of apportionment approved by the City Council, acting as the legislative body of the District, and the qualified electors of the District. The Special Tax will be collected in the same manner and at the same time as ad valorem property taxes are collected by the Treasurer-Tax Collector of the County of Riverside and when received, will be placed in a fund of the District to be held by the City Treasurer. The unpaid Special Taxes, together with interest on the declining balances, will be collected in annual installments on the tax roll on which general taxes on real property are collected and are payable and become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do said general taxes, and the properties upon which the Special Taxes were levied are subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. Local Obligation Reserve Fund The Fiscal Agent Agreements provide for a special reserve fund securing the Local Obligation for each Assessment District and Community Facilities District (the "Local Obligation Reserve Funds"). Each Local Obligation Reserve Fund secures only the Assessment District or Community Facilities District from which it is funded and the moneys on deposit in the Local Obligation Reserve Fund for one Assessment District or Community Facilities District may not be used to provide funds in the event of a delinquency in another Assessment District or Community Facilities District, nor may they be intermingled. For each Assessment District or Community Facilities District, the Local Obligation Reserve Fund will provide available funds to the extent of such Local Obligation Reserve Fund, from which the City will make payment of the amount of any delinquent Reassessments of Special Taxes in the appropriate Assessment District or Community Facilities District and interest thereon, for transfer into the appropriate Redemption Fund. Payments from such Local Obligation Reserve Fund will be deemed an advance to be reimbursed and deposited in the Local Obligation Reserve Fund from the proceeds of redemption or sale of the properties with respect to which payment of delinquent Reassessments or Special Taxes and interest thereon was paid from such Local Obligation Reserve Fund. The Local Obligation Reserve Funds will be held and maintained by the Fiscal Agent as separate trust accounts, distinct from all other funds of the City. The City will fund the Local Obligation Reserve Funds with surplus collections received from moneys posted to the 1997-98 tax rolls for each Local -8- District. The City will maintain the Local Obligation Reserve Funds in amounts not to exceed the Reserve Requirement established for each Local District. Each Local Obligation will be entitled to the protection and benefit of the amounts on deposit in the corresponding Local Obligation Reserve Fund, in the following amounts: Reserve Requirement Test Assessment District No. 92-1 (Tierravista) $177,100.00 10% Assessment District No. 94-1 (BIGHORN) $481,249.00 Max. Annual Debt Service Community Facilities Dist. No. 91-1 (Indian Ridge)-Series 1992A $978,892.00 Max. Annual Debt Service Community Facilities Dist. No. 91-1 (Indian Ridge)-Series 1995 $1,020,781.00 Max.Annual Debt Service The Local Obligation Reserve Funds will be invested and all investment earnings (except investment earnings rebatable to the federal government) will be transferred on or before each Interest Payment Date to the Authority for deposit in the Reserve Fund until the Reserve Requirement is satisfied and, thereafter, to the Revenue Fund. The Local Obligation Reserve Funds may not exceed the Reserve Requirement. Moneys in the Local Obligation Reserve Funds will be administered, separately for each Local District, as follows: A. Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of principal of or interest on the Local Obligations, an amount necessary to make up such deficiency will be transferred from the Local Obligation Reserve Fund,to the extent of available funds, to the Redemption Fund. The amount so advanced shall be reimbursed to the Local Obligation Reserve Fund from the proceeds of redemption or sale of the parcel for which payment of delinquent Reassessment or Special Tax installments was made from the Local Obligation Reserve Fund. B. If any Reassessment or Special Tax or any portion thereof is prepaid prior to the final maturity of the Local Obligations, the amount of principal of the Reassessment or Special Tax to be prepaid will be reduced as follows: The amount to be prepaid shall be reduced by multiplying the total amount initially provided for the Local Obligation Reserve Fund by the ratio of the original Reassessment or Special Tax to be prepaid to the total amount of all Reassessment or Special Tax in the Assessment District or Community Facilities District as appropriate. C. The amounts deposited in the Local Obligation Reserve Fund shall never exceed the Reserve Requirement, and , except to the extent, if any, required for rebate to the federal government, all proceeds from investment of moneys on deposit in the Local Obligation Reserve Fund in excess of the Reserve Requirement will be transferred to the Revenue Fund, on each Interest Payment Date. D. When the amount in the Local Obligation Reserve Fund equals or exceeds the amount required to retire the remaining unmatured Local Obligations (whether by advance retirement or otherwise), the amount of the Local Obligation Reserve Fund, the remaining installments of principal and interest not yet due from the reassessed or specially taxed property owners shall be canceled without payment, subject to satisfaction of the Fiscal Agent and Treasurer. -9- Investment Agreement At the direction of the City, the Fiscal Agent may invest the proceeds of the Local Obligations in investment agreements (the 'Investment Agreement") with an entity or entities whose long-term unsecured obligations are rated in either of the two highest rating categories (the "Required Rating") of Standard & Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"). Any Investment Agreement entered into shall provide that the entity providing the Investment Agreement (the Provider") shall notify the Fiscal Agent and the City in writing within five (5) business days of the effective date of any change, including a downgrade, withdrawal or suspension in the rating by S&P and Moody's of the long-term unsecured obligations of the Provider. Any Such Investment Agreement shall further provide: (i) that if at any time during the term of the Investment Agreement such rating is downgraded below the two highest rating categories of S&P and Moody's, the Provider shall within five (5) business days following the effective date of downgrading, at its sole expense, collateralize the moneys invested in the Investment Agreement with obligations which are Federal Securities and which shall at all times until such rating is restored to the Required Rating have a market value, valued weekly by the Provider, marked-to-market at the current market price plus accrued interest which is equal to one hundred five percent (105%) of the principal amount of such moneys; (ii) that such obligations shall be delivered to and registered in the name of a third party custodian, approved by the Fiscal Agent and the City, for the benefit of the Fiscal Agent and giving the Fiscal Agent a perfected first lien security interest in such obligations; (iii) that if the market value of such obligations is at the time of any valuation thereof less than one hundred five percent (105%) of the principal amount of such moneys the Provider shall deposit additional collateralizing obligations with the Fiscal Agent or such custodian in a form which satisfies all of the requirements specified above and in a principal amount which will bring the value of the obligations held by the Fiscal Agent or such custodian to the required amount within one (1) business day after the date of such valuation; (iv) that such obligations, except to the extent that the market value thereof exceeds the amount required above, shall be held by the Fiscal Agent or such custodian until the Provider's said rating is restored to the Required Rating; (v) that if at the time of any valuation of such obligations, the market value thereof exceeds the market value required above, the Fiscal Agent or such custodian shall deliver from such obligations at the written request of the City a portion thereof having a market value equal to such excess to the Provider, and (vi) that if the City notifies the Fiscal Agent in writing that the Provider's said rating has been restored to the Required Rating, all such obligations shall thereupon be released by the Fiscal Agent or such custodian to the Provider. Any such Investment Agreement shall also provide that if the Provider fails to collateralize the moneys invested in the Investment Agreement as provided above within the time specified above or to maintain the market value of the obligations comprising such collateral in the required amount by -10- depositing additional obligations with the Fiscal Agent or such custodian within the time and as otherwise specified above, or if the rating of the long-term unsecured obligations of the Provider is downgraded below the three highest rating categories of S&P and Moody's, the Fiscal Agent shall have the right (at the direction of the City), regardless of whether such moneys have been collateralized as provided above, to immediately withdraw or cause the withdrawal of all moneys invested in such Investment Agreement,without penalty or breakage fee, for reinvestment in Permitted Investments. Before entering into any Investment Agreement, the Fiscal Agent shall have received an opinion from counsel to the Provider to the effect that the Investment Agreement constitutes a valid, legal and binding obligation of the Provider enforceable in accordance with its terms, in a form acceptable to the Fiscal Agent and the City. Value to Lien Ratio The parcels of land within the Assessment Districts and Community Facilities District have an overall assessed valuation of$173,832,281 which is 5.60 to 1 assessed value to lien ratio. However, the investor should not assume that the assessed valuation is a true indicator of the market value of the parcels; the value of the parcels at a sale may be less or more than the assessed value of the property. In addition, real estate market conditions can change rapidly which could adversely affect the valuation of the parcels. See "ASSESSED VALUE TO LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS° herein. The land within the Local Districts and Community Facilities District secures the Reassessments and Special Taxes, as appropriate, which, in turn, secures the portion of the Bonds corresponding to the amounts of Bond proceeds used to purchase the Local Obligations. However, the land within the Local Districts and Community Facilities District does not secure the portion of the Bonds corresponding to the amount of Bond proceeds expended on the Underwriter's discount and costs of issuance. See "BONDHOLDERS' RISKS-Non-Asset Bonds Risks"herein. Covenant to Commence Superior Court Foreclosure a) Assessment Districts The Refunding Act provides that in the event any Reassessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a court action to foreclose the lien of the unpaid Reassessment. In such an action, the real property subject to the unpaid Reassessment may be sold at a judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Fiscal Agent Agreements, the City has covenanted with the Authority, as the owner of the Local Obligations, that, it will order, and cause to be commenced, judicial foreclosure proceedings against all properties with delinquent Reassessment installments by the October 1 following the close of each fiscal year in which the City receives Reassessments in an amount which is less than ninety-five percent (95%) of the total Reassessments which were to be received in such fiscal year. However, if ninety-five percent (95%) or more of the total Reassessments which are to be received in any given fiscal year are actually received, then the City will commence foreclosure against only those properties which delinquent Reassessments in excess of $1,000 by the October 1 following the close of the fiscal year in which such installments of Reassessments were due. -11- b) Community Facilities District Pursuant to the Mello-Roos Act, in the event of any delinquency in the payment of the Special Tax on a taxed parcel, the City may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. The City has covenanted for the benefit of the Owners of the Special Tax Bonds that it will determine or cause to be determined, no later than February 15 and June 15 of each year, whether or not any delinquencies exist in Special Tax Payments and will, no later than April 1 (with respect to the February 15 determination date) or August 1 (with respect to the June 15 determination date) commence foreclosure proceedings against all parcels with delinquent special Tax installments; provided, however, that the City shall not be required to commence such proceedings if the total delinquency for the Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year and the amount on deposit in the Reserve Fund is not less than the Reserve Requirements. The foregoing notwithstanding, such proceedings shall be commenced by the above-indicated date against any single property owner determined by the City to be delinquent in excess of$10,000 in the payment of its Special Taxes. In each case, once the foreclosure proceeding is commenced, the City has covenanted to diligently pursue to the completion such foreclosure proceedings. Apart from the Local Obligation Reserve Funds, the real property subject to the lien of the unpaid Reassessments and Special Taxes is the sole security for the repayment of the Local Obligations. See "BONDHOLDERS' RISKS- Limits on the Foreclosure Remedy'herein. In 1982, the legislature enacted a comprehensive revision of the law of enforcement of judgments. Under prior law, a judgment debtor (i.e., the property owner) enjoyed a statutory right to redeem such owner's property when it was sold under court foreclosure proceedings by paying the purchaser, who purchased the property at the foreclosure sale, the sale price paid by the purchaser and certain additional amounts, and to do so at any time within 12 months after the sale. By contrast, the 1982 revisions eliminates the redemption period after a foreclosure sale. The judgment debtor's sole method of protecting its interest in title to the property is by perfecting an appeal and obtaining stay of enforcement of the judgment by taking appropriate trial or appellate court procedures that will preclude a court foreclosure sale. The constitutionality of the legislation has not been specifically tested in court and there can be no assurance that if tested such legislation will be upheld. Status of Lien The Reassessments and Special Taxes for the Local Obligations and each installment thereof and any interest and penalties thereon constitute a lien against the lots and parcels of land on which they were imposed until the same are paid. Such special assessment and special tax liens have priority over all private liens including the lien of any mortgage or deed of trust and over all fixed special assessment liens or special tax liens which may thereafter be created against the property, but is subordinate to all tax liens, fixed special assessment liens and Special Taxes previously imposed upon the same property. However, such special assessment lien is on parity with all special taxes and such special tax lien is on parity with all special assessments and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. -12- As described herein under °BONDHOLDERS' Risxs," certain parcels of property in the Local Districts have current and past property tax delinquencies. THE BONDS Generally The Bonds will be issued in the aggregate principal amount of $30,670,000*will be dated as of the date of delivery, will be payable as to interest at the rates per annum set forth on the cover page hereof, payable on April 1, 1998, and semiannually thereafter on October 1 and April 1 of each year (individually, as °Interest Payment Date"), will be subject to redemption prior to maturity, and will mature according to the schedule set forth on the cover page hereof. The Bonds will be issued in fully registered form, without coupons, in the denomination of$5,000 each or in any integral multiple thereof. Principal will be payable at the principal corporate trust office of the Trustee in Los Angeles, California, upon presentation and surrender of the Bonds. Interest on the Bonds will be payable by check or the Trustee mailed on each Interest Payment Date to the Owners of record at the addresses shown on the registration books maintained by the Trustee for such purposes as of the fifteenth (15th) of the month preceding such Interest Payment Date, whether or not such day is a Business Day (the °Record Date"), or by wire transfer on each Interest Payment Date to any Owner of $1,000,000 or more in aggregate principal amount of the Bonds who has requested such transfer in written notice filed with the Trustee by the fifteenth (15th) of the month preceding such Interest Payment Date. Interest will be calculated on the basis of a 360-day year of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next proceeding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) it is authenticated on or before April 1, 1998, in which event it shall bear interest from its dated date; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Transfer and Exchange of Bonds The Bonds may be transferred or exchanged upon the Registration Books for the registration and transfer of the Bonds as provided in the Indenture. All Bonds presented for transfer or exchange will be accompanied by a written instrument or instruments of transfer or authorization for exchange, in form approved by the Trustee, duly executed by the Owner or by such Owner's attomey duly authorized in writing and all such Bonds will be surrendered to the Trustee and canceled by the Trustee. The Authority and the Trustee may deem and treat the Owner of any such Bond and for all other purposes of the Indenture,whether such Bond is overdue or not, and neither the Authority nor the Trustee will be affected by any notice to the contrary. In all cases in which the privilege of exchange or registering the transfer of Bonds is exercised, the Authority will execute and the Trustee will authenticate and deliver Bonds in accordance with the •Preliminary,subject to change -13- provisions of the Indenture. There will be no charge to the Owner for any such exchange or registration of transfer of Bonds, but the Authority may require the payment of a sum sufficient to pay any tax or other governmental charge required to be paid with respect to any such exchange or registration of transfer. The Trustee will not be required to register the transfer of or exchange of (a) any Bond during the fifteen (15) day period preceding the selection of Bonds for redemption of(b) any Bonds selected for redemption. Upon surrender for exchange or transfer of any Bond at the principal office of the Trustee, the Authority will execute (which may be by facsimile) and the Trustee will authenticate and delivery in the name of the Owner (in the case of transfers) a new Bond or Bonds of denominations of $5,000 or any integral multiple thereof, in the aggregate principal amount which the registered Owner is entitled to receive. New Bonds delivered upon any transfer or exchange will be valid obligations of the Authority, evidencing the same debt as the Bonds surrendered, will be secured by the Indenture and will be entitled to all of the security and benefits thereof to the same extent as the Bonds surrendered. Bonds Mutilated, Destroyed, Stolen or Lost In the event any Bond is mutilated, lost, stolen or destroyed, the Authority may execute and, upon its request in writing, the Trustee will authenticate and deliver a new Bond of the same principal amount and maturity as the mutilated, lost, stolen or destroyed Bond in exchange and substitution for such mutilated Bond, or in lieu of and substitution for lost, stolen or destroyed Bond. Application for exchange and substitution of mutilated, lost, stolen or destroyed Bonds must be made to the Trustee at the corporate trust office of the Trustee in Los Angeles, California. In every case the applicant for a substitute Bond must fumish to the Authority and the Trustee security or indemnification to their satisfaction. In every case of loss, theft or destruction of a Bond, the applicant must also furnish to the Authority and the Trustee evidence to their satisfaction of the loss, theft, or destruction of the identify of the applicant, and in every case of mutilation of a Bond, the applicant must surrender the Bond so mutilated. Notwithstanding the foregoing provisions under this caption, in the event any such Bond has matured, and no default has occurred which is then continuing in the payment of the principal of or redemption premiums, if any, or interest on the Bonds, the Trustee may pay the same (without surrender thereof except in the case of a mutilated Bond) instead of issuing a substitute Bond so long as security or indemnification is furnished as above provided. Upon the issuance of any substitute Bond, the Authority and the Trustee may charge the Owner of such Bond with their reasonable fees and expenses in connection therewith. The Trustee The Trustee has been appointed Trustee under the terms of the Indenture for the purpose of receiving all moneys required to be deposited with the Trustee under the Indenture and to allocate, use and apply the same as provided in the Indenture. The Authority has agreed that it will maintain a Trustee which shall be a financial institution and which (i) has a corporate trust office in the State of California, (ii) -14- has a combined capital and surplus of at least fifty million dollars ($50,000,000), and (iii) is subject to supervision or examination by federal or State of California Authority, so long as any Bonds are outstanding. If such financial institution publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining Authority above referred to, then the combined capital and surplus of such financial institution shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. See "APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS" herein. Further Provisions of the Indenture For a summary of selected provisions of the Indenture, including the events of default, remedies in the event of default provisions regarding the Trustee, amendment of the Indenture, and the rights of the Owners of the Bonds in the event of default, see "APPENDIX B - SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS" herein. ESTIMATED SOURCES AND USES OF PROCEEDS Bond Proceeds The Proceeds of the sale of the Bonds will be deposited with the Trustee, in trust pursuant to the terms of the Indenture. The moneys in the Program Fund will be used to purchase the Local Obligations. See THE LOCAL OBLIGATIONS" herein. The estimated sources and uses of proceeds, exclusive of accrued interest, is summaries as follows: Sources of Proceeds Bond Proceeds $30,670,000.00 Plus: Original Issue Premium Total Sources $30,670,000.00* Uses of Proceeds Program Fund $30,036,000.00* Costs of Issuance, Administration and Underwriter's Discount 633,375.00* Adjustment 625.00* Total Uses $30,670,000.00* •Preliminary, subject to change -15- Local Obligation Proceeds Sources of Funds Principal Amount of Local Obligations $30,036,000,00 Prior Reserve Fund -Assessment District No. 92-1 (Tierravista) 209,947.00 Prior Reserve Fund -Assessment District No. 94-1 (BIGHORN) 650,888.00 Prior Reserve Fund - Community Facilities District No. 91-1 (Indian Ridge) 2,213,509.00 Other 320,308.00 Total Sources of Funds $33,430,652.00 Uses of Funds Escrow Fund -Assessment District No. 92-1 (Tierravista) $1,996,407.72 Escrow Fund - Assessment District No. 94-1 (BIGHORN) 6,179,595.45 Escrow Fund - Community Facilities District No. 91-1 (Indian Ridge) 25,253,134.00 Miscellaneous 1,514.83 Total Uses of Funds $33,430,652.00 REDEMPTION OF THE BONDS Optional Redemption The Bonds maturing on or after October 1, 2007, are subject to redemption prior to their stated maturities on October 1, 2006, and on any Interest Payment Date thereafter, as a whole or in part, in integral multiples of$5,000, at the option of the Authority from moneys derived by the Authority from any source (except proceeds of optional redemption of Local Obligations as set forth in "Mandatory Redemption From Optional Redemption of Local Obligations"below), at the following redemption prices including a premium expressed as a percentage of the principal amount thereof, together with accrued interest to the date of redemption: Redemption Dates Redemption Prices October 1, 2006 and April 1, 2007 103% October 1, 2007 and April 1, 2008 102% October 1, 2008 and April 1, 2009 101% October 1, 2009 and thereafter 100% Mandatory Redemption From Optional Redemptions of Local Obligations Notwithstanding the provisions described in "Optional Redemption"above, the Bonds are subject to mandatory redemption on any date prior to their respective maturity dates from moneys received by the Authority as the redemption prices for any of the Local Obligations which may be redeemed pursuant -16- to the Fiscal Agent Agreements, as a whole (in case of a refunding of the Local Obligations) or, at the written direction of the Authority, in part, (in case of a partial refunding or individual prepayments of Local Obligations) among maturities such that the debt service on the Bonds which will remain Outstanding following such redemption will be equal to the debt service on the Local Obligations which will remain Outstanding following the redemption of the portion of the Local Obligations being redeemed, at a redemption price equal to one hundred percent (100%) of the principal amount of the Bonds which will be redeemed, together with accrued interest thereon to the date of redemption. Pursuant to the Fiscal Agent Agreements, the Local Obligations are subject to redemption prior to their stated maturity dates on any Interest Payment Date, hereinafter set forth, in whole, or in part in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, plus a premium on the principal amount of the Bonds to be redeemed, as follows: The optional redemption price of each Local Obligation which may be redeemed is as follows: Assessment District No. 92-1 (Tierravista) Redemption Date Redemption Price On or Prior to September 2, 2002 103% March 2, 2003 and September 2, 2003 102% March 2, 2004 and September 2, 2004 101% March 2, 2005 and thereafter 100% Assessment District No. 94-1 (BIGHORN) Redemption Date Redemption Price On or Prior to September 2, 1999 103% March 2, 2000 and thereafter 100% Community Facilities District No. 91-1 (Indian Ridge) Redemption Date Redemption Price October 1, 2002 to September 30, 2003 102% October 1, 2003 to September 30, 2004 101% October 1, 2004 and thereafter 100% The difference between the redemption premium on the Local Obligations and the Bonds will, upon a redemption of both, be deposited in the Revenue Fund. For a further discussion of the redemption provisions of the Local Obligations, see THE LOCAL OBLIGATIONS- Redemption Provisions"herein. -17- Surplus Assessment and Special Tax Collection to Local Obligation Reserve Fund Because of the timing of the issuance of the Local Obligations, the City expects to receive from the property owners in the Local Districts installments of Assessments and Special Taxes in tax year 1997-98 higher than that which is required to pay debt service on the Local Obligations on March 2, 1998 and September 2, 1998 (as to the Assessment Districts) and April 1, 1998 and October 1, 1998 (as to the Community Facilities District). As a result, the City shall use the surplus Assessments and Special Taxes received in each Assessment District and Community Facilities District to fund the Local Obligation Reserve Fund, not to exceed the Reserve Requirement for each Local Obligation. General Redemption Provisions When the Bonds are to be redeemed, the Trustee will give to the affected Owners written notice of the redemption of the Bonds. Notice will be mailed by first class mail, in a sealed envelope, postage prepaid, at least thirty (30) days but not more than sixty (60) days before the date fixed for redemption, (i) to the Owners of such Bonds, or portions thereof, so called for redemption, at their respective addresses as the same last appear on the Registration Books, (ii)to the Securities Depositories identified in the Indenture, and(iii) to one or more of the Information Services identified in the Indenture. Neither the failure of any Bond Owner to receive any notice so mailed nor any defect in such notice will affect the validity of the proceedings for redemption of any Bonds or the cessation of the accrual of interest thereon. The Trustee shall not be liable or responsible for giving notice of any redemption unless it receives notice of such redemption from the Authority at least forty five (45) days prior to the date of redemption. Whenever less than all the Bonds are to be redeemed on any one date, the Trustee will select the particular Bonds to be redeemed by lot and in selecting the Bonds for redemption the Trustee will treat each Bond of a denomination of more than five thousand dollars ($5,000) as representing that number of Bonds of five thousand dollars ($5,000) denomination which is obtained by dividing the principal amount of such Bond by five thousand dollars ($5,000), and the portion of any Bond of a denomination of more than five thousand dollars ($5,000) to be redeemed will be redeemed in an increment of five thousand dollars ($5,000). If any Bond or any portion thereof has been duly called for redemption and payment of the redemption price, together with unpaid interest accrued to the date fixed for redemption, has been made or provided for by the Authority, then interest on such Bond or such portion will cease to accrue from such date, and from and after such date such Bond or such portion will no longer be entitled to any lien, benefit or security under the Indenture, and the Owner thereof will have no rights in respect of such Bond or such portion except to receive payment of such redemption price, and unpaid interest accrued to the date fixed for redemption. -18- DEBT SERVICE SCHEDULE The semi-annual debt service on the Bonds is shown below: Principal Date Payment Interest Total April 1, 1998 October 1, 1999 April 1, 1999 October 1, 2000 April 1, 2000 October 1,2001 April 1,2001 October 1, 2002 April 1,2002 October 1, 2003 April 1, 2003 October 1, 2004 April 1, 2004 October 1,2005 April 1, 2005 October 1, 2006 April 1,2006 October 1, 2007 April 1, 2007 October 1, 2008 April 1, 2008 October 1,2009 April 1,2009 October 1, 2010 April 1,2010 October 1, 2011 April 1,2011 October 1, 2012 April 1, 2012 Total: -19- THE LOCAL OBLIGATIONS Generally The Local Obligations consist of refunding bonds issued for two Assessment Districts and one Community Facilities District. The value to lien ratios of all of the properties in these Local Districts are set forth in TABLE 9 herein. Some of the Local Districts have been subject to delinquencies in the payment of the installments of the original assessments or Special Taxes. See "Delinquencies in the Assessment Districts and Community Facilities District"below for a discussion of the delinquencies in the Assessment Districts and Community Facilities District. However, no delinquencies are included as a part of the Reassessments and Special Tax lien. The Assessment Districts and Community Facilities District, with a brief description of each, are described herein. See "APPENDIX D - MAPS OF THE ASSESSMENT DISTRICTS AND COMMUNITY FACILITIES DISTRICT"for information on the location of the Assessment Districts and Community Facilities District in the City. Assessment District No. 92-1 (Tierravlsta) The City is advance refunding the limited obligation Bonds for Assessment District No. 92-1 (Tierravista) through the levy of the Reassessments on the properties within Assessment District No. 92-1 (Tierravista). The refunding bonds constituting one of the Local Obligations are being issued in the principal amount of$1,815,000 and are to be purchased by the Authority from a portion of the proceeds of the Bonds. A portion of the proceeds of the Bonds used to purchase the refunding bonds and other funds will be deposited into an escrow fund to be held by First Trust of California, N.A., as the escrow agent, under the terms of an escrow agreement. Under the terms of the escrow agreement, funds in the escrow fund will be invested in federal securities and used to pay, in full, the outstanding principal, interest and redemption premium on the Assessment District No. 92-1 (Tierravista) Assessment Bonds on March 2, 1998. The amounts on deposit in the escrow fund on the date of sale and delivery of the Bonds, along with all investment earnings expected on said fund, are sufficient to redeem the entire outstanding principal, interest and redemption premium on the Assessment District No. 92-1 (Tierravista) Assessment Bonds on March 2, 1998, as verified by Emst & Young, LLP, Certified Public Accountants, Memphis, Tennessee. -20- The Local Obligations for Assessment District No. 92-1 (Tierravista) matures as shown below: Principal Date Payment Interest September 2, 1998 $ 75,000.00 8.200% March 2, 1999 September 2, 1999 80,000.00 6.400% March 2, 2000 September 2, 2000 85,000.00 6.600% March 2, 2001 September 2, 2001 90,000.00 6.700% March 2, 2002 September 2, 2002 95,000.00 6.800% March 2, 2003 September 2, 2003 100,000.00 6.900% March 2, 2004 September 2, 2004 105,000.00 7.600% March 2, 2005 September 2, 2005 110,000.00 7.600% March 2, 2006 September 2, 2006 120,000.00 7.600% March 2, 2007 September 2, 2007 130,000.00 7.600% March 2, 2008 September 2, 2008 140,000.00 7.600% March 2,2009 September 2, 2009 150,000.00 7.600% March 2, 2010 September 2, 2010 165,000.00 7.600% March 2, 2011 September 2,2011 180,000.00 7.600% March 2, 2012 September 2, 2012 190,000.00 7.600% Total: $1,815,000.00 Desert Aggregates, Inc., the developers of the Tierravista community, is a wholly owned subsidiary of Granite Construction, Inc. Granite Construction, Inc., is a diversified heavy civil contractor and construction materials producer. The company's corporate offices are located in Watsonville, California and has offices located throughout the state of California and in Arizona, Nevada, Utah, Texas, Georgia, Maryland and Florida. The company also has a minority interest in TIC Holdings, Inc., an international industrial contractor based in Colorado. -21- The company is traded publicly on the New York Stock Exchange (NYSE:GVA). Net income for 1996 was$27,348,000 on revenues of$928,799,000 for an increase of 3.8% over 1995. Desert Aggregates acquired the Tierravista property in 1994 and opened for sales in November 1995. The real estate development management team at Tierravista has over 40 years of combined experience in the home building and development industry. A majority of that experience was acquired in the Coachella Valley. As of November 13, 1997, Desert Aggregates have sold and closed 21 homes. There are currently nine homes in escrow. Two of those nine will close in November 1997 and one will close in December 1997. The others are scheduled to close the first quarter of 1998. A total of 35 homes have been constructed to date and there are ten homes currently under construction. The average valuation of the homes sold to date is$350,000. Assessment District No. 92-1 (Tierravista) was formed in 1992 and $2,298,980.05 aggregate principal amount of limited obligation bonds were issued and assessed upon 96 residential lots. The bonds financed various street, sewer and water improvements. All of the improvements have been completed. Assessment District No. 92-1 (Tierravista) consists of the following parcels of property with outstanding assessment liens thereon: Land Use Classification Number of Parcels Single Family Residential - Residence 35 Vacant, Residential Land 51 Total: 86 The District is located along the west line of Eldorado Drive approximately 2,640 lineal feet south of Country Club Drive. The Lakes Country Club (developed)to the north, the Vamer project (developed) to the south, the Primrose subdivision (developed) to the east and Indian Ridge Country Club (developed)to the west. The following table illustrates historical sales within the Tierravista Project. The investor must note that it is the current policy of Desert Aggregates, Inc., to pay off all outstanding assessment liens at the time of sale. The investor should not assume that the value of sales set forth below constitute any form of security for the Bonds. -22- TABLE 1 CITY OF PALM DESERT ASSESSMENT DISTRICT NO. 92-1 (TIERRAVISTA) HISTORICAL PROJECT SALES Total Homes Total Purchase Average Purchase Price Price 1993 1 $ 625,000 $ 625,000 1994 2 840,000 420,000 1995 1 425,000 425,000 1996 7 2,275,000 325,000 1997 (to date) 10 3,250,000 325,000 1997 (est. November& December) 3 $1,300,000 325,000 Only completed homes are sold at Tierravista and not vacant lots. Additionally, it is the policy of the developer to pay off underlying indebtedness of the assessment with proceeds from each sale. There is currently a 0% dollar assessment delinquency rate within Assessment District No. 92-1 (Tierravista). See "Assessment Delinquencies"herein. Assessment District No. 94-1 (BIGHORN) The City is advance refunding the limited obligation Bonds for the Assessment District No. 94-1 (BIGHORN),through the levy of the Reassessments on the properties within the Assessment District No. 94-1 (BIGHORN). The refunding bonds constituting one of the Local Obligations are being issued in the principal amount of $5,870,000 and are to be purchased by the Authority from a portion of the proceeds of the Bonds. A portion of the proceeds of the Bonds used to purchase the refunding bonds and other funds will be deposited into an escrow fund to be held by First Trust of Califomia, N.A., as the escrow agent, under the terms of an escrow agreement. Under the terms of the escrow agreement, funds in the escrow fund will be invested in open market securities and used to pay, in full, the outstanding principal, interest and redemption premium on the Assessment District No. 94-1 (BIGHORN) Assessment Bonds on March 2, 1998. The amounts on deposit in the escrow fund on the date of sale and delivery of the Bonds, along with all investment earnings expected on said fund, are sufficient to redeem the entire outstanding principal, interest and redemption premium on the Assessment District No. 94-1 (BIGHORN) Assessment Bonds on March 2, 1998, as verified by Emst & Young, LLP, Certified Public Accountants, Memphis, Tennessee. -23- The Local Obligations for Assessment District No. 94-1 (BIGHORN) matures as shown below: Principal Date Payment Interest September 2, 1998 $125,000.00 5.950% March 2, 1999 September 2, 1999 125,000.00 6.100% March 2, 2000 September 2, 2000 135,000.00 6.200% March 2, 2001 September 2, 2001 145,000.00 6.300% March 2, 2002 September 2, 2002 155,000.00 6.400% March 2, 2003 September 2, 2003 160,000.00 6.500% March 2, 2004 September 2, 2004 175,000.00 7.250% March 2, 2005 September 2, 2005 190,000.00 7.250% March 2, 2006 September 2, 2006 200,000.00 7.250% March 2, 2007 September 2, 2007 215,000.00 7.250% March 2, 2008 September 2, 2008 230,000.00 7.250% March 2, 2009 September 2, 2009 250,000.00 7.250% March 2, 2010 September 2, 2010 270,000.00 7.250% March 2, 2011 September 2, 2011 285,000.00 7.250% March 2, 2012 September 2, 2012 305,000.00 7.250% March 2, 2013 September 2, 2013 330,000.00 7.625% March 2, 2014 September 2, 2014 355,000.00 7.625% March 2, 2015 September 2, 2015 380,000.00 7.625% March 2, 2016 September 2, 2016 410,000.00 7.625% March 2, 2017 September 2, 2017 445,000.00 7.625% -24- Principal Date Payment Interest March 2, 2018 September 2, 2018 475,000.00 7.625% March 2, 2019 September 2, 2019 510,000.00 7.625% Total: $5,870,000.00 BIGHORN Development L.P., is a limited partnership whose investors consist of members and residents of BIGHORN. On April 18, 1996 the Partnership completed a successful acquisition of BIGHORN, an exclusive golf community located in south Palm Desert. Following the BIGHORN acquisition, BIGHORN Development L.P., and Safeco Properties, Inc., joined forces in combining BIGHORN Golf Club with the additional 18-hole championship course to be built on the neighboring 450 acres owned by a subsidiary of Safeco Properties. The combined communities will be known as BIGHORN, with the current course being named The Mountains at BIGHORN and the new course being named The Canyons at BIGHORN. Assessment District No. 94-1 (BIGHORN) was formed in 1994 and $6,945,000 aggregate principal amount of limited obligation bonds were issued. Assessment District No. 94-1 (BIGHORN) financed the widening of Highway 74 and water improvements benefiting 645 acres. All of the 94-1 improvements have been completed. Assessment District No. 94-1 (BIGHORN) consists of the following parcels of property upon which assessment liens remain outstanding: Land Use Classification Number of Parcels Single Family Residential - Residence 0 Vacant Desert Land 8 Vacant, Residential Land 83 Total: 91 Assessment District No. 94-1 (BIGHORN) is located on the south side of Cahallia Way along both the east and west sides of Highway 74 in the southem area of the City and is bounded by the Santa Rosa Mountain foothills to the west, Portola Avenue to the east and Mesa View Drive to the north. The property within Assessment District No. 94-1 (BIGHORN) subject to the levy of an Assessment is currently located on 91 County Assessor's Parcels. The assessable parcels include 83 finished lots in the BIGHORN Project. The three remaining parcels in the BIGHORN Project has been divided into 34 finished lots, and the five parcels in the Suncreek property is proposed for 72 finished lots. Assessment District No. 94-1 (BIGHORN) includes two distinct developments. The first is the BIGHORN Project, a 645 acre planned development community. The Developer has currently sold 208 -25- lots in the project, and 107 homes have either been constructed or are under construction, with an estimated average assessed value of$1,300,000. The Developer plans on selling the remaining finished lots to buyers for construction of custom homes, and completing an additional 49 finished lots on the remaining acreage. The following table is illustrative only and evidences the sales prices of unimproved lots and improved lots with residential structures. The investor must note that it is the current policy of BIGHORN Development, L.P., as the major developer of BIGHORN to pay off all outstanding assessment liens at the time of sale. The investor should not assume that the values of sales set forth below constitutes any form of security for the Bonds. CITY OF PALM DESERT ASSESSMENT DISTRICT NO. 94-1 (BIGHORN) HISTORICAL PROJECT SALES Total Purchase Average Purchase Total Lots Price Price 1991 Homesites 56 $25,436,438 $454,222 Parcels 1 4,200,000 4,200,000 Total 1991 Sales 57 $29,636,438 1992 Homesites 19 $11,309,950 $595,261 Custom Homes 3 3,810,000 1,270,000 Parcels 1 1,800,000 1,800,000 Total 1992 Sales 23 $16,919,950 1993 Homesites 9 $4,292,438 $476,938 Custom Homes 3 2,690,000 896,667 Parcels 1 7.609,750 7,609,750 Total 1993 Sales 13 $14,592,188 1994 Homesites 2 802,500 401,250 Custom Homes 0 0 0 Total 1994 Sales 2 802,500 1995 Homesites 6 2,510,000 418,333 Custom Homes 4 3,870,000 967,500 Total 1995 Sales 10 6,380,000 -26- Total Purchase Average Purchase Total Lots Price Price 1996 Custom Homes 2 2,075,000 1,037,500 Homesites 12 4,150,000 345,883 Parcels 1 1,200,000 1,200,000 Total 1996 Sales Source: BIGHORN Development LP There is currently a .19% dollar assessment delinquency rate within Assessment District No. 94-1 (BIGHORN). See'Assessment Delinquencies"herein. RECENT HOME AND LOT SALES November 15, 1995 -October 17, 1997 Assessment District 94-1 (BIGHORN) The following table is illustrative only and evidences the sales prices of unimproved lots and improved lots with residential structures. The investor must note that it is the current policy of BIGHORN Development, L.P., as the major developer of BIGHORN to pay off all outstanding assessment liens at the time of sale. The investor should not assume that the values of sales set forth below constitutes any form of security for the Bonds. • TABLE 3 Sales Date Address Structure Lot Size Sales Price 10/17/97 148 Tamit Place 15,539 sqft $ 579,000 10/08/97 245 Kiva Court 2 bdrm, 3.0 ba 571,842 09/18/97 106 Netas Drive 16,117 sqft 330,000 09/08/97 160 Wikil Place 3 bdrm, 3.5 ba 710,000 08/29/97 18 Kiva Court 13,504 sqft 169,000 07/24/97 137 Navtem Place 3 bdrm, 3.5 ba 985,000 06/30/97 107 Netas Drive 4 bdrm, 4.5 ba 1,600,000 06/03/97 143 Tamit Place 13,939 sqft 320,000 05/27/97 148 Wikil Place 3 bdrm, 3.5 ba 770,000 04/15/97 33 Wanish Place 23,465 sqft 437,000 04/07/97 130 Wanish Place 4 bdrm, 5.5 ba 1,700,000 03/31/97 100 Sivat 4 bdrm, 4.5 ba 2,500,000 03/26/97 136 Wikil Place 3 bdrm, 3.5 ba 750,000 02/09/97 124 Menil 3 bdrm, 3.5 ba 1,350,000 -27- Sales Date Address Structure Lot Size Sales Price 11/06/96 107 Tamit Place 3 bdrm, 3.5 ba 1,375,000 09/17/96 161 Kiva Court 14,941 sqft 300,000 08/22/96 148 Chalaka 5 bdrm, 5.0 ba 1,200,000 07/30/96 155 Kiva Court 3 bdrm, 3.5 ba 1,090,000 03/08/96 148 Tamit Place 15,539 sqft 550,000 01/12/96 191 Kiva Court 5 bdrm, 5.0 ba 1,495,000 11/15/95 106 Sivat Drive 4 bdrm, 4.5 ba 1,850,000 Community Facilities District No. 81-1(Indian Ridge) The City is advance refunding the limited obligation bonds for the Community Facilities District No. 91-1 (Indian Ridge) through the levy of the Special Taxes on the properties within the Community Facilities District No. 91-1 (Indian Ridge). The refunding bonds constituting one of the Local Obligations are being issued in the principal amount of$23,340,000 and are to be purchased by the Authority from a portion of the proceeds of the Bonds. A portion of the proceeds of the Bonds used to purchase the refunding bonds and other funds will be deposited into an escrow fund to be held by First Trust of California, N.A., as the escrow agent, under the terms of an escrow agreement. Under the terms of the escrow agreement, funds in the escrow fund will be invested in federal securities and used to pay, in full, the outstanding principal, interest and redemption premium on the Community Facilities District No. 91-1 (Indian Ridge) bonds on April 1, 1998. The amounts on deposit in the escrow fund on the date of sale and delivery of the Bonds, along with all investment earnings expected on said fund, are sufficient to redeem the entire outstanding principal, interest and redemption premium on the Community Facilities District No. 91-1 (Indian Ridge) bonds on April 1, 1998, as verified by Emst &Young, LLP, Certified Public Accountants, Memphis, Tennessee. The Local Obligations for Community Facilities District No. 91-1 (Indian Ridge), Series 1992A and 1995 matures as shown below: Series 1992A Principal Date Payment Interest October 1, 1998 $ 265,000.00 6.250% April 1, 1999 October 1, 1999 280,000.00 6.500% April 1, 2000 October 1, 2000 295,000.00 6.750% April 1, 2001 October 1, 2001 320,000.00 6.900% April 1, 2002 October 1, 2002 340,000.00 7.000% April 1, 2003 _28- Principal Date Payment Interest October 1, 2003 365,000.00 7.100% April 1, 2004 October 1, 2004 390,000.00 7.200% April 1, 2005 October 1, 2005 415,000.00 7.300% April 1, 2006 October 1, 2006 450,000.00 7.400% April 1, 2007 October 1, 2007 480,000.00 7.600% April 1, 2008 October 1, 2008 515,000.00 7.600% April 1, 2009 October 1, 2009 555,000.00 7.600% April 1, 2010 October 1, 2010 600,000.00 7.600% April 1, 2011 October 1, 2011 645,000.00 7.600% April 1, 2012 October 1, 2012 695,000.00 7.600% April 1, 2013 October 1, 2013 745,000.00 7.600% April 1, 2014 October 1, 2014 805,000.00 7.600% April 1, 2015 October 1, 2015 865,000.00 7.600% April 1, 2016 October 1, 2016 930,000.00 7.600% April 1, 2017 October 1, 2017 1,000,000.00 7.600% Total: $10,955,000.00 Series 1995 Principal Date Payment Interest October 1, 1998 $ 255,000.00 5.000% April 1, 1999 October 1, 1999 270,000.00 5.250% April 1, 2000 October 1, 2000 280,000.00 5.500% -29- Principal Date Payment Interest April 1, 2001 October 1, 2001 300,000.00 5.700% April 1, 2002 October 1, 2002 315,000.00 5.900% April 1, 2003 October 1, 2003 335,000.00 6.000% April 1, 2004 October 1, 2004 355,000.00 6.150% April 1, 2005 October 1, 2005 375,000.00 6.300% April 1, 2006 October 1, 2006 400,000.00 6.450% April 1, 2007 October 1, 2007 425,000.00 6.600% April 1, 2008 October 1, 2008 455,000.00 6.700% April 1, 2009 October 1, 2009 485,000.00 6.800% April 1, 2010 October 1, 2010 515,000.00 6.900% April 1, 2011 October 1, 2011 550,000.00 6.950% April 1,2012 October 1, 2012 590,000.00 7.000% April 1, 2013 October 1, 2013 630,000.00 7.000% April 1, 2014 October 1, 2014 675,000.00 7.000% April 1, 2015 October 1, 2015 720,000.00 7.000% April 1, 2016 October 1, 2016 775,000.00 7.125% April 1, 2017 October 1, 2017 830,000.00 7.125% April 1,2018 October 1, 2018 885,000.00 7.125% April 1, 2019 October 1, 2019 950,000.00 7.125% April 1, 2020 October 1, 2020 1,015,000.00 7.125% Total: $12,385,000.00 -30- Sunrise Desert Partners, a California Limited Partnership (the °Developer") is currently in the process of developing the property within Community Facilities District No. 91-1 (Indian Ridge) (the -District"). The development, which is known as Indian Ridge Country Club (the "Development"), is currently planned to include approximately 1,137attached and detached single family homes, two 18-hole golf courses, a sports club with a health spa and tennis facilities, a golf clubhouse and sports clubhouse. The Developer has offered four different housing products ranging in size from 1,538 square feet to 3,562 square feet, with prices ranging from $190,000 to $590,000. All homes are contiguous to one golf course and command views of the golf courses, lakes, waterfalls, landscaping of the Development, as well as the mountains beyond. Currently, one 18-hole golf course, the driving range, one hole of the second golf course, the sports clubhouse, seven tennis courts, and approximately fifty percent of the infrastructure have been completed to date. The Developer began construction on the golf clubhouse, eight holes of the second golf course, and the remaining seven tennis courts in January 1997. These facilities will open in late 1997. The remaining nine holes of the second golf course will be constructed some time in 1999. Total build out of the Development is expected to be around the year 2002. Community Facilities District No. 91-1 (Indian Ridge) was formed in 1992 and of the total $35,000,000 of bonds authorized by the qualified elections (the single property owner), $11,870,000 aggregate principal amount of limited obligation special tax bonds were issued originally in 1992 (Series 1992A) and $12,385,000 of special tax bonds were issued in 1995 (Series 1995). Community Facilities District No. 91-1 (Indian Ridge) financed various off-site public improvements, including street and water improvements, and paid fees required by public agencies for sewer, water, schools, parks, traffic mitigation and other related fees, charges and expenses benefiting 641 acres. Community Facilities District No. 91-1 (Indian Ridge) consists of the following parcels of property with Special Tax liens: Land Use Classification Number of Parcels A. Developed Residential Detached 3,599 <SF> 3,100 74 Detached 3,099<SF> 2,600 100 Detached 2,599 <SF> 2,100 30 Detached <SF> 2,500 2 Attached 2,499 <SF> 2,100 113 Attached 2,099 <SF> 1,700 80 Attached 1,699 <SF> 1,300 8 B Non-Residential Undeveloped 24 Golf Course 9 As of September 30, 1997, 516 homes have been sold at a total sales price of approximately $182,600,000. Of those homes, 444 homes have closed escrow with the remaining 74 homes under construction. -31- The chart below is a summary of the status of construction loans that have been obtained from The Bank of Tokyo-Mitsubishi Ltd., as of September 30, 1997 Type of Loan Number of Homes Loan Amount Current Balance Land Development N/A $ 23,000,000 $ 0 Land Development N/A 21,000,000 8,654,000 Construction 238 56,167,428 0 Construction 74 13,787,250 0 Construction 24 6,865,600 0 Construction 19 4,505,250 0 Construction 85 26,422,500 0 Construction 9 6,491,250 0 Construction 132 44,079,000 12,202,000 TOTAL `31$ $202.318 178 $20.856.000 As of September 30, 1997, the Developer owned approximately 535 acres. Approximately 100 acres have reached the Planned Development Stage. 254 acres remained to be developed. There is currently a 1.18% dollar special tax delinquency rate within Community Facilities District No. 91-1 (Indian Ridge). See "Local Districts Delinquencies"herein. RECENT HOME SALES December 1, 1995 -November 7, 1997 Community Facilities District No. 91-1 (Indian Ridge) The following table evidences recent sales prices of improved lots with residential structures constructed thereon. The sales price values set forth does constitute a portion of the security for the Bonds. TABLE 4 Sales Date Address Structure Sales Price 11/07/97 804 Red Arrow Trail 2 bdrm, 2.0 ba $203,500 11/03/97 308 Desert Holly Drive 3.bdrm, 2.0 ba 246,000 10/31/97 471 Falcon View 3 bdrm, 3.5 ba 429,000 10/06/97 891 Deer Haven 3 bdrm, 3.5 ba 472,500 09/30/97 272 Eagle Dance 3 bdrm, 3.5 ba 349,000 09/18/97 817 Box Canyon 3 bdrm, 3.5 ba 337,000 09/16/97 525 Falcon View 2 bdrm, 2.0 ba 180,000 08/20/97 483 Falcon View 3 bdrm, 3.0 ba 347,500 -32- 7 Sales Date Address Structure Sales Price 08/08/97 521 Red Arrow Trail 4 bdrm, 3.75 ba 559,000 08/01/97 460 Desert Holly Drive 2 bdrm, 2.0 ba 227,500 07/31/97 720 Red Arrow Trail 2 bdrm, 2.0 ba 219,000 07/23/97 518 Red Arrow Trail 3 bdrm, 3.5 ba 275,000 07/09/97 512 Red Arrow Trail 3 bdrm, 2.0 ba 310,000 07/07/97 805 Box Canyon 3 bdrm, 3.5 ba 309,000 07/02/97 925 Box Canyon 3 bdrm, 3.0 ba 330,000 06/13/97 931 Box Canyon 3 bdrm, 3.5 ba 286,000 05/30/97 278 Eagle Dance 3 bdrm,2.0 ba 365,000 05/19/97 762 Red Arrow Trail 3 bdrm, 3.5 ba 270,000 05/08/97 41865 Harrison Drive 4 bdrm, 3.5 ba 365,000 04/28/97 555 Falcon View 3 bdrm, 3.5 ba 305,000 04/24/97 733 Box Canyon 3 bdrm, 3.0 ba 240,000 04/21/97 738 Red Arrow Trail 3 bdrm, 3.5 ba 340,000 04/17/97 810 Deer Haven 3 bdrm, 3.0 ba 352,500 04/07/97 830 Deer Haven 3 bdrm, 3.0 ba 365,000 03/17/97 459 Falcon View 3 bdrm, 3.5 ba 320,000 03/10/97 213 Desert Holly Drive 3 bdrm, 3.5 ba 575,000 03/04/97 542 Red Arrow Trail 3 bdrm, 3.5 ba 290,000 02/28/97 550 Desert Holly Drive 2 bdrm, 2.0 ba 190,000 02/26/97 840 Red Arrow Trail 3 bdrm, 2.0 ba 314,000 02/21/97 241 Arrowhead 3 bdrm, 3.0 ba 449,000 02/14/97 527 Desert Holly Drive 3 bdrm, 3.5 ba 329,000 01/31/97 484 Desert Holly Drive 3 bdrm, 2.0 ba 306,000 01/07/97 431 Desert Holly Drive 3.bdrm, 2.0 ba 280,000 10/16/96 831 Red Arrow Trail 3 bdrm, 3.5 ba 400,000 07/24/96 798 Red Arrow Trail 3 bdrm, 3.5 ba 244,700 07/03/96 41770 Harrison Drive 4 bdrm, 3.5 ba 404,000 06/28/96 691 Box Canyon 2 bdrm, 2.0 ba 195,000 06/10/96 440 Desert Holly Drive 3 bdrm, 3.5 ba 315,000 04/01/96 551 Red Arrow Trail 4 bdrm, 4.5 ba 570,000 03/25/96 661 Box Canyon 3 bdrm, 1.75 ba 240,000 03/19/96 853 Box Canyon 3 bdrm, 3.5 ba 333,333 03/15/96 697 Box Canyon 3 bdrm, 3.5 ba 315,000 03/11/96 901 Box Canyon 3 bdrm, 3.5 ba 345,000 03/06/96 453 Falcon View 3 bdrm, 1.75 ba 275,000 02/29/96 542 Red Arrow Trail 3 bdrm, 3.5 ba 305,000 02/23/96 41800 Jones Road 4 bdrm, 4.0 ba 434,700 02/16/96 506 Red Arrow Trail 3.bdrm, 2.0 ba 275,000 02/09/96 720 Red Arrow Trail 2 bdrm, 2.0 ba 195,000 02/02/96 858 Red Arrow Trail 3 bdrm, 3.5 ba 299,700 12/21/95 913 Box Canyon 3 bdrm, 3.5 ba 281,000 12/01/95 660 Red Arrow Trail 3 bdrm, 3.5 ba 259,700 -33- Local Delinquencies Certain parcels within the Local Districts have current and past special assessment and special tax delinquencies, as shown below in TABLE 5, TABLE 6, and TABLE 7. TABLE 5 DELINQUENCIES IN ASSESSMENT DISTRICT NO. 92-1 (TIERRAVISTA) Percentage of Total Dollars Dollars Total Dollars Total Parcels Parcels Tax Year Levied Delinquent Delinquent Levied Delinquent -NONE — TABLE 6 DELINQUENCIES IN ASSESSMENT DISTRICT NO. 94-1 (BIGHORN) Percentage of Total Total Dollars Dollars Total Dollars Parcels Parcels Tax Year Levied Delinquent Delinquent Levied Delinquent 1995/96 Installment 1 313,956.17 0.00 0.00% 91 0 1995/96 Installment 2 313,956.17 1,191.66 0.38% 91 1 TOTAL $627,912.34 $1,191.66 0.19% Special Tax Delinquencies Certain parcels within the Community Facilities District No. 91-1 (Indian Ridge) have current and past property special tax delinquencies, as shown below in TABLE 7. -34- TABLE 7 DELINQUENCIES IN COMMUNITY FACILITIES DISTRICT NO. 91-1 (INDIAN RIDGE) Percentage of Total Total Dollars Dollars Total Dollars Parcels Parcels Tax Year Levied Delinquent Delinquent Levied Delinquent 1996/97 Installment 1 $ 549,214.88 $ 5,850.00 1.07% 371 6 1996/97 Installment 2 549,214.88 7,075.00 1.29% 371 7 TOTAL $1,098,429.76 $12,925.00 1.18% The principal and interest delinquencies shown above, as well as all penalties, costs and interest on said delinquencies are not included as part the refunding of the Local Obligations on those properties which are delinquent. The resolutions for the refunded bonds of the Assessment Districts each contained a covenant to institute foreclosure proceedings on all delinquent parcels within 150 days of the delinquency, subject to certain minimum dollar thresholds. The resolution for the refunded special tax bonds of the Community Facilities District each contain a covenant that it will determine, no later than February 15 and June 15 of each year, whether or not any delinquencies exist in Special Taxes payments and will, no later than April 1 (with respect to the February 15 determination date) or August 1 (with respect to the June 15 determination date) commence foreclosure proceedings against all parcels with delinquent Special Taxes installments, subject to certain minimum dollar thresholds. See 'BONDHOLDERS' RISKS- Local District Delinquencies"herein. Method of Reassessment MuniFinancial, Temecula, Califomia, is acting as the assessment engineer for all four Local Districts. The City hired MuniFinancial to prepare separate reports for each Local District showing the amount of the Reassessment and Special Taxes for each property in the Local Districts and the costs savings within each Local District by reducing the original assessment and special taxes by the same percentage. The individual original assessments and special taxes were spread among the various parcels of land with each Local District consistent with the benefit conferred on each parcel as a result of the applicable improvement project. Prepayment of Reassessments The City has declared that the Reassessments may be prepaid under Part 11.1 of Division 10 of the California Streets and Highways Code. Under Part 11.1, the owner of Reassessed land, except land which has been ordered to judicial foreclosure sale, may prepay all or a portion of the Reassessment and -35- remove all or a part of the lien of the Reassessment by paying to the Treasurer of the City all of the following: (a) The amount of any delinquent installments of principal and interest, together with penalties accrued to the date of prepayment; (b) The unpaid, nondelinquent principal of the Reassessment, including principal posted to the tax roll for the current fiscal year but not yet paid, if prepayment is in full, or a portion of the unpaid, nondelinquent principal of the Reassessment in increments of$5,000 if prepayment is in part; (c) An allowance for redemption premium, calculated by multiplying the amount of the unmatured principal being paid (which excludes principal due during the fiscal year of prepayment) by the redemption premium percentage stated in the Local Obligations; (d) A reasonable fee, fixed by the Treasurer of the City, for the cost of administering the prepayment and advance redemption of the Local Obligations; (e) Interest accrued to the next call date of the Local Obligations, which is the next interest payment date which is not less than ninety (90) days after the date of prepayment (credit shall be given, or a refund provided, for installments of interest posted to the current tax roll and actually paid); and (f) A credit for the appropriate Local Obligation Reserve Fund calculated pursuant to Part 11.1 of the Streets and Highways Code. The Treasurer of the City after making the required deposits of (i) the administrative fee in the general fund of the City, (ii) delinquent principal and interest, and penalties, to the Redemption Fund for payment on the appropriate Local Obligations or replenishment of the appropriate Local Obligation Reserve Fund, (iii) the installment of principal due in the fiscal year of prepayment and the accrued interest to the next call date to the appropriate Redemption Fund for payment on the appropriate Local Obligation,will apply the balance of the prepaid amount to advance the maturity of the appropriate Local Obligation to the next call date in the maximum amount for which principal and redemption premiums may be paid in full from said prepayment amounts. This may result in optional redemption of all or a portion of the appropriate Local Obligation, which may result in the mandatory redemption of all or a portion of the Bonds. See REDEMPTION OF BONDS" herein. Prepayment and Satisfaction of Special Tax Obligation Any property owner in Community Facilities District No. 91-1 (Indian Ridge) who desires to prepay the Special Tax on a particular parcel shall notify the Finance Director of the City in writing of such intention, and upon payment by such property owner of a non-refundable deposit in an amount determined by the Finance Director of the City (to be applied against the "Prepayment Amount"), the Finance Director of the City shall cause to be determined the amount of prepayment, which determination shall be made no more than seventy-five (75) days and no less than forty-five (45) days prior to the expected date of prepayment (the "Prepayment Date"). The Prepayment Amount shall be computed as follows: -36- (a) Compute the present value of the Parcel's remaining payments of the Maximum Special Tax at the weighted average yield' on Bonds issued for Community Facilities District No. 91-1 (Indian Ridge). (b) Add the following amount to (a) above: (i) Call premium as required in the fiscal agents agreement or supplement thereof. (c) Subtract the following amount from (b) above: (i) The applicable portion of the Parcel's pro rata share of the bond reserve fund of the bonds issued for Community Facilities District No. 91-1 (Indian Ridge). (d) Add the following amounts to (c) above to determine the Parcels Prepayment Amount: (i) Unpaid Special Taxes which may have been enrolled on the Assessor's tax roll; (ii) Interest and penalties, if applicable, which may be associated with unpaid Special Taxes; and (iii) An administrative fee to cover the costs incurred by Community Facilities District No. 91- 1 (Indian Ridge) associated with calculating the amount of prepayment, redeeming bonds, and preparing amended tax bill. Notwithstanding the foregoing, no prepayment shall be made on any Parcel of property in Community Facilities District No. 91-1 (Indian Ridge) until such time as no more Bonds will be issued by the City for Community Facilities District No. 91-1 (Indian Ridge), as determined by the City Council. Additional Assessments and Special Taxes In addition, as a part of the Local Districts, all properties with outstanding Reassessments or Special Taxes are being charged additional amounts to pay for county collection charges, the fees of MuniFinancial (who is also the City's special district administrator) and City administrative expenses. During tax year 1997-98, the additional charges are 3.22% for Assessment District No. 92-1 (Tierravista), 1.53% for Assessment District No. 94-1 (BIGHORN), and 1.7% for Community Facilities District No. 91-1 (Indian Ridge). The projected costs associated with each Local District for the next year are levied annually. Since the levy is based on the following year's projected costs, the amount may vary from year to year. See °BONDHOLDERS' RISKS° herein. Redemption Provisions of the Local Obligations The Local Obligations issued for Assessment District No. 92-1 (Tierravista) and Assessment District No. 94-1 (BIGHORN) may be called for redemption prior to maturity on any March 2 or September 2 upon payment of the principal amount to be redeemed, plus accrued interest to the date of Average yield means that amount which when computing the present worth of all payments and interest produces an amount equal to the face value of the bonds. -37- redemption, plus a premium on the principal amount of the refunding bonds to be redeemed. See "MANDATORY REDEMPTION FROM OPTIONAL REDEMPTION OF LOCAL OBLIGATIONS" herein. The Local Obligations issued for Community Facilities District No. 91-1 (Indian Ridge) may be called for redemption prior to maturity on any April 1 or October 1 upon payment of the principal amount to be redeemed, plus accrued interest to the date of redemption, plus a premium on the principal amount of the refunding bonds to be redeemed. See "MANDATORY REDEMPTION FROM OPTIONAL REDEMPTION OF LOCAL OBLIGATIONS" herein. An authorized officer of the City shall give the Fiscal Agent written notice of the City's intention to redeem Local Obligations not less than sixty (60) days prior to the applicable redemption date (however, such notice need not be given if the Local Obligations are to be purchased in lieu of redemption). The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Authority, as the registered owner of the Local Obligations; 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 redemption of such Local Obligations. Notwithstanding the foregoing, so long as the Authority is the owner of the Local Obligations, the Authority may, by written waiver filed with the Fiscal Agent, waive receipt of notice of any redemption of the Local Obligations. In the event of a redemption of purchase in lieu of redemption of all or any portion of a Local Obligation, the Fiscal Agent shall deposit in the appropriate Redemption Fund moneys in an amount equal to the redemption price of said Local Obligations being redeemed or purchased on or before the fifteen (15th) day of the month preceding the Interest Payment Date upon which said Local Obligations are to be redeemed or purchased. For each issue of Local Obligations separately, whenever less than all of the Local Obligations are to be redeemed, the Fiscal Agent shall select the maturities of the Local Obligations for redemption in such a way that the ratio of that outstanding Local Obligations to the original issued amount of the Local Obligations shall be approximately the same in each maturity of the Local Obligations insofar as possible, and shall select Local Obligations for redemption within each maturity of the Local Obligations by lot. In lieu of payment at maturity or redemption of the Local Obligations, moneys in the Redemption Fund for any Local Obligations may be used and withdrawn by the Fiscal Agent, upon written instructions from the Treasurer of the City, for purchase of all or any portion of that Local Obligations, at public or private sale as and when, and at such prices (including brokerage or other charges) as the Treasurer may determine to be appropriate, but in no event may the Local Obligations be purchased at a price in excess of the principal amount thereof, plus interest to the date of purchase. Amendment or Modification of the Local Obligations The Authority, the Trustee and the City, as applicable, may at any time amend or modify any of the Local Obligations or the applicable Fiscal Agent Agreement, but only if certain provisions of the -38- Indenture regarding the Trustee are satisfied and (a) if the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding to such amendment or modification; provided, however, that no such amendment or modification shall (i) extend the maturity of or reduce the amount of interest or principal payments on the Local Obligations, or otherwise alter or impair the obligation of the City to pay the principal, interest or prepayment premiums on the Local Obligations at the time and place and at the rate and in the currency provided in the Indenture, without the express written consent of the Owner of each affected Bond (ii) reduce the percentage of Bonds required for the written consent to any such modification or amendment, or (iii)without its written consent thereto, modify any of the rights or obligations of the Trustee; or(b) without the consent of the Trustee of any of the Bond Owners, if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreement of the City contained in such Local Obligations or Fiscal Agent Agreements other covenants and agreements thereafter to be observed, or to be confirmed upon the City, so long as such limitation or surrender of such rights or powers shall not materially adversely affect the Owners of the Bonds, in the opinion of Bond Counsel filed with the Authority and the Trustee. (ii) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in such Local Obligations or Fiscal Agent Agreements or in any other respect whatsoever as the City may deem necessary or desirable, provided that under any circumstances such modification or amendments shall not materially adversely affect the interests of the Owners of the Bonds, in the opinion of Bond Counsel filed with the Authority and the Trustee; or (iii) to amend any provision relating to the Internal Revenue Code of 1986, as amended, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any of the Bonds under the Internal Revenue Code of 1986, as amended, in the opinion of Bond Counsel filed with the Authority and Trustee. Nothing shall prevent the City and/or the Authority from entering into an amendment or modification of any Local Obligation or Fiscal Agent Agreement which solely affects a particular Bond or Bonds all of the Owners of which shall have consented to such amendment or modification. Sale of Local Obligations by the Authority The Authority may sell a Local Obligation upon written direction to the Trustee so long as the proceeds of such sale are placed in an appropriate fund to pay debt service on the Bonds, and such proceeds are sufficient to discharge all of the Authority's obligations on the portion of the Bonds represented by such Local Obligation. Concentration of Ownership Approximately 94.8 % of the proposed Reassessments will be levied on land owned by 12 landowners. While the mean average assessed value-to-lien ratio for the parcels subject to the Reassessments on the land owned by these 12 landowners is approximately 3.69:1, concentration of -39- ownership has elements of risk. See "BONDHOLDERS' RISKS" herein. Set forth below in TABLE 6 are the 12 landowners whose land is being reassessed for approximately 94.8% of the proposed Reassessments. All percentages have been rounded to the nearest whole percentile. Approximately 53.27% of the proposed Special Taxes will be levied on land owned by 6 landowners. Concentration of ownership has elements of risk. See °BONDHOLDERS' RISKS° herein. All percentages have been rounded to the nearest whole percentile. Except for the identity of the concentrated landowners, no representations of any kind are made in this Official Statement regarding (i) any individual property owner or (ii) the financial status of any individual property owners. The absence of information on the property owners does not imply that the property owners are financially able or willing to pay the installments of Reassessments and Special Taxes. The Authority and the City cannot predict the property owners' ability or willingness to pay the installments of Reassessments and Special Taxes. TABLE 8 CONCENTRATION OF OWNERSHIP Top 12 Owners by Reassessment Amount Amount of Name Number of Parcels Assessment BIGHORN Development L.P. 80 $3,656,476.37 Altamira Venture 5 1,763,590.62 • Desert Aggregates Inc. 79 1,626,848.84 GI Land Holdings Ltd Partnership 3 70,449.76 Krakus Ventures Ltd 1 23,483.25 Alan Bjorklund & Marguerite Bjorklund 1 20,593.02 Barry Rochlin &Carol Rochlin 1 20,593.02 David Ankeny & Geraldine Ankeny 1 20,593.02 Donald Cortum & David Jacob 1 20,593.02 Gayle Anderson & Lisa Ballinger 1 20,593.02 Joseph Dibiase &Alice Dibiase 1 20,593.02 Robert Friedman 1 20,593.02 Grand Total: 175 $7,285,000.00 Top 6 Owners by Special Tax Amount Amount of 1997/98 Name Special Taxes Sunrise Desert Partners $1,130,891.32 Lowell Milken and Sandra Milken 6,600.00 Vivian Soikkeli 5,400.00 Albert Hooning and Patricia Hooning 4,550.00 John Secton and Patricia Secton 4,250.00 Richard Giauque and Kaye Giauque 3,744.84 -40- Because of the concentration of ownership, failure of the property owners to pay installments of Reassessment and Special Taxes when due could result in a default in payment of the principal of and interest on the Local Obligations. See"BONDHOLDERS' RISKS- Concentration of Ownership"herein. ASSESSED VALUE-TO-LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS Methods of Valuation Because of the large number of parcels in the Local Districts, the value of the parcels for purpose of the value-to-lien analysis is the assessed value of all of the property as shown on the latest equalized assessment roll of the County of Riverside. The assessed valuation of the property in the Local Districts is one percent (1%) of the °full-market value" of the property at the date of determination. The date of determination for all of the parcels was initially tax year 1977-78. The assessed valuation of any individual parcel of property has only been and may only be increased under any one of the following three circumstances: A. Up to two percent (2%) per year for inflation. B. Upon new construction. C. Upon change of ownership. Value-to-Lien Ratio The following TABLE 9 sets forth for each Local District the principal balance of the outstanding bond debt, the total assessed valuation of land and improvements, and the ratio of outstanding bond debt to total assessed valuation. TABLE 9 Summary of Assessed Valuation Ratios Local District Outstanding Bond Total Assessed Ratio of Bond Principal Valuation. Debt to Assessed Valuation Assessment District 92-1 $ 1,815,000 $ 6,127,911 3.376 Assessment District 94-1 5,870,000 22,258,861 3.790 Community Facilities District 91-1 23,340,000 145,455,549 7.447 Total: $31,025,000 $173,832,281 = 5.6029 Average As a result of the restrictions on the reassessment of property, the assessed valuation of many of the parcels which have not had any new construction or which have not had a recent change of ownership may be severely understated. Despite the probably understatement of assessed valuation, the Local Districts have an overall assessed valuation of $173,832,281 which is a 5.60 to 1 assessed -41- value to lien ratio. However, the investor should not assume that the assessed valuation is a true indicator of the market value of the parcels; the value of the parcels at a sale may be less or more than the assessed value of the property. In addition, real estate market conditions can change rapidly which could adversely affect the valuation of the parcels. The land within the Local Districts secures the Reassessments and Special Taxes which, in tum, secures the portion of the Bonds corresponding to the amounts of Bond proceeds used to purchase the Local Obligations. However, the land within the Local Districts does not secure the portion of the Bonds corresponding to the amount of Bond proceeds expended on the Underwriter's discount and costs of issuance. See "BONDHOLDERS' RISKS- Non-Asset Bonds Risks"herein. Set forth below in TABLE 10 are a number of categories of assessed value-to-lien ratios. Opposite each category are the number of parcels within that assessed value-to-lien ratio category (based on the assessed value of the parcels) and the percentage of the Reassessments to be levied in the Local Districts that each category of assessed value-to-lien ratio represents. TABLE 10 LOCAL ASSESSMENT DISTRICTS ASSESSED VALUE TO LIEN RATIO Percent of Proposed(1) Value to Lien Ratio(1) Number of Parcels Local Obligations Less than 1:1 61 17.24% 1:1 to 2:1 0 0.00% 2:1 to 3:1 34 19.59% 3:1 to 4:1 41 45.24% 4:1 to 5:1 9 2.90% 5:1 to 10:1 9 8.42% 10:1 to 15:1 11 3.60% 15:1 to 20:1 5 1.49% 20:1 to 259:1 5 1.51% 25:1 to 30:1 0 0.00% 30:1 and greater 0 0.00% Totals: 175 100.00% 0) Neither the assessed value to lien ratio nor the percent of proposed Local Obligations include additional levies for collection and administration. During tax year 1997-98, the additional levies are 3.22% for Assessment District No. 92-1 (Tierravista), 1.53% for Assessment District No. 94-1 (BIGHORN), and 1.7% for Community Facilities District No. 91-1 (Indian Ridge). The projected costs associated with each Local District for the next year are levied annually. Since the levy is based on the following year's projected costs, the amount may vary from year to year. See "BONDHOLDERS' RISKS - Additional Levies"herein. -42- FLOW OF FUNDS Program Fund The Indenture creates the Program Fund, which will be funded from Bond proceeds and will be used to purchase the Local Obligations. After all of the Local Obligations are purchased, the Program Fund will be closed. Cost of Issuance Fund The Indenture creates the Cost of Issuance Fund, which will be funded from Bond proceeds. Amounts in the cost of Issuance Fund will be used to pay the costs of issuing the Bonds. The Trustee shall maintain the Cost of Issuance Fund for a period of ninety (90) days from the date of the sale and delivery of the Bonds and shall then transfer and deposit any moneys remaining therein, including any investment earnings, to the Revenue Fund. Revenue Fund All Revenues received by the Trustee will be deposited by the Trustee into the Revenue Fund, which fund was created pursuant to the Indenture. The Trustee will transfer on or before each Interest Payment Date or the date on which the redemption price of the Bonds becomes due, the required amount from the Revenue Fund for deposit into the following respective funds in the following order of priority, the requirements of each fund to be fully satisfied, leaving no deficiencies therein, prior to any deposit into any fund later in priority: (a) Interest Account; (b) Principal Account; and (c) Rebate Account. Interest Account The Trustee will deposit in the Interest Account as soon as practicable before each Interest Payment Date, from the Revenue Fund an amount of Revenues which together with any amounts then on deposit in said Interest Account is equal to the interest on the Bonds due on such date. On each Interest Payment Date, the Trustee will pay the interest due and payable on the Bonds on such date from the Interest Account. All amounts in the Interest Account will become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). All amounts on deposit in the Interest Account on the first day of any Bond Year, to the extent not required to pay any interest then having come due and payable on the Outstanding Bonds, shall be withdrawn therefrom by the Trustee and transferred to the Revenue Fund. Principal Account On or before each date on which the principal of the Bonds becomes due and payable, the Trustee shall deposit in the Principal Account an amount required to cause the aggregate -43- amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such date pursuant to the Indenture or the redemption price of the Bonds (consisting of the principal amount thereof and any applicable redemption premiums) required to be redeemed on such date pursuant to the Indenture. All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of (i) paying the principal of the serial Bonds at the maturity thereof or (ii) paying the principal of and premium (if any) on any Bonds upon the redemption thereof. All amounts on deposit in the Principal Account on the first day of any Bond Year, to the extent not required to pay the principal of any Outstanding Bonds then having come due and payable, shall be withdrawn therefrom and transferred to the Revenue Fund. Rebate Account The Trustee shall deposit in the Rebate Account from time to time, from payments made by the City for such purpose pursuant to the tax certificate executed by the Authority on the date of sale and delivery of the Bonds, an amount determined by the Authority to be subject to rebate to the United States of America in accordance with the Indenture. Amounts in the Rebate Account shall be applied and disbursed by the Trustee solely for the purposes and at the time set forth in the written request of the Authority filed with the Trustee. The Trustee has no obligation to rebate any amounts required to be rebated pursuant to the Indenture, other than from moneys held in the Rebate Fund or from other moneys provided to it by the Authority. Computations of the rebate amount will be fumished by or on behalf of the Authority in accordance with the tax certificate. Investments All moneys in any of the funds or accounts (except the Cost of Issuance Fund) established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments pursuant to the written direction of the Authority given to the Trustee in advance of the making of such investments. In the absence of any such direction from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (vii) or clause, (viii) of the definition thereof. The moneys in the Cost of Issuance Fund shall be invested in Permitted Investments described in clause (vii) or (xi) of the definition thereof. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be a part of such fund or account. All interest or gain derived or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture shall be deposited in the fund or account from which such investment was made. For purposes of acquiring or disposing of any investments, the Trustee may, in its discretion, commingle funds held by it under the Indenture. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may engage in or be interested in any financial or other transaction with the Authority. The Trustee shall incur no liability for losses arising from any investments made under the Indenture. -44- THE CITY The City and Environs The City of Palm Desert was incorporated in 1973 and the incorporated area encompasses approximately 24 square miles. The City is located 117 miles east of the City of Los Angeles and is adjacent to the City of Palm Springs. Governing Body The City operates under a council-manager form of government, with a five-member City Council for staggered four-year terms. The Mayor and Vice-Mayor are selected by the City Council. The Mayor and City Council and their respective terms are set forth below in TABLE 11: TABLE 11 MAYOR AND CITY COUNCIL Name of Official Expiration of Term Richard S. Kelly, Mayor November 1999 Jean M. Benson, Mayor Pro-Tempore November 1997 Buford A. Crites, Councilman November 1999 Robert A. Spiegel, Councilman November 1999 Walter H. Snyder, Councilman November 1997 The City staff are selected by the City Council and serve at the will of the City Council. The names of the staff members and their respective titles appear on page (iv) herein. Population According the City, the population of the City as of 1995 was approximately 32,800 persons. Direct and Overlapping Debt The Direct and Overlapping Bond Indebtedness Report, dated October 2, 1997, for the City of Palm Desert as prepared by California Municipal Statistics, Inc., is as set forth in TABLE 12 below: -45- TABLE 12 CITY OF PALM DESERT 1997-98 Assessed Valuation: $5,195,733,837 Redevelopment Incremental Valuation: 2,457.325,471 Adjusted Assessed Valuation: $2,738,408,386 DIRECT AND OVERLAPPING BONDED DEBT: %Applicable"t Debt 9-1-97 Coachella Valley Unified School District 0.009% $ 900 Desert Sands Unified School District Lease Tax Obligations 45.720 45,467,123 Palm Springs Unified School District 0.759 447,431 Coachella Valley County Water District,ID No. 16 64.286 360,002 Coachella Valley County Water District,ID No.53 42.425 661,830 Coachella Valley County Water District,ID No.54 87.672 8,249,935 Coachella Valley County Water District,ID No.55 25.572 3,0E5,262 Coachella Valley County Water District, ID No.58 67.555 6,340,037 City of Palm Desert 100. 0 (2) City of Palm Desert 1915 Act Bonds 100. 16,585,000 City of Palm Desert Community Facilities District No.91-1 (Indian Ridge) 100. 23,340,000 Riverside County Assessment District No.150 30.696 590,896 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $104,928,418 OVERLAPPING GENERAL FUND OBLIGATION DEBT: Riverside County General Fund Obligations 4.733% $26,969,503 Riverside County Board of Education Certificates of Participation 4.733 983,381 Desert Community College District Certificates of Participation 17.914 508,937 Desert Sands Unified School District Certificates of Participation 45.720 12,575,716 Palm Desert Water Services District Certificates of Participation 100. 1,335,000 Coachella Valley County Water District,ID No.71 Certificates of Participation 31.182 4,830,092 TOTAL GROSS OVERLAPPING GENERAL FUND OBLIGATION DEBT $47,202,629 Less: Palm Desert Water Services District Certificates of Participation 1,335,000 TOTAL NET OVERLAPPING GENERAL FUND OBLIGATION DEBT $45,867,629 GROSS COMBINED TOTAL DEBT $152,131,047 (3) NET COMBINED TOTAL DEBT $150,796,047 (1) Based on 1996-97 ratios. (2) Excludes refunding revenue issued to be sold. (3) Excludes tax and revenue anticipation notes,revenue,mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to Adiusted Assessed Valuation: Direct Debt 0.00% Total Direct and Overlapping Tax and Assessment Debt 2.02% Ratios to Adjusted Assessed Valuation: Gross Combined Total Debt 5.56% Net Combined Total Debt 5.51% STATE SCHOOL BUILDING AND REPAYABLE AS OF 6/30/97: $0 -46- Further Information For an economic overview of the City, please see "APPENDIX A - MACROECONOMIC OVERVIEW OF THE CITY OF PALM DESERT" herein. BOOK-ENTRY ONLY SYSTEM General DTC will act as securities depository for the Certificates. The Certificates will be executed and delivered as fully-registered securities, registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Certificate will be executed and delivered for each maturity of the Certificates, in the aggregate principal amount of the said maturity of Certificates, and will be deposited with DTC. DTC 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 securities that its Participants deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants ("Direct Participants") include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("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, but Beneficial Owners are 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 with Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Demised Premises with DTC and their registration in the name of the Cede & Co., effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the -47- identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Certificates are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC or Cede & Co.,will consent or vote with respect to the Certificates. Under its usual procedures, DTC would mail an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be govemed 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 to DTC, the paying agent, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Certificates are required to be printed and delivered, as described below. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event Certificates will be printed and delivered, as described below: Neither the City nor the Trustee shall have any responsibility or obligation to any DTC Participant or any Beneficial Owner or any other person not shown on the Registration Books of the Trustee as being a Certificate Owner with respect to either (1) the accuracy of any records maintained by DTC or any DTC Participant; (2) the payment by DTC or any DTC Participant of any amount due to any Beneficial Owner in respect to the principal or redemption or purchase price of or interest on the Certificates; (3) the delivery or the timeliness of any notice to any Beneficial Owner which is required or -48- permitted under the terms of the Indenture to be given to the Owner of the Certificates; or(4) any consent given or other action taken by DTC as Certificate Owner. So long as Cede &Co., on behalf of DTC is the Registered Owner of the Certificates: i) Selection of Certificates to be redeemed upon partial redemption and presentation of Certificates to the Trustee upon partial redemption shall be deemed made when the right to exercise ownership rights through DTC is transferred by DTC on its books; ii) Notice of a demand for purchase of Certificates by the Trustee shall be given by the Beneficial Owner of such Certificates exercising ownership rights through DTC by telephonic notice (confirmed in writing) or written notice; and iii) DTC may present notices, approvals, waivers or other communications required or permitted to be made by Certificate Owners under the Indenture on a fractionalized basis on behalf of some or all of those persons entitled to exercise ownership rights in the Certificates through DTC. Discontinuation of Book-Entry System The book-entry system described above may be discontinued at any time by either. (a) DTC determines to resign as securities depository for the Certificates; or (b) the City determines that the continuation of the system of book-entry transfers through DTC (or through a successor securities depository), is not in the best interests of the City; or (c) the City determines that it is desirable that certificates representing the Certificates be delivered to the Certificate Owners. In either of such events (unless the City appoints a successor securities depository) the Certificates will be delivered in registered certificate form to such persons and in such maturities and principal amounts as may be designated in writing by DTC, without any liability on the part of the City or the Trustee for the accuracy of such designation. Transfer and Exchange Upon Discontinuation of Book-Entry System The Indenture provides for the transfer and exchange of Certificates upon the discontinuation of the book-entry system. See THE CERTIFICATES" herein. BONDHOLDERS' RISKS General In order to pay debt service on the Bonds, it is necessary that Revenues are timely received. There is no reserve fund funded by the proceeds of the Bonds and in order to make timely payments on the Bonds, the Authority must receive sufficient Revenues. In order for the Revenues to be received in a timely manner, it is necessary that unpaid installments of Reassessments and Special Taxes on land within the Local Districts are paid in a timely manner. Should the installments of Reassessments and Special Taxes not be paid by the property owners on time, the City will draw on the Local Obligation Reserve Fund for the Local District which has delinquent Reassessments and Special Taxes. If a -49- delinquency occurs in the payment of any Reassessment and Special Tax installment, the City has elected not to obligate itself to advance available funds to cure any delinquency and the City's only source of funds, until the delinquent Reassessment and Special Tax installments are paid or the delinquent property is sold at a foreclosure sale, will be the Local Obligation Reserve Funds. If, during the period of delinquency, there are insufficient funds in the Local Obligation Reserve Funds, a delay may occur in payments to the Authority as the owner of the Local Obligations. The City is not required to pay delinquent installments of the Reassessments and Special Taxes. The Reassessments and Special Taxes are secured by a lien on the parcels of land and the City must institute foreclosure proceedings to sell land with delinquent installments in order to obtain funds to pay debt service on the Local Obligations. (See "SECURITY FOR THE BONDS- Covenant to Commence Superior Court Foreclosure'). Failure by owners of the parcels to pay installments of Reassessments and Special Taxes when due, depletion of the Local Obligation Reserve Funds, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Reassessments and Special Taxes levied against such parcels may result in the inability of the City to make full or punctual payments of debt service on the Local Obligations. The failure of the City to make full or punctual payments of debt service on the Local Obligations will result in insufficient Revenues available to the Authority to make the debt service on the Bonds, and Bond Owners would therefore be adversely affected. Unpaid Reassessments and Special Taxes do not constitute indebtedness of the owners of the lots and parcels within the Local Districts. There is no assurance the owners will be able to pay the Reassessment and Special Taxes installments or that they will pay such installments event though financially able to do so. Except in certain circumstances, no representations of any kind are made in this Official Statement regarding (i) any individual property owner or (ii) the financial status of any individual property owners. Limited Obligation of the Authority The Bonds are special obligations of the Authority payable solely from the Revenues. The Owners of the Bonds shall never have the right to compel the forfeiture of any property of the Authority and the debt service on the Bonds shall not be a legal or equitable pledge, charge, lien or encumbrance upon any property of the Authority or upon any of its income, receipts or revenues except the Revenues and other funds pledged to the payment thereof in the Indenture. The Bonds are not a debt or liability of the City, the State, or any political subdivision thereof, other than the Authority, and will be payable solely from the funds provided therefor. Neither the City, the State nor the Authority will be obligated to pay the principal of the Bonds, or the interest thereon, except from the funds described above, and neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds. The issuance of the Bonds will not directly, indirectly or contingently obligate the City, the State or any political subdivision thereof to levy or pledge any form of taxation whatever therefor or to make any appropriation for their payments. The Authority has no taxing power. -50- No Reserve Fund Securing the Bonds There is no reserve fund funded out of the proceeds of the Bonds, and as a result, there is no reserve fund securing the Bonds. However, the Local Obligations for each Local District are secured by the Local Obligation Reserve Funds to advance moneys to the Authority, as the owner of the Local Obligations, in the event that there are delinquencies in the payment of any of the Reassessments and Special Taxes. Any advance from the Local Obligation Reserve Funds constitutes Revenues and shall be used to make payment on the Bonds. As such, the Local Obligation Reserve Funds provide a source of Revenues to the Authority in the event that Revenues derived from the Reassessments and Special Taxes are not collected in full. See "SURPLUS ASSESSMENT AND SPECIAL TAX COLLECTION TO LOCAL OBLIGATION RESERVE FUND" herein. Non-Asset Bonds Risk On the date of the sale and delivery of the Bonds, the Underwriter's discount will be paid out of the proceeds of the Bonds and, over the next few weeks, amounts in the Cost of Issuance Fund will be expended on the costs and expenses of issuing the Bonds (collectively, the Underwriter's discount and the costs of issuance shall be referred to herein as the "Costs"). A portion of the Bonds corresponding to the amounts expended on Costs are not secured by either(i)the principal amount of the Reassessments and Special Taxes or(ii)the property within the Local Districts. In order to pay debt service on the amount of Bonds corresponding to the amount of the Costs, the Authority will be required to recoup both the principal and interest on the portion of the Bonds corresponding to the Costs from (i) investment of Local Obligation Reserve Funds, which will be paid by the Fiscal Agent to the Trustee, and the funds and accounts created under the Indenture and (ii) the spread between the interest rate on the Bonds and the interest rate on the Local Obligations. On the date of the sale and delivery of the Bonds, the Underwriter will deliver to the Authority a certificate verifying that the regularly scheduled debt service payable on the Local Obligations, when combined with other Revenues payable to the Authority as the result of investment of the Local Obligation Reserve Funds and other funds, will be sufficient to pay debt service on the Bonds. For the purpose of the Underwriter's certificate, an interest rate of five percent (5%) will be assumed on all investments. Notwithstanding the foregoing, no guarantee can be given that such interest rate will be achieved over the life of the Bonds. In addition, (i) if there are substantial prepayments by property owners in the Local Districts of Reassessments and Special Taxes (see "Prepayments of Reassessments and Special Taxes"herein) or(ii) if there are draws on the Local Obligation Reserve Funds such that the earnings on the investment of the Local Obligation Reserve Funds are not as expected in the certificate of the Underwriter, there may be an insufficiency in funds available to the Authority to pay debt service on the Bonds. Furthermore, investment earnings on the Local Obligation Reserve Funds which are rebatable to the federal government shall not be transferred to the Authority and are not considered Revenues. Secondary Market There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a -51- particular Bond issue, secondary marketing practices in connection with the issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase prices. Loss of Tax Exemption As discussed under "TAx EXEMPTION° herein, interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date the Bonds were issued as a result of future acts or omissions of the Authority or the City in violation of the covenants in the Indenture. Should such an event of taxability occur, the Bonds are not subject to special redemption or any increase in the interest rate on the Bonds, and the Bonds will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Indenture. See "REDEMPTION OF THE BONDS" herein. Limits on the Foreclosure Remedy Generally Pursuant to the Fiscal Agent Agreements, the City has the obligation to institute and diligently prosecute a judicial foreclosure action if certain events occur (see °SECURITY FOR THE BONDS- COVENANT TO COMMENCE SUPERIOR COURT FORECLOSURE"herein). As set forth in °ASSESSMENT VALUE TO LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS" herein, a high value to lien ratio suggests that the real property, if sold at a foreclosure sale, would produce sufficient sales proceeds with which to cure any delinquencies and pay all costs, interest and penalties. However, no guarantee can be given that any of the property in the Local Districts could (i) be sold at all, or (ii) be sold at a price sufficient to cure all delinquencies and pay all costs, interest and penalties. Since the ultimate security for the Local Obligations, and therefore the Bonds, is the real property within the Local Districts, the investor must consider that there are many events with (i) could delay a foreclosure sale (see 'Delays in the Foreclosure Process" below) or (ii) could result in insufficient sales proceeds (see "The Foreclosure Sale"below). A delay in the foreclosure sale or the inability to sell property at a price sufficient to cure all delinquencies and pay all costs, interest and penalties could result in the rapid depletion of the Local Obligation Reserve Funds. The continued delay in foreclosing the lien of the delinquent Reassessments and Special Taxes or the inability to collect sufficient proceeds, along with the rapid depletion of the Local Obligation Reserve Funds, may result in the inability of the City to make full or punctual payments of debt service on the Local Obligations. The failure by the City to pay debt service on the Local Obligations may result in the inability of the Authority to make full or punctual payments of debt service on the Bonds and the Bond Owners would therefore be adversely affected. Unpaid Reassessments and Special Taxes do not constitute a personal indebtedness of the owners of the lots and parcels within the Local Districts. There is no assurance the owners will be able to pay the Reassessment and Special Taxes installments or that they will pay the installments even though financially able to do so. While private lenders whose loans may also be secured by the property in foreclosure may be motivated to cure any delinquency (since the Reassessments and Special Tax liens have priority over -52- private loans), there is no guarantee that such a cure will take place and investors should not rely on any private lender cuffing any such delinquency. Delays in the Foreclosure Process While the real property is the main security for the Local Obligations, and therefore the Bonds, the remedy of judicial foreclosure is a time consuming process often subject to delays which are outside the control of the City. Delays in exercising the remedy of foreclosure, along with the rapid depletion of the Local Obligation Reserve Fund, may result in the inability of the City to make full or punctual payments of debt service on the Local Obligations. The failure by the City to pay debt service on the Local Obligations may result in the inability of the Authority to make full or punctual payments of debt service on the Bonds, and Bond Owners would therefore be adversely affected. Examples of such delays are as follows: A. The foreclosure action is subject to all available defenses of the property owners, including defenses based on unfair Reassessments and Special Taxes, fraud or constitutional defects in the Reassessments and Special Taxes proceedings or counter claims attacking the validity of the payments or the Local Districts in another way. While there is ample judicial precedents to support the validity of the Local Districts and the Reassessments and Special Taxes themselves and the strict application of the statute of limitations to the assertion of any such challenges raised in a foreclosure proceedings, countering such challenges and allegations, however, requires the preparation of responsive pleadings by foreclosure counsel. B. Given the technical nature of assessment proceedings, the judge may have to be educated on the Local Districts and the foreclosure process as it relates to assessments and special taxes. C. Service of process on all interested parties may be difficult, particularly if the entity owning the property is not a natural person. D. Receivership with or ownership by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation, or other federal agency, as more full discussed in 'Ownership of Property by Federal Agencies"herein. E. Another federal entanglement involves the seizure of property under federal forfeiture laws, most notably those seizures arising out to the use of the property for drug trafficking. While the lien of the Reassessments and Special Taxes remain in place, the federal government may take the position that it has no obligation to pay either delinquent Reassessments and Special Taxes penalties and interest or current Reassessments and Special Taxes installments based upon concept of federal sovereignty. F. One of the most effective ways to stop a foreclosure action is through the filing of a bankruptcy proceeding. In such a case, the City is at least initially automatically stayed, i.e., prohibited, from either filing or pursuing a judicial foreclosure action. In order to proceed with a judicial foreclosure action, the City must seek relief from the automatic stay, which relief will normally be granted only where the City can show there little or no value in the -53- property to the petitioner, i.e., the party subject to the bankruptcy proceedings. Also, it is important to remember that special assessments and special taxes are collected with general property taxes. In bankruptcy court, petitioners are often allowed to enter into an agreement with the county to pay delinquent taxes under a 5-year plan. Under such a plan, the special assessments and special taxes are paid to the City only after the last payment is received by the County at the end of such five year period. The Foreclosure Sale If the City prevails in the foreclosure action, the court has the power to order the delinquent property be sold at a foreclosure sale. The judgment is executed by the Marshall (or Sheriff in some counties). Before the Marshall may execute the judgment, the City must obtain a writ of sale from the clerk of the court. Next, the writ of sale, a certified copy of the judgment, a deposit, and levying instructions must go to the Marshall. Once the Marshall records the Notice of Levy, there is a mandatory one hundred twenty (120) day waiting period. Before the property may be sold, the Marshall must serve a Notice of Sale at least twenty (20) days before the sale of the property. The foregoing time periods are the minimum statutory timelines provided for by the Califomia Code of Civil Procedure. Individual Marshall's or Sheriffs offices may have local procedures which will extend the actual date of foreclosure sale beyond the statutory minimum. The Califomia Streets and Highways Code sets forth a minimum sale price for the property which is equal to the amount of the judgment with costs and interest, costs and interest accruing after the issuance of the writ of sale, the costs of the levying officer and any other amounts required by law to be bid at the foreclosure sale. The decline in the market value of certain properties resulting from economic conditions and coupled with delays in the foreclosure process can create a situation where the market value of delinquent property is equal to or perhaps even less than the accumulated delinquent Reassessments and Special Taxes installments, interest, penalties and costs. The existence of prior assessments and special taxes on the delinquent property may make it difficult to recover the full amount of all delinquencies. In such situations it is quite possible that the City will not receive a bid for the minimum price at the foreclosure sale if it receives any bids at all. In such cases the City may petition the court and request that the court modify its judgment and authorize the sale of the property at a lesser minimum price or with no minimum price. The court is then required to hold a hearing to consider the City's petition. Notice of this hearing must be given to, among others, each Bondholder and the original underwriter. Following such a hearing the court may authorize the property to be sold at a lesser minimum price or with no minimum price if the court determines any one of the following: (a) Sale will not result in an ultimate loss to the Bondholders. (b) The owners of seventy-five percent (75%) or more of the Bonds, by principal amount, have consented to the sale and the sale will not result in an ultimate loss to the non- consenting owners. -54- (c) The owners of seventy-five percent (75%) or more of the Bonds, by principal amount, have consented to the sale and all of the following apply: (i) The City has elected not to obligate itself to advance available funds to cure the deficiency; (ii) No bids equal to or greater than the minimum price have been received at the foreclosure sale; (iii) No funds remain in the Local Obligation Reserve Fund for the Bonds; (iv) The City has reasonably determined that a proceeding is not practicable, or has in good faith attempted to accomplish such a refunding and has not been successful or has completed such a refunding which will, to the maximum extent feasible, minimize the ultimate loss to the Bondowners; and (v) No other remedy acceptable to the owners of seventy-five percent (75%) of the Bonds, by principal amount, is reasonably available. Neither the property owners, the holder of any security interest in the property nor any other defendant or agent thereof may purchase the property at the foreclosure sale for less than the minimum price established by the original judgment. In other words, such parties may not benefit from the approval by the court of a sale for lesser minimum price or with no minimum price. Assuming a worst case scenario in which the City fails to receive a minimum bid and the court cannot make one of the above determinations that would enable it to approve a lesser minimum bid or no minimum bid at all, the delinquent property would remain unsold and the City could attempt at another time to sell the property at a foreclosure sale. The City would also have to face the possibility that the Bondowners will suffer an ultimate loss. City Not Required to Foreclose in All Cases As set forth in 'SECURITY FOR THE BONDS- Covenant to Commence Foreclosure Actions"herein, the City is not required, in any given fiscal year, to foreclose on properties with delinquent Reassessments and Special Taxes of$1,000 or less (in the case of Reassessments) or $10,000 or less (in the case of Special Taxes) if at least ninety-five percent (95%) of the total Reassessments and Special Taxes due during any such fiscal year are actually collected. The failure to foreclose on delinquent parcels may result in the accumulation of delinquencies on any number of parcels. The accumulation of delinquencies on parcels of property may result in the rapid and total depletion of the Local Obligation Reserve Funds as a result if the delinquencies prior to replenishment from the resale of property upon a foreclosure. The accumulated delinquencies may result in the inability to replenish the Local Obligation Reserve Funds from the resale of property upon a foreclosure. See "Limitations on the Foreclosure Remedy"above. -55- No Analysis of Property Owners'Ability to Pay Reassessments and Special Taxes Neither the Authority nor the City has undertaken an analysis of the Local District property owners' ability to pay the Reassessments and Special Taxes in a timely fashion. In fact, except in certain circumstances, no representations of any kind are made in this Official Statement regarding (i) any individual property owner or (ii) the financial status of any individual property owner or (ii) the financial status of any individual property owners. The absence of information on the property owners does not imply that the property owners are financially able or willing to pay the installments of Reassessments and Special Taxes. The Authority and the City cannot predict the property owners' ability or willingness to pay the installments of Reassessments and Special Taxes. Prepayment of Reassessments and Special Taxes The Reassessments and Special Taxes are subject to prepayment by individual property owners at any time. In such event, the City would call in for redemption Local Obligations in an amount corresponding to the number of Bond in $5,000 increments callable from the amount of prepayments on hand plus the credit for the appropriate Local Obligation Reserve Fund. Under the terms of the Indenture, the Authority would, in turn, call for redemption the Bonds in an amount corresponding to the amount of Local Obligations redeemed. However, in the case of a substantial prepayment of Reassessments and Special Taxes by the property owners in the Local Districts, there may not be sufficient Revenues to recoup the principal and interest on the non-asset Bonds (i.e., the amount of Bond proceeds expended to pay the costs of issuance and Underwriter's discount). As a result, there may not be sufficient Revenues to pay all the scheduled debt service on the Bonds. As stated above, such prepayments would result in redemption of a portion of or all of the Bonds prior to their stated maturity and, therefore, the length of the Owner's investment may be shorter than expected or desired. Additional Levies In addition, as a part of the Local Districts, all properties with outstanding Reassessments and Special Taxes will annually be charged additional amounts to pay for county collection charges (16¢ per parcel), the fees of MuniFinancial (who is also the City special district administrator) and city administrative expenses. The projected costs associated with each Local District for the next year are levied annually. Since the levy is based on the following year's projected costs, the amount may vary from year to year. See "BONDHOLDERS' Risks" herein. All additional levies are collected on the regular county tax rolls, along with the Reassessments and Special Taxes securing the Local Obligations. These additional levies are collected on the regular county tax rolls, along with the Reassessments and Special Taxes securing the Local Obligations, may have an adverse affect on the willingness of property owners to make payments on their annual county tax bills which could result in delinquencies. In addition, collection charges may be assessed in the Prior Local Districts which may result in the inability or unwillingness to make payments. The value-to-lien ratio analysis set forth in °ASSESSED VALUE To LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS" does not consider these additional levies for the Local Districts. There may also be subsequent transfers of ownership whereby the failure of the property owners to pay installments of Reassessments and Special Taxes when due could result in a default in payments -56- of the principal of and interest on the Local Obligations, which, in turn, could result in a default in the payment of principal of and interest on the Bonds, if foreclosure delays cause a rapid and total depletion of the Local Obligation Reserve Funds prior to the curing of the default from the resale of property upon a foreclosure. The amount of the Reassessments and Special Taxes for the Local Districts, along or when combined with the Prior Liens, if applicable, may reduce the willingness and ability of the current or subsequent property owners within the Local Districts to pay the installments of Reassessments and Special Taxes when due. Many of the Concentrated owners are commercial businesses and are subject to fluctuations in the market for the particular product or service. There are unique risks associated with businesses. See "Businesses subject to Market Fluctuations"below. Business Subject to Market Fluctuations Some of the property owners in the Local Districts are commercial businesses and, like all businesses, they are subject to fluctuations in the market for the particular product or service provided by the business. There are many factors which could result in the failure of a business, including, but not limited to, (i) a reduction in the demand for the product or services, (ii) a decrease in the income produced by such products or services, of (iii) poor management or quality control. The failure of a business in the Local Districts may result in the reluctance or inability of the business to pay installments of Reassessments and Special Taxes when due. The failure of some or all of the businesses to pay installments of Reassessments and Special Taxes when due could result in a default in payments of the principal of and interest on the Local Obligations, which, in turn, could result in a default in the payment of principal of and interest on the Bonds, if foreclosure delays cause a rapid and total depletion of the Local Obligation Reserve Funds prior to the curing of the default from the resale of property upon a foreclosure. Bankruptcy The payment of the Bonds is largely dependent upon the timely payment of the Reassessments and Special Tax by installments. Within each Local District, the City has no obligation to cure any delinquencies except to the extent that (i) there are funds on deposit in the applicable Local Obligation Reserve Fund and (ii) delinquent Reassessments and Special Taxes are paid or proceeds from foreclosure sales are realized. If during the period of delinquency there are insufficient funds in the Local Obligation Reserve Funds, a delay may occur in payments on the Local Obligations, which, in turn, may result in a delay in the payments to the Bond Owners. Notwithstanding the above, the City may, at its sole option and in its sole discretion, elect to advance available surplus funds of the City to pay for any delinquent installments pending sale, reinstatement, or redemption of the delinquent property. However, Bond Owners should not rely upon the City to advance moneys to cure any delinquencies. Land Value The value of land within the Local Districts is an important factor in determining the investment quality of the Local Obligations which are being purchased by a portion of the proceeds of the Bonds. If -57- a property owner defaults in the payment of Reassessments and Special Tax installments, the City's only remedy is to withdraw moneys on deposit in the applicable Local Obligation Reserve Fund and to commence foreclosure proceedings in an attempt to obtain funds to pay the delinquent Reassessments and Special Tax. Prospective purchasers of the Bonds should be aware that neither the Authority nor the City can guarantee that the property within the Local Districts could be sold at a foreclosure sale for delinquent Reassessments and Special Taxes in amounts sufficient to cover delinquent Reassessments and Special Taxes. The assessed valuations described herein under the caption "ASSESSMENT VALUE TO LIEN RATIO ANALYSIS OF THE LOCAL OBLIGATIONS"do not necessarily reflect the current market value of the land in the Local Districts. The actual value of the property within the Local Districts is also subject to future events which might render invalid the assessed valuations described herein. Many factors cold prevent or delay the sale of the property within the Local Districts. Additionally, the value of the property in the Local Districts may be negatively affected by changes in general economic conditions, fluctuations in the real estate market and other factors. Failure to Develop Vacant Land There are 150 parcels of vacant, unimproved land in the Assessment Districts of various land use classifications. The vacant, unimproved land represents 92.93% of the total Reassessment obligation. The value-to-lien ratio for the proposed Reassessments and Special Taxes on the vacant, unimproved land varies from parcel to parcel,with many parcels having a ratio of less than 3:1. Overall, however, the assessed value-to-lien ratio for the proposed Reassessments and Special Taxes is 5.60:1. See TABLE 13 below. -58- TABLE 13 ASSESSMENT DISTRICTS VACANT LAND Percent of Proposed Value to Lien Ratio Number of Parcels Local Obligations Less than 1:1 61 17.24% 1:1 to 2:1 0 0.00% 2:1 to 3:1 32 18.72% 3:1 to 4:1 31 42.68% 4:1 to 5:1 10 3.22% 5:1 to 10:1 8 8.14% 10:1 to 15:1 4 1.63% 15:1 to 20:1 2 0.64% 20:1 to 259:1 2 0.66% 25:1 to 30:1 0 0.00% 30:1 and greater 0 0.00% Totals: 150 92.93% Land development operations are subject to comprehensive federal, state and local regulations. Approval is required from various agencies in connection with the layout and design of developments, the nature and extent of improvements, construction activity, land use, zoning, school and health requirements, as well as numerous other matters. There is always the possibility that such approvals will not be obtained on a timely basis. Failure to obtain any such agency approval or satisfy such governmental requirements would adversely affect land development operations. Moreover,there can be no assurance that land development operations within the Local Districts will not be adversely affected by future deterioration of the real estate market and economic conditions on changes in future local, state, and federal governmental policies relating to real estate development, the income tax treatment of real property ownership, or the national economy. A slowdown of the development process could adversely affect land values and reduce the ability or desire of the property owners to pay the installments of the Reassessments and Special Taxes when due. In that event, there could be a default in the payment of the principal of, and interest on, the Bonds. There are a number of contingencies which could slow or prevent future development. Consequently, no assurance can be given that the undeveloped property within the Local Districts will be developed in the future, and in assessing the investment quality of the Bonds, prospective purchasers should evaluate the risks of noncompletion discussed below. First, undeveloped land and land subject to development constraints is less valuable than such land in a developed condition and provides less valuable security to the Bond Owners should it be necessary for the City to foreclose due to the nonpayment of Reassessments and Special Taxes. -59- Second, if the undeveloped property within the Local Districts remains undeveloped, the number of likely purchasers at a foreclosure sale, in the event the City forecloses the lien of a delinquent unpaid Reassessments and Special Taxes installment, is likely to be reduced. Third, in addition to potentially reducing the ability and willingness of the landowners to pay Reassessments and Special Tax installments, a slowdown on the development process could adversely affect land values and reduce the proceeds received at the foreclosure sale in the event Reassessments and Special Tax installments are not paid when due. ENFORCEABILITY OF REMEDIES The remedies available to the Trustee, the Authority or the Owners upon an Event of Default or default under the Indenture or the City Resolutions are in many respects dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code) and relevant banking insurance law, the remedies provided in the Indenture or the City Resolutions may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. ABSENCE OF MATERIAL LITIGATION There is no controversy or litigation now pending against the Authority, or to the knowledge of its offices threatened, restraining or enjoying the issuance, sale, execution or delivery of the Bonds, or in any way contesting or affecting the validity of the Bonds. TAX EXEMPTION Tax Covenants The.Authority has covenanted in the Indenture that it will not directly or indirectly use or permit the use of any proceeds of the Bonds or any other funds of the Authority or take or omit to take any action that would cause the Bonds to be "private activity Bonds" within the meaning of Section 141(a) of the Internal Revenue Code of 1986 (the "Code") or obligations which are "federally guaranteed" within the meaning of Section 149(b) of the Code, and that it will not lend more than five percent (5%) or more of the proceeds of the Bonds to any nongovernmental units. To that end, the Authority will comply with all requirements of Section 148 of the Code to the extent applicable to the Bonds. The Authority has also covenanted in the Indenture that it will not directly or indirectly use or permit the use of any proceeds of the Bonds or any other funds of the Authority or take or omit to take any action that would cause the Bonds to be "arbitrage Bonds"within the meaning of Section 148 of the Code. -60- Legal Opinion In the opinion of Briggs and Morgan, Professional Association, Bond Counsel, based on existing statues, regulations, rulings and court decisions, and assuming compliance by the Authority with the above-mentioned covenants, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. A complete copy of the proposed form of opinion of Bond Counsel is set forth in "APPENDIX C - FORM OF OPINION OF BOND COUNSEL" hereto and will be printed on the Bonds. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Authority has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income. Failure of the Authority to comply with its covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance by the Authority with its covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. Bond Counsel is further of the opinion that interest on the Bonds is not a specific preference item for purpose of the federal individual or corporate alternative minimum taxes. Bond Counsel observes, however, that interest on the Bonds is included in adjusted current earnings in calculating corporate altemative minimum taxable income. Certain requirements and procedures contained or referred to in the Indenture and other relevant documents may be changed and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of nationally recognized Bond Counsel. Bond Counsel expresses no opinion as to any Bond or interest thereon if any such change occurs or action is taken upon the advice or approval of counsel other than Bond Counsel. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from federal gross income and is exempt from State of California personal income taxes, the accrual or receipt of interest on the Bonds may otherwise affect an Owner's tax liability. The nature and extent of these other tax consequences will depend upon the Owner's particular tax status and the Owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. APPROVAL OF LEGALITY Legal matters incident to the issuance of the Bonds are subject to the approving opinion of Briggs and Morgan, Professional Association, Minneapolis, Minnesota, Bond Counsel. A copy of the proposed form of the Opinion of Bond Counsel is attached as "APPENDIX C - FORM OF OPINION OF BOND COUNSEL" hereto. Copies of such opinion will be available at the time of delivery of the Bonds. Bond Counsel's engagement does not extend to providing an opinion as to the accuracy, completeness or faimess of this Official Statement. Certain matters relating to the disclosure for the transaction will be -61- passed upon by Disclosure Counsel, Haight & Weist, a Professional Law Corporation, Scotts Valley, California. Certain matters will be passed upon for the Authority by its counsel, Best, Best & Krieger, Rancho Mirage, California. UNDERWRITING The Bonds are being purchased by the Underwriter at a purchase price equal to the par amount of the Bonds being issued, plus an original issue premium of $ , less an Underwriter's discount of $ , pursuant to a Bond Purchase Contract between the Authority and the Underwriter(the "Bond Purchase Contract"). The Bond Purchase Contract provides that the Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering price. The offering price may be changed from time to time by the Underwriter. CONTINUING DISCLOSURE COVENANTS OF THE AUTHORITY Rule 15c2-12(b)(5) of the Securities and Exchange Act of 1934 (the "Rule'), prohibits an underwriter from purchasing or selling municipal securities (such as the Bonds) unless it has reasonably determined that an issuer(such as the Authority) has undertaken in a written agreement for the benefit of the holders of the municipal securities to provide certain continuing disclosure items. The Authority, the City and MuniFinancial Services, Inc., ("MuniFinancial") have entered into a °Continuing Disclosure Agreement (the "Disclosure Agreement), to prove certain financial information and certain event reports in compliance with the Rule, in relation to the Bonds and the Local Obligations. The Rule requires that this Official Statement disclose whether the City/Authority has failed to make the required continuing disclosure. This is the fifth (5th) issue of the City/Authority's Bonds which is subject to the Rule and, as such, the City/Authority has complied with the continuing disclosure requirements of the Rule and has not failed to provide the required documentation when due. Annual Information of the Authority and the City The Authority and the City have covenanted for the benefit of the Bondholders in the Disclosure Agreement that it will cause the Dissemination Agent (initially MuniFinancial) to, not later than December 15 of each year(the °Annual Report Date'), commencing December 15, 1998, provide to each nationally recognized municipal security information repository ("NRMSIR") and to the appropriate state information depository, of any CSID;" and together with NRMSIR, hereinafter collectively referred to as the "Repositories") an annual report (hereinafter,the "Annual Report") containing the following information: (a) Current information regarding Tables 5 through 9 and 13. (b) The principal amount of the Bonds outstanding. (c) The principal amount of the Local Obligations outstanding. (d) The balance on deposit in the Local Obligation Reserve Funds. -62- (e) The number of parcels within each Local District which are delinquent in the payment of installments of the Reassessments and Special Taxes levied thereon which are security for the payment of debt service on the Local Obligations as shown on the most recent equalized assessment roll of the County of Riverside. (f) Any failure of the Authority or the Trustee to pay interest on and principal of the Bonds on nay scheduled payment date. (g) The amount of any funds withdrawn from the Local Obligation Reserve Funds to pay principal and interest on the Local Obligations. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Authority and the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the documents incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board (the "MSRB"). The Authority and the City shall clearly identify each such other document so incorporated by reference. The Annual Report shall be submitted to the Dissemination Agent not later than fifteen (15) days prior to each Annual Report Date. If the Authority and the City are unable to provide to the Repositories an Annual Report by fifteen (15) business days prior to the Annual Report Date, the Authority shall send a notice to each Repository or, in the alternative, to the MSRB informing them of the Authority's failure to comply with the Rule. Event Reports The Authority and the City have also covenanted to provide the following information for both the Bonds and the Local Obligations (hereinafter, the "Listed Events"): (a) Delinquency in payment when due of any principal of and interest on the Bonds or the Local Obligations (b) Occurrence of any event of default under and as defined in the Indenture or under the Fiscal Agent Agreements (other than as described in clause 1 above); (c) Amendment to or modification of the Indenture or the Fiscal Agent Agreements modifying the rights of the owners or the Bonds or the Local Obligations; (d) Giving of a notice of optional or unscheduled redemption of any of the Local Obligations; (e) Defeasance of the Bonds or the Local Obligations or any portion thereof; (f) Changes in the rating of the Bonds, if any; (g) Adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds or the Local Obligations; (h) Any unscheduled draws on the Local Obligation Reserve Funds reflecting financial difficulties. The Dissemination Agent shall, within one (1) business day of obtaining actual knowledge of the occurrence of any of the Listed Events (except events listed in 1, 4, or 5), contact the Chief -63- Administrative Officer of the Authority or the City Manager of the City (or such other officers as designated), inform such person of the event, and request that the Authority and the City promptly notify the Dissemination Agent in writing whether or not to report the event after determining the materiality of the event. Whenever the Authority and the City obtain knowledge of the occurrence of a Listed Event, the Authority and the City shall as soon as possible determine if such event would constitute material information for the Owners of the Bonds under applicable federal securities laws (provided, however, that an event under subsection 4, 5 or 6, shall always be material). If the Authority or the City has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the Authority shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report the occurrence of the Listed Event. Likewise, if the Authority or the City has determined that knowledge of the occurrence of a Listed Event would not be material, the Authority shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence of the Listed Event. If the Dissemination Agent has been instructed by the Authority or the City to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB and the SID. Notwithstanding the foregoing, notice of Listed Events described in 4 and 5 above need not be given any earlier than the notice (if any) of the underlying event is given to the Owners of the affected Bonds pursuant to the Indenture. Notwithstanding any other provision of the Disclosure Agreement, the Authority, the City and the Dissemination Agent may amend the Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Authority and the City), and any provision of the Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in the federal securities law, acceptable to the Authority, the City and the Dissemination Agent, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings in the Disclosure Agreement to violate the Rule if such amendment or waiver had been effective on the date of the Disclosure Agreement but taking into account any subsequent change in the official interpretation of the Rule. In the event of a failure of the Authority and the City to comply with any provision of the Disclosure Agreement, any Bondholder may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the City or the Dissemination Agent, as the case may be, to comply with their obligations under the Disclosure Agreement. An event of default under the Disclosure Agreement shall not be deemed an event of default under the Indenture or the Fiscal Agent Agreements and the sole remedy under the Disclosure Agreement in the event of the failure of the Authority or the City to comply therewith shall be an action to compel performance. CONTINUING DISCLOSURE COVENANTS OF THE DEVELOPERS For the purposes of the within issue of Bonds, an Obligated Person is defined to mean any property owner whose principal amount of lien debt service exceeds twenty percent (20%) of the unpaid principal amount of the outstanding lien debt service on the Bonds. -64- As such, Assessment District 92-1 (Tierravista) and Assessment District No. 94-1 (BIGHORN) do not meet the qualification of an Obligated Person under the Rule. Sunrise Desert Partners, as the developer of Community Facilities District No. 91-1 (Indian Ridge), is an Obligated Person under the Rule and by letter agreement (the 'Letter Agreement") with the Authority, has agreed that its existing Developers Continuing Disclosure Agreement executed on behalf of the $12,385,000 City of Palm Desert Community Facilities District No. 91-1 Special Tax Bonds, Series 1995, shall apply to the Bonds. Provisions of Annual Reports (a) The Developer shall provide, or cause to be provided, to each Repository an Annual Report which is consistent with the requirements of Section 3 of the Disclosure Agreement, not later than December 15 of each year, commencing with an Annual Report to be provided on December 15, 1998. 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 3 of the Disclosure Agreement; provided, however, that if audited Financial Statements are required to be provided, such audited Financial Statements may be submitted separately from the balance of the Annual Report, and later than the date required above for filing of the Annual Report, if not available by that date. The Financial Statements submitted with such Annual Report by the Developer shall be the consolidated cash flow statements for the Development for the year ending on September 30 immediately preceding such December 15. (b) Not later than fifteen (15) business days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the Developer shall provide the Annual Report to the and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent), Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Developer. The Dissemination Agent may conclusively rely upon such certification of the Authority. If by such date the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact the Developer and the Dissemination Agent to determine if the Developer is in compliance with the first sentence of subsection (b). (c) If the Fiscal Agent is unable to verify that an Annual Report has been provided to the Repositories by the date required in subsection (a), the Fiscal Agent shall send a notice to the Municipal Securities Rulemaking Board and the appropriate State Repository, if any. (d) The Dissemination Agent shall (i) determine each year prior to the date for providing the Annual Report, the name and address of each National Repository and each State Repository, if any; and (ii) file a report with the Authority and the Developer and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. Content of Annual Reports The Developer's Annual Report shall contain or incorporate by reference the following: -65- (a) Financial Statements prepared in accordance with generally accepted accounting principles, as in effect from time to time. If audited Financial Statements are required to be provided, and such audited Financial Statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain unaudited Financial Statements, and the audited Financial Statements shall be filed in the same manner as the Annual Report when they become available. Such Financial Statements, and the audited Financial Statements shall be filed in the same manner as the Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby; provided however, that the Financial Statements provided by the Developer shall be the consolidated cash flow statements for the Development for the year ending on the September 30 immediately preceding the December 15 upon which the Annual Report is submitted. (b) The following information with respect to each Major Developer2 (i) If information regarding such Major Developer has not previously been included in the Official Statement or an Annual Report, the Development Plan of such Major Developer or, if information regarding such major Developer has previously been included in the Official Statement or an Annual Report, a description of the progress made in the Development Plan of such Major Developer since the last Annual Report and a description of any significant changes in such Development Plan and the causes or rationale for such changes. (ii) If information regarding such Major Developer has not previously been included in the Official Statement or an Annual Report, the Financing Plan of such Major Developer or, if information regarding such Major Developer has previously been included in the Official Statement or an Annual Report, a description of any significant changes in the Financing Plan of such Major Developer and the causes or rationale for such changes. (iii) A description of any sales, significant leases or other conveyances of twenty percent (20%) or more of such Major Developer's Property during the period covered by such Annual Report, including date of sale, identification and description of buyer and sales price. (iv) A description of how many acres of Property are owned by such Major Developer as of the end of the period covered by such Annual Report, how many acres of such Major Developer's Property have reached the Planned Development Stage3 since the last Annual Report prepared and submitted by such Major Developer and how many acres of such Major Developer's Property 2"Major Developer"means any property owner,including the Developer,(A)for which the sum of(x)the area of the Property that has not reached the Planted Development Stage owned by such Property Owner,plus(y)the area of the Property that has not reached the Planned Development Stage owned by Property Owners that are Affiliates of such Pr trinity Owner,is equal to or Beater than twenty percent(20%)of the total area of the Property,and(b)that has not executed an Assumption Agreement '"Planted Development Stags"means,with respect to any portion of the Property,the stage of development to which the Developer intends to develop such Property,which with respect to the portions of the Property being developed for residential use,is the stage at which completed residential units are completed and ready for occupancy by homeowners. -66- have not reached the Planned Development Stage as of the end of the period covered by such Annual Report. (v) With respect to the portion of such Major Developer's Property that has reached the Planned Development Stage as of the end of the period covered by such Annual Report, a description of (I) the number of residential units and/or other types of buildings constructed thereon, (ii) whether such residential units are attached or detached units, (iii) the size of such residential units and other types of buildings, and (iv) the aggregate purchase price or leasing rate for such residential units and other types of buildings. (vi) A description of the status of any portion of such Major Developer's Property that such Major Developer does not intend to sell. (vii) An update of the status of any previously reported Listed Event. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b), the Developer 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. Major Developers that are Affiliates of each other may file a single Annual Report covering as such entities. Any or all of the items listed above may be included by specific reference to other documents that have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Developer shall clearly identify each such other document so included by reference. Reporting of Significant Events The Developer shall promptly file, or cause to be filed,with the Municipal Securities Rulemaking Board and each State Repository, with a copy to the Fiscal Agent, notice of the occurrence of any of the following events with respect to each Major Developer. (a) The conveyance by such major Developer of twenty percent (20%) or more of the Property to any other entity, including but not limited to, an Affiliate of such Major Developer. (b) Any change in the legal structure of such Major Developer. (c) Any failure of such Major Developer to pay when due general property taxes, special taxes or assessments with respect to its Property. (d) Any previously undisclosed amendments to the land use entitlements or environmental conditions or other governmental conditions that must be met to develop the Property to the Planned Development Stage. -67- (e) Any previously undisclosed legislative, administrative and judicial challenges to the development of the Property to the Planned Development Stage. (f) Any denial or termination of credit, any denial or termination of, or default under, any line of credit or loan or any other loss of a source of funds that could have a material adverse effect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such major Developer, to pay special tax payments when due. (g) The occurrence of an Event of Bankruptcy with respect to such Major Developer or any Affiliate of such Major Developer. (h) The assumption of any obligations by a Major Developer. Assumption of Obligation If a portion of the Property owned by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such conveyance, will be a Major Developer, the obligations of the Developer hereunder with respect to the Property owned by such major Developer and its Affiliates may be assumed by such Major Developer or by an Affiliate thereof. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement. Termination of Reporting Obligation All of the Developer's obligations hereunder shall terminate (except as to default) upon the legal defeasance, prior redemption or payment in full of all the bonds constituting Local Obligations. The Developer's obligations under the Disclosure Agreement with respect to a Major Developer shall terminate upon the earliest to occur of (a) the date on which such Major Developer is no longer a Major Developer, as defined herein, (b) the date on which the Developer's obligations with respect to such Major Developer are assumed under an Assumption Agreement, and (c) the date on which all special taxes levied on the Property owned by such Major Developer and its Affiliates are paid or prepaid in full; provided however, upon the occurrence if any of the events described in clause (a) through (c), the Developer's obligations hereunder with respect to each other Major Developer, of any, shall remain in full force and effect. Upon the occurrence of any such termination prior to the final maturity of the Bonds, the Developer shall give notice of such termination in the same manner as for a Listed Event. Default In the event of a failure of the Developer or the Dissemination Agent, as the case may be, to comply with any provision of this Disclosure Agreement, the Fiscal Agent or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed as a default under the Fiscal Agent Agreement and the sole remedy under this Disclosure Agreement in the event of any failure of the Developer or the Dissemination Agent, as the case may be, to comply with this Disclosure Agreement shall be an action to compel performance. -68- MISCELLANEOUS This Official Statement speaks only as of its date, and the information contained herein is subject to change. All quotations from, and summaries and explanation of, the Indenture and other statues and documents contained herein do not purport to be complete, and reference is made to said documents, Indenture and statues for full and complete statement of their provisions. See °APPENDIX B - SUMMARY OF THE INDENTURE.° This Official Statement is submitted only in connection with the sale of the Bonds by the Authority. All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered reliable, are not guaranteed by the Authority or the Underwriter. The information contained herein should not be construed as representing all conditions affecting the Authority or the Bonds. The execution and delivery of this Official Statement have been authorized by the Authority. PALM DESERT FINANCING AUTHORITY BY: /s/Carlos L. Ortega Authorized Officer -69- (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX A - Summary of Defined Terms A-I APPENDIX A SUMMARY OF DEFINED TERMS L DEFINITIONS,AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY Section 1.01 Definitions. Unless the context otherwise requires, the terms defined below shall for all purposes have the meanings specified below. "Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time. "Assessment Districts" means Assessment District No. 92-1, Assessment District No. 94-1 and Assessment District No. 94-2 of the City. "Authority" means the Palm Desert Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State. "Bond Counsel" means (a) Briggs and Morgan, Professional Association, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. "Bond Law" means the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act(commencing with Section 6584), as in existence on the Closing Date or as thereafter amended from time to time. "Bond Year" means each twelve-month period extending from October 1 in one calendar year to September 30 of the succeeding calendar year, both dates inclusive, except that the first Bond Year shall begin on the Closing Date and end on September 30, 1998. "Bonds" means the Palm Desert Financing Authority 1997 Revenue Bonds (Assessment Districts Nos. 92-1, 94-1 and 94-2 and Community Facilities District No. 91-1) authorized by and at any time Outstanding pursuant to the Bond Law and this Indenture. "Business Day" means a day of the year on which banks in the city in which the Trust Office of the Trustee is located, are not required or authorized to remain closed. "Certificate of the Authority" means a certificate in writing signed by the President, Chief Administrative Officer, Secretary or Treasurer of the Authority, or by any other officer of the Authority duly authorized by the Commission for that purpose. "City" means the City of Palm Desert, California, a municipal corporation organized and existing under the Constitution and laws of the State. "Closing Date"means the date of delivery of the Bonds to the original purchasers thereof. "Commission" means the Commission of the Authority. "Community Facility District" means the City of Palm Desert Community Facility District No. 91-1 which has issued two series of Local Obligations being refunded. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement dated as of the Closing Date among the Authority, the City and Muni Financial Services, Inc., as Dissemination Agent,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 Authority and the City and related to the authorization, sale and issuance of the Bonds and the Local Obligations, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, including but not limited to the preliminary official statement and official statement regarding the Bonds, closing costs,filing and recording fees, expenses incurred by the Authority or the City in connection with the issuance of the Bonds or the Local Obligations, bond (underwriter's) discount, fees and charges of consultants performing services in connection with the reassessment proceedings for the Assessment Districts, legal fees and charges, including the fees of bond counsel and disclosure counsel, charges for authentication, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing. "Cost of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.04. "Districts" means collectively the Assessment Districts and the Community Facilities District. "Event of Default" means any of the events described in Section 8.01. "Excess Investment Earnings" means the amount of excess investment earnings determined to be subject to rebate to the United States of America with respect to the investment of the gross proceeds of the Bonds, determined pursuant to Section 148(f) of the Tax Code. "Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein: a. Cash; and b. Direct general obligations of the United States of America (including obligations issued or held in book entry from on the books of the Department of the Treasury of the United States of America), or obligations, the payment of principal of and interest on which is unconditionally guaranteed by the United States of America. "Fiscal Agent" means First Trust of California, N.A., as Fiscal Agent under the Fiscal Agent Agreements. "Fiscal Agent Agreements" means the four separate Fiscal Agent Agreements entered into by the City and the Fiscal Agent providing for the issuance and sale of the Local Obligations. "Fiscal Year" means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority an its official fiscal year period. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions hereof. "Independent Accountant" means any certified public accountant or firm of certified public accountants appointed and paid by the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service", 30 Montgomery Street, 10th Floor, Jersey City,New Jersey 07302, Attention: Editor; Kenny Information Services, Inc.'s "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10006; Moody's Investors Service, "Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor's Ratings Group's "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds as the Authority may designate in a Certificate of the Authority delivered to the Trustee. "Interest Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(a). "Interest Payment Date" means April 1 and October 1 in each year, beginning April 1, 1998, and continuing thereafter so long as any Bonds remain Outstanding. "Local Obligations" means the City's Limited Obligation Refunding Bonds (Property Secured Only - No Issuer Liability), City of Palm Desert Assessment District No. 92-1, Series 1997; Limited Obligation Refunding Bonds (Property Secured Only - No Issuer Liability), City of Palm Desert Assessment District No. 94-1, Series 1997; Limited Obligation Refunding Bonds (Property Secured Only - No Issuer Liability), City of Palm Desert Assessment District No. 94-2, Series 1997; and Limited Obligation Refunding Bonds (Property Secured Only - No Issuer Liability), City of Palm Desert Community Facilities District No. 91-1, Series 1997. "Maximum Annual Debt Service" means the amount determined by the City to be the greatest amount for any Bond Year of the sum of(i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds scheduled to be paid in such Bond Year. "Moody's" means Moody's Investors Service, Inc., its successors and assigns. "Outstanding", when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 9.07) all Bonds theretofore executed, issued and delivered by the Authority under thin Indenture except (a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation, (b) Bonds paid or deemed to have been paid within the meaning of Section 9.03, and(c)Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered pursuant to this Indenture or any Supplemental Indenture. "Owner" or "Bond Owner," when used with respect to any Bond, means the person in whose name the ownership of such Bond shall be registered on the Registration Books. "Permitted Investments" means: i) Federal Securities; ii) any of the following obligations of federal agencies not guaranteed by the United States of America: (a)debentures issued by the Federal Housing Administration; (b) participation certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation or Farm Credit Banks (consisting of Federal Land Banks, Federal Intermediate Credit Bank or Banks for Cooperatives); (c) bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, bonds of any federal home loan bank established under said act and stocks, bonds, debentures, participations or other obligations of or issued by the Federal National Mortgage Association, the Student Loan Marketing Association,the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation; and (d) bonds, notes or other obligations issued or assumed by the International Bank for Reconstruction and Development; iii) interest-bearing demand or time deposits (including certificates of deposit) in federal or State of California chartered savings and loan associations or banks, provided that (a) in the case of a savings and loan association, such demand or time deposits shall be filly insured by the Federal Deposit Insurance Corporation, or the unsecured obligations of such savings and loan association shall be rated in one of the two highest rating categories by a nationally recognized rating service, and (b) in the case of a bank, such demand or time deposits shall be filly insured by the Federal Deposit Insurance Corporation, or the unsecured obligations of such bank(or the unsecured obligations of the parent bank holding company of which such bank is the lead bank) shall be rated in one of the two highest rating categories by a nationally recognized rating service; iv) repurchase agreements collateralized by Federal Securities with a registered broker/dealer subject to Securities Investors Protection Corporation liquidation in the event of insolvency, or any commercial bank provided that: (a)the unsecured obligations of such bank shall be rated in one of the two highest rating categories by a nationally recognized rating service, or such bank shall be the lead bank of a bank holding company whose unsecured obligations are rated in one of the two highest rating categories by a nationally recognized rating service; (b) the most recent reported combined capital, surplus and undivided profits of such bank shall be not less than $100,000,000; (c) the repurchase obligation under any such repurchase agreement shall be required to be performed in not more than thirty (30) days; and (d)the entity holding such repurchase agreement shall have a perfected first security interest in the collateral securities for the benefit of the City under the California Commercial Code or pursuant to the book entry procedures prescribed at 31 C.F.R. 306.1 et sea. or 31 C.F.R. 350.0 et seq.; v) bankers acceptances endorsed and guaranteed by banks described in clause(iv)above; vi) obligations, the interest on which is exempt from federal income taxation under Section 103 of the Code and which are rated in one of the two highest rating categories by a nationally recognized rating service; vii) money market funds which invest solely in Federal Securities or in obligations described in the preceding clause(ii)or(iv) of this definition, or money market funds which are rated in the highest rating category by S&P and Moody's; viii) units of a taxable government money market portfolio comprised solely of obligations listed in clause(i), (ii)or(iv)above; ix) commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating by Moody's or S & P, of issuing corporations that are organized and operating within the United States of America and have total assets in excess of $500,000,000 and have an "Aa," "AA" or higher rating for the issuer's debentures, other than commercial paper, as provided by Moody's or S&P, respectively, and provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation; x) any general obligation of a bank or insurance company whose long- term debt obligations are rated in one of the two highest rating categories of a nationally recognized rating service; or xi) the Local Agency Investment Fund in the State Treasury of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code. "Principal Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(b). "Program Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.03. "Reassessments" means the reassessments levied on the lots and parcels within the Assessment Districts as security for the payment the principal of and interest on the Local Obligations relating to the Assessment Districts. "Rebate Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(c). "Record Date" means, with respect to any Interest Payment Date, the fifteenth(15th) calendar day of the month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. "Refunded Local Obligations" means the City's (i) Limited Obligation Improvement Bonds, Assessment District No. 94-1 (Bighorn), 1994 Series A; (ii) Limited Obligation Improvement Bonds, Assessment District No. 94-2 (Sun Terrace); (iii) 1915 Act Improvement Bonds, Assessment District No. 94-3 (Merano); (iv) Community Facilities District No. 91-1 (Indian Ridge Public Improvements) Series 1992A Special Tax Bonds; and (v)Community Facilities District No. 91-1 (Indian Ridge Public Improvements) Special Tax Bonds, Series 1995. "Registration Books" means the records maintained by the Trustee pursuant to Section 2.08 for the registration and transfer of ownership of the Bonds. "Representation Letter" means the global representation letter from the Authority to The Depository Trust Company. "Request of the Authority" means a request in writing signed by the President, the Chief Administrative Officer, the Secretary or the Treasurer of the Authority, or by any other officer of the Authority duly authorized by the Commission in writing for that purpose. "Revenue Fund" means the fund by that name established pursuant to Section 4.02. "Revenues" means: (a) all amounts payable by the City on the Local Obligations other than(i) administrative fees and expenses and indemnity against claims payable to the Authority or the Trustee and (ii) amounts payable to the United States of America pursuant to Section 5.08 hereof; (b) all moneys deposited and held from time to time by the Trustee in the funds and accounts established hereunder, other than the Rebate Account; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established hereunder,other than the Rebate Account. "S&P"means Standard&Poor's Rating Group, its successors and assigns. "Securities Depositories" means The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Fax: (516) 227-4039 or 4190; Midwest Securities Trust Company, Capital Structures-Call Notification, 440 South LaSalle Street, Chicago, Illinois 60605, Fax: (312) 663-2343; Philadelphia Depository Trust Company, Reorganization Division, 1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Dex: (215)496-5058; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addressee and/or such other securities depositories as the Authority may designate in a Certificate of the Authority delivered to the Trustee. "Special Taxes" means the special taxes levied on the lots and parcels with the Community Facilities District as security for the payment of the principal of and interest on the Local Obligations relating to the Community Facility District. "State" means the State of California. "Supplemental Indenture" means any indenture, agreement or other instrument hereafter duly executed by the Authority and the Trustee in accordance with the provisions of this Indenture. "Tax Code" means the Internal Revenue Code of 1986, as amended. Any reference to a provision of the Tax Code shall include the applicable Tax Regulations with respect to such provision. "Tax Regulations" means temporary and permanent regulations promulgated under or with respect to Section 103 and Sections 141 through 150, inclusive, of the Tax Code. "Treasurer" means the City Treasurer of the City. "Trust Office" means the corporate trust office of the Trustee at the address set forth in Section 9.13, and such office as the Trustee may designate in writing to the Authority from time to time as the place for transfer, exchange or payment of the Bonds. "Trustee" means First Trust of California, NA, and its successors and assigns, and any other corporation or association which may at any time be substituted in its place as provided in Article VI. APPENDIX B - Form Of Opinion Of Bond Counsel bob/palmds t.97/POS.DOC B_1 2400 IDS CENTER 80 SOUTH EIGHTH STREET MINNEAPOLIS, MINNESOTA 55402 TELEPHONE BRIGGS AND MORGAN FACSIMILE LE (612) 3 4-8650 PROFESSIONAL ASSOCIATION WRITER'S DIRECT DIAL (612) 334-8420 WRITER'S E-MAIL tiepau@email.briggs.com November , 1997 Palm Desert Financing Authority 73-510 Fred Waring Drive Palm Desert, CA 92260 Re: $ Palm Desert Financing Authority 1997 Revenue Bonds (Assessment Districts Nos. 92-1, and 94-1 and Community Facilities District No. 91-1) We have acted as bond counsel in connection with the issuance by the Palm Desert Financing Authority (the "Authority") of$ aggregate principal amount of Palm Desert Financing Authority 1997 Revenue Bonds (Assessment Districts Nos. 92-1 and 94-1 and Community Facilities District No. 91-1) (the 'Bonds"). The Bonds are issued pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"), a resolution adopted by the Authority Commission of the Authority (the "Commission") on October 23, 1997 (the "Resolution"), and an Indenture of Trust dated as of November 1, 1997 (the "Indenture"), between the Authority and First Trust of California, National Association, as Trustee (the "Trustee"). We have examined the Act, the Resolution, the Indenture and certified copies of the proceedings taken for the issuance and sale of the Bonds. As to questions of fact which are material to our opinions,we have relied upon the representations of the Authority contained in the Indenture and in certificates of its authorized officers which have been delivered to us for the purpose of supplying such facts, without having undertaken to verify the accuracy of any such representations by independent investigation. Based upon such examination, we are of the opinion, as of the date hereof, that the proceedings referred to above have been taken in accordance with the laws and the Constitution of the State of California, and that the Bonds, having been issued in duly authorized form and executed by the proper officials and delivered to and paid for by the purchaser thereof, constitute the legally valid and binding obligations of the Authority and are enforceable in accordance with their terms subject to the qualifications specified below and, except where funds are otherwise available, as may be permitted by law, are payable, 805893.1 SAINT PAUL OFFICE.FIRST NATIONAL BANK BUILDING•WWW.BRIGGS.COM MEMBER-LEX MUNDI,A GLOBAL ASSOCIATION OF INDEPENDENT LAW FIRMS BRIGGS A MORGAN Palm Desert Financing Authority November _, 1997 Page 2 as to both principal and interest, solely from certain revenues to be received by the Trustee and other funds available therefor held under the Indenture. The Internal Revenue Code of 1986, as amended (the "Code"), sets forth certain investment, rebate and related requirements which must be met subsequent to the issuance and delivery of the Bonds for the interest on the Bonds to be and remain exempt from federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroaction to the date of issuance of the Bonds. Pursuant to the Indenture, the Authority has covenanted to comply with the requirements of the Code and applicable regulations promulgated thereunder. We are of the opinion that, under existing statutes, regulations, rulings and court decisions, and assuming compliance by the Authority with the aforementioned covenants,the interest on the Bonds is excluded from gross income for purposes of federal income taxation and is exempt from personal income taxation imposed by the State of California. We are further of the opinion that interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions of the Code. However, interest on the Bonds received by corporations will be included in corporate adjusted current earnings, a portion of which may increase the alternative minimum taxable income of such corporations. Although interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these tax consequences will depend on the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted, and their enforcement may be subject to the exercise of judicial discretion in accordance with general principals of equity. Respectfully submitted, Professional Association 805893.1 (THIS PAGE INTENTIONALLY LEFT BLANK) APPENDIX C - Supplemental Information, City of Palm Desert The following information concerning the City of Palm Desert, the County of Riverside and surrounding areas is included only for the purpose of supplying general information regarding the community. General Description The City of Palm Desert (the "City'), incorporated in 1973 as a general law city, is located in the Coachella Valley and is approximately mid-way between the cities of Indio and Palm Springs, 117 miles east of Los Angeles, 118 miles northeast of San Diego and 515 miles southeast of San Francisco. Elevation of the City is 243 feet and the mean temperature is 73.1 degrees. Except for the summers, the weather is mild and annual average rainfall is 3.38 inches. The population was estimated at 32,800 for 1995, an increase of approximately 15,700 since 1987, attributable in part to territorial annexation. The City occupies an area of 24.75 square miles. Government Voters elect a five member City Council to four-year overlapping terms. The City Council selects one of its members to serve as Mayor and appoints a City Manager to conduct the day to day business of the City. Principal Property Taxpayers The principal property taxpayers and the market value of the taxable property of each for fiscal 1996-97 are shown for the City of Palm Desert in the following table: CITY OF PALM DESERT Largest 1996-97 Local Secured Property Tax Payers 1996-97 Assessed Percent Property Owner Primary Land Use Valuation of Total") 1. Desert Springs Marriott LP Hotels $169,142,437 3.46% 2. Teachers Insurance &Annuity Association Shopping Centers 64,506,607 1.32 3. Elizabeth S. Stewart Condominiums 61,654,115 1.26 4. Sunrise Desert Partners Vacant- Residential 31,966,370 0.65 5. Property California SCILW Shopping Centers 29,170,344 0.60 6. TE3 Asset Corporation Apartments 28,647,698 0.59 7. Bighorn Development LP Vacant- Residential 25,381,703 0.52 8. National Golf Operating LP Residences 21,234,668 0.49 9. Altamira Venture Vacant- Desert Land 21,039,985 0.43 10. Lakes Country Club Association, Inc. Residences 17,261,733 0.43 11. Palm Desert Ltd. Food Stores 16,742,120 0.35 12. Lucky Stores, Inc. Shopping Centers 16,554,933 0.34 C-1 1996-97 Assessed Pc Property Owner Primary Land Use Valuation Oa Total''i 13. FDIC/FSLIC Resolution Fund Vacant- Desert Land 16,382,087 0.34 14. Palm Desert Hotel Ventures Hotels & Motels 16,382,087 0.33 15. M&H Realty Partners LP Shopping Centers 15,516,347 0.32 16. Metropolitan Life Insurance Company Apartments 13,900,000 0.28 17. Bishop Bernice Pallahi Charitable Estate Trust Food Stores 13,760,648 0.28 18. Nationwide Health properties Medical & Related Srvcs. 12,983,093 0.27 19. Villa at Desert Falls I & II Vacant Land 12,003,981 0.25 20. David &Arline Langman Commercial 12,000,395 0.25 $623,588,772 12.75% (1) 1996-97 Local Secured Assessed Valuation: $4,891,840,140. Source: California Municipal Statistics Construction Activity The following table shows building permit valuation for the City from 1989 through April 1994: City of Palm Desert Building Permit Valuation (Valuation in Thousands of Dollars) 1989 1990 1991 1992 1993 1994(1) Residential New single-dwelling $ 81,377 $49,721 $32,462 $ 91,504 $43,575 $ 7,242 New multi-dwelling 15,603 2,491 2,027 10,445 0 897 Additions, alterations 3,614 5,076 1,649 2,880 3,182 1,025 Total Residential $100,594 $57,288 $36,137 $104,830 $46,757 $9,146 Non-Residential New commercial $ 10,168 $11,414 $14,251 $ 13,685 $9,018 $ 2,914 . New Industrial 1,573 1,720 573 2,220 0 275 Other 6,029 4,404 2,102 638 0 0 Additions, alterations 5,882 8,341 6,619 4,868 9,105 2,174 Total Non-Residential $ 23,652 $25,879 $25,545 $ 21,411 $18,128 $ 5,363 TOTAL VALUATION $124,246 $83,167 $59,682 $128,241 $64,880 $14,509 (') As of April Source: 'California Construction Trends,"Bank of America National Trust and Savings Association C-2 Taxable Transactions The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions from 1988 through the second quarter of 1995 is presented in the following table: City of Palm Desert Taxable Retail Sales Retail Stores Total All Others No. of Taxable No. of Taxable Year Permits Transactions Permits Transactions 1988 576 326,675 1,143 414,312 1989 653 380,673 1,365 488,654 1990 750 420,021 1,690 528,866 1991 787 413,938 1.804 515,648 1992 842 425,833 1,993 526,926 1993 954 492,828 2,292 599,585 1994 976 532,914 2,250 637,909 1995(1) 1,019 287,294 2,356 348,691 (1) Second Quarter, 1995 Source: California State Board of Equalization Employment The City of Palm Desert is located in the County of Riverside. The largest employers in the Riverside County labor market as of January 1997, are shown in the following tables: County of Riverside Major Employers(1) Estimated Number of Company Name Location Product/Service Employees County of Riverside Countywide Government 10,934 University of California, Riverside Riverside Education 4,550 Stater Bros. Countywide Supermarkets 3,000 Moreno Valley Unified School District Moreno Valley Education 2,800 City of Riverside Riverside Government 2,671 Corona-Norco Unified School District Corona Education 2,400 Riverside Unified School District Riverside Education 2,260 Riverside Community College District Riverside Education 1,800 Valley Health System Hemet Health Care 1,750 United States Postal Service Countywide Mail Delivery 1,725 Fleetwood Enterprises, Inc. Countywide Manufactured Housing 1,718 C-3 Estimated Number of Company Name Location Product/Service Employees Eisenhower Medical Center Rancho Mirage Health Care 1,708 Kaiser Pennanente Riverside Health Care 1,700 Desert Hospital Palm Springs Health Care 1,600 Boums, Inc. Riverside Electronics 1,500 La Quinta Resort &Club La Quinta Resort Hotel 1,480 Marriott Desert Springs Resort Palm Desert Resort Hotel 1,400 March Air Force Base Riverside Military Reserve Base 1,335(2) The Press Enterprise Riverside Newspaper 1,216 Califomia Rehabilitation Center Norco Corrections 1,147 Parkview Community Hospital Riverside Health Care 1,139 Starcrest Perris Mail Retail 1,100 Guidant (Formerly ACS) Temecula Medical Devices 1,057 Deutsch Banning Electronics 1,056 Riverside Community Hospital Riverside Health Care 1,053 (1) The County itself does not directly maintain employment records, but relies upon a variety of independent surveys, as well as upon its own surveys to identify major employers compiled as of January 1997. (2) Represents civilian employment only. March Air Force Base converted to a "Reserves Only" base on April 1, 1996, under the provisions of the Federal Base Closure and Realignment Act. A joint powers authority has been formed to manage the reuse of the base. As of January 1, 1997, total base employment was 6,299, including Reserve and National Guard units, some of which are on active duty. Source: County of Riverside Economic Development Agency County of Riverside Major Health Care and Public Sector Employers Number of Company Location Service Employees Health Care Valley Health System Hemet Health Care 1,750 Eisenhower Medical Center Rancho Mirage Hospital 1,708 Kaiser Pemianente Medical Center Riverside Hospital 1,700 Desert Hospital Palm Springs Hospital 1,600 Riverside General Hospital Riverside Hospital 1,600 Parkview Community Hospital & Medical Riverside Hospital 1,139 Center Riverside Community Hospital Riverside Hospital 1,053 Hemet Valley Medical Center Hemet Hospital 954 Corona Regional Medical Center Corona Hospital 770 C-4 Number of Company Location Service Employees Riverside Medical Clinic Riverside Health Care 675 JFK Memorial Hospital Indio Hospital 650 Public Service Riverside County Countywide County Gov't. 10,934 Corona-Norco Unified School District Corona-Norco School, K-12 3,001 Moreno Valley Unified School District Moreno Valley School, K-12 3,000 Riverside Unified School District Riverside School, K-12 2,924 University of California, Riverside Riverside University 2,800 City of Riverside Riverside City Gov't. 2,642 Desert Sands Unified School District Indio School, K-12 1,444 Alvord Unified School District Riverside School, K-12 1,200 Riverside County Office of Education Countywide Education 1,068 California Institution for Women Norco State Correctional 600 Institution Military March Air Force Base Riverside US Air Force 9,026 Defense Facility Source: Inland Empire Business Journal The civilian labor force employment and unemployment statistics for the Riverside County labor market from 1982 through 1995 are shown below. The total civilian labor force as of 1995 was reported by the State Employment Development Department to be 586,000 and the total civilian unemployment rate was 7.5 percent. Riverside County Labor Market Civilian Labor Force, Employment and Unemployment Unemployment Year Labor Force Employment Unemployment Rate 1982 271,500 236,400 35,100 12.9% 1983 304,300 270,700 33,600 11.0 1984 322,500 294,700 27,800 8.6 1985 344,100 316,600 27,500 6.8 1986 366,100 339,900 26,200 7.2 1987 386,900 362,200 24,700 6.4 1988 406,900 379,600 27,300 6.7 1989 442,700 412,700 30,000 6.8 1990 466,200 430,300 35,900 7.7 1991 498,000 446,900 51,100 10.3 1992 524,500 459,800 64,700 12.3 C-5 Unemployment Year Labor Force Employment Unemployment Rate 1993 571,800 506,800 65,000 11.4 1994 591,000 528,700 62,300 10.5 1995 586,000 541,500 44,200 7.5 Source: State of California Employment Development Department Historical Assessed Values A summary of the City's assessed value of taxable property is set forth in the following table: City of Palm Desert Assessed Valuations Fiscal Years Ending June 30, 1985 through 1997 Fiscal Year Assessed Ending June 30 Value 1985 $1,615,263,954 1986 1,839,758,506 1987 2,039,124,861 1988 2,326,206,631 1989(1) 2,426,114,963 1990 2,757,932,802 1991 3,143,661,290 1992 3,388,343,426 1993 3,540,329,565 1994 4,168,163,690 1995 4,285,617,264 1996 4,837,590,640 1997 4,891,840,140 (1) Beginning in 1988-89, unitary utility valuations are excluded from City and District valuations. Source: California Municipal Statistics. Utilities Services Water is supplied to the City by the Coachella Valley Water District and the Palm Desert Water and Services District. Sewage treatment and disposal is provided by the Coachella Valley Water District. Southern California Gas Company supplies natural gas to the City and electric power is provided by the Southern California Edison Company. Telephone service is available through GTE California Inc. C-6 Transportation Inter-City transportation is provided by Greyhound Bus which provides service from its connection points in the City to its lines located outside of the City in addition to the community owned and operated Sunline Bus System which provides service throughout the entire Coachella Valley. Intra-City transportation is provided by Tel-A-Ride and local taxi firms. The City's central highways are California Highway 111 and 74 which connect to US Interstate 10 and to California Highway 63 and 86. A full service airport is located in Palm Springs, twelve miles northwest of the City, with approximately seven carriers providing service. The airport has an 8,500 foot runway and general aviation facilities. There is also a private airport in Bermuda Dunes, eight miles northeast of the City. In addition, shipping is provided by numerous truck carriers which have overnight service to Los Angeles, San Francisco, San Diego and Phoenix. Rail transportation is provided by the Southern Pacific Railroad located in Indio, ten miles east of the City, and by Amtrak, which has two stations located in the Coachella Valley. Community Service Facilities The City of Palm Desert provides both police and fire protection through contracts with the County of Riverside. Educational services are provided through the Desert Sands Unified School District. Cultural and recreational facilities include sixteen churches and one City library. 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CO CO eN () ;� ��,) -A, CA '�! _�) CO W <,`_) 4 Qcon, gi ztu O COCO Zit p- COO co I i CZ 0 ill i il fit`I :� RI fi iz II 91 9R 9 h QEEEEE!!!! 1& e ng e� e' � a I z CC ITET Ct O o _ a cc Cn � Q cj z cc LL LUVo Erne CAco0UJ CO LLi azUJ iO h Lre COIII co 0 Z 1 'Co 1 , ATTENDANCE LIST INVESTMENT & FINANCE COMMITTEE September 1997-August 1998 NAMES Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 23 15 19 17 21 18 18 15 20 17 15 19 Benson X X Diaz X X `0 Erwin X X 71 Gibson X X Kelly A X C Magloff X X X Ortega A X X Ruth X A X Veazie A X X Members: 9 Quorum: 5 E:Excused A: Absent X: Present Revised 10/28/97 vla