$18,030,000 COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF …cdiacdocs.sto.ca.gov/2013-1293.pdf · facilities to be owned and operated by the Santa Clarita Valley Sanitation District,

The date of this Official Statement is: August 7, 2013.

NEW ISSUE NOT RATED

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, subject, however to certain qualifications described in this Official Statement, under existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of federal alternative minimum taxes imposed on individuals and corporations, although Bond Counsel observes that such interest is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liabilities. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxation. Bond Counsel expresses no other opinion regarding or concerning any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS – Tax Exemption.”

$18,030,000 COMMUNITY FACILITIES DISTRICT NO. 2006-1C

OF THE SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY SERIES 2013 SPECIAL TAX BONDS

Dated: Date of Delivery Due: September 1, as shown on inside coverAuthority for Issuance. The bonds captioned above (the “Bonds”) are being issued under the Mello-Roos Community Facilities Act of

1982 (the “Act”), the Resolution of Issuance (as defined in this Official Statement), and a Fiscal Agent Agreement, dated as of July 1, 2013 (the “Fiscal Agent Agreement”), by and between Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “Community Facilities District”), and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). The Board of Directors (the “Board”) of the Saugus-Castaic School Facilities Financing Authority (the “Authority”), acting as legislative body of the Community Facilities District, and the eligible landowner voters in the Community Facilities District, have authorized the issuance of bonds in an aggregate principal amount not to exceed $25,000,000. See “THE BONDS – Authority for Issuance.”

Security and Sources of Payment. The Bonds are payable from proceeds of Net Taxes (as defined in this Official Statement) levied on property within the Community Facilities District according to the rate and method of apportionment of special tax approved by the Board and the eligible landowner voters in the Community Facilities District. The Bonds are secured by a first pledge of the revenues derived from the Net Taxes and moneys deposited in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See “SECURITY FOR THE BONDS.”

Use of Proceeds. The Bonds are being issued to (i) pay the costs of acquisition, construction and completion of certain school facilities and improvements to be owned and operated by the Saugus Union School District and William S. Hart Union High School District and certain facilities to be owned and operated by the Santa Clarita Valley Sanitation District, (ii) fund a deposit into the reserve fund for the Bonds (see “SECURITY FOR THE BONDS – Reserve Fund”), and (iii) pay the costs of issuing the Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS.”

Bond Terms. Interest on the Bonds is payable on March 1, 2014, and semiannually thereafter on each March 1 and September 1. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. See “THE BONDS – General Bond Terms” and “APPENDIX F – DTC and the Book-Entry Only System.”

Redemption. The Bonds are subject to optional, mandatory sinking fund, and special mandatory redemption from prepaid Special Taxes. See “THE BONDS – Redemption.”

THE BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE BONDS, ARE NOT AN INDEBTEDNESS OF THE AUTHORITY, THE COMMUNITY FACILITIES DISTRICT, THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE AUTHORITY, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. OTHER THAN THE NET TAXES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE NET TAXES AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

MATURITY SCHEDULE

(see inside cover)

This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must

read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS' RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds.

The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Community Facilities District by Jones Hall, A Professional Law Corporation, San Francisco, California, as disclosure counsel, and by Bowie, Arneson, Wiles & Giannone, special counsel to the Authority. Nossaman LLP, Irvine, California, is serving as counsel to the Underwriter. Certain legal matters will be passed upon for Newhall Land (as defined in this Official Statement) by Goodwin Procter LLP, Los Angeles, California. It is anticipated that the Bonds, in book-entry form, will be available for delivery on or about August 22, 2013.

MATURITY SCHEDULE

$1,410,000 3.750% Term Bond due September 1, 2018, Yield: 3.750%, Price: 100.000% CUSIP† No. 804239 AA9

$1,770,000 5.000% Term Bond due September 1, 2023, Yield: 5.150%, Price: 98.835% CUSIP† No. 804239 AB7

$2,300,000 5.750% Term Bond due September 1, 2028, Yield: 5.850%, Price: 99.007% CUSIP† No. 804239 AC5

$3,045,000 5.875% Term Bond due September 1, 2033, Yield: 6.000%, Price: 98.552% CUSIP† No. 804239 AD3

$9,505,000 6.000% Term Bond due September 1, 2043, Yield: 6.200%, Price: 97.287% CUSIP† No. 804239 AE1

† Copyright 2013, American Bankers Association. CUSIP data in this Official Statement are provided by Standard & Poor's CUSIP Service

Bureau, a division of The McGraw-Hill Companies, Inc., and are provided for convenience of reference only. Neither the Community Facilities District, the Authority nor the Underwriter assumes any responsibility for the accuracy of CUSIP data.

SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

BOARD OF TRUSTEES OF SAUGUS UNION SCHOOL DISTRICT ACTING AS

BOARD OF DIRECTORS

Judy Egan Umeck, President Paul De La Cerda, Clerk

Douglas A. Bryce, Member Rose Koscielny, Member

Vacancy

SAUGUS UNION SCHOOL DISTRICT ADMINISTRATION

Joan Lucid, Ed.D., Superintendent Cynthia Shieh, Assistant Superintendent, Business Services

Barbara Boliver, Director of Facilities & Maintenance Eric Hart, Director of Fiscal Services

___________________________________

PROFESSIONAL SERVICES

BOND COUNSEL

Bowie, Arneson, Wiles & Giannone Newport Beach, California

DISCLOSURE COUNSEL

Jones Hall, A Professional Law Corporation

San Francisco, California

FINANCIAL ADVISOR

Keygent LLC El Segundo, California

APPRAISER

Stephen G. White, MAI

Fullerton, California

MARKET ABSORPTION CONSULTANT

Empire Economics, Inc. Capistrano Beach, California

SPECIAL TAX CONSULTANT

Willdan Financial Services

Temecula, California

FISCAL AGENT

U.S. Bank National Association Los Angeles, California

RA TV

Saugus Union School District (Los Angeles County, California)

Regional Location Map

Rosamond ---------

~Saugus Union U School District

LOS ANGELES COUNTY

Pasadena -~~~~~~~~~~

SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITYCommunity Facilities District No. 2006-1CWest Hills

[THIS PAGE INTENTIONALLY LEFT BLANK]

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TABLE OF CONTENTS Page Page INTRODUCTION .......................................................... 1 ESTIMATED SOURCES AND USES OF FUNDS ........ 4 FACILITIES TO BE FINANCED WITH PROCEEDS

OF THE BONDS ....................................................... 5 Facilities to be Financed ........................................... 5 CFD Funding Agreement .......................................... 6

THE BONDS ................................................................. 7 General Bond Terms ................................................. 7 Authority for Issuance ............................................... 8 Debt Service Schedule ............................................ 10 Redemption ............................................................. 11 Additional Bonds or Obligations Permitted Only for

Refunding Purposes ........................................... 15 Registration, Transfer and Exchange ...................... 15

SECURITY FOR THE BONDS ................................... 16 General ................................................................... 16 Limited Obligation ................................................... 16 Special Taxes .......................................................... 17 Rate and Method ..................................................... 17 Covenant to Foreclose ............................................ 23 Special Tax Fund .................................................... 24 Prepayment Account of the Special Tax Fund ........ 25 Bond Fund ............................................................... 26 Reserve Fund .......................................................... 26 Letter of Credit Fund ............................................... 27 Compliance of DR Horton with Letter of Credit

Requirement ....................................................... 28 Investment of Moneys in Funds .............................. 28

THE AUTHORITY ....................................................... 29 The Authority ........................................................... 29 The Saugus School District ..................................... 29 The Castaic School District ..................................... 29

THE COMMUNITY FACILITIES DISTRICT ................ 30 General ................................................................... 30 Projected Special Tax Revenues and Debt Service

Coverage ............................................................ 31 Market Absorption Study ......................................... 32 Appraised Property Value ....................................... 32 Appraised Value-to-Burden Ratio ........................... 34 Direct and Overlapping Governmental Obligations . 35 Estimated Tax Burden on Single Family Home ...... 37 Property Tax Collection History ............................... 38

PROPERTY OWNERSHIP ......................................... 39 All Property ............................................................. 39 Developed and Undeveloped Property ................... 40 DR Horton ............................................................... 41

PROPOSED PROPERTY DEVELOPMENT .............. 43 Current Development Status ................................... 43 Infrastructure Development and Financing Plans ... 44 Entitlement Status ................................................... 48 Environmental Conditions ....................................... 48

BOND OWNERS' RISKS ............................................ 50 Limited Obligation of the Community Facilities

District to Pay Debt Service ................................ 50 Levy and Collection of the Special Tax ................... 50 Payment of Special Tax Is Not a Personal

Obligation of the Property Owners ...................... 52 Appraised Values .................................................... 52 Property Values and Property Development ........... 52 Concentration of Property Ownership ..................... 54 Duration of Letter of Credit; No Cross

Collateralization .................................................. 55 Property Tax Delinquencies .................................... 55 Other Possible Claims Upon the Value of Taxable

Property .............................................................. 56 Exempt Properties .................................................. 56 Depletion of Reserve Fund ..................................... 57 Bankruptcy .............................................................. 57 Disclosure to Future Purchasers ............................. 58 No Acceleration Provisions ..................................... 58 Loss of Tax Exemption ........................................... 58 Voter Initiatives ....................................................... 58 Secondary Market for Bonds .................................. 59

LEGAL MATTERS ...................................................... 60 Legal Opinions ........................................................ 60 Tax Exemption ........................................................ 60 No Litigation ............................................................ 62

CONTINUING DISCLOSURE ..................................... 63 The Community Facilities District ............................ 63 The Property Owner ................................................ 63

NO RATINGS ............................................................. 64 UNDERWRITING ....................................................... 64 PROFESSIONAL FEES ............................................. 64

APPENDIX A – General Information About the City of Santa Clarita and Los Angeles County APPENDIX B – Rate and Method of Apportionment for Community Facilities District No. 2006-1C of Saugus-

Castaic School Facilities Financing Authority APPENDIX C – Summary Appraisal Report APPENDIX D – Market Absorption Study APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement APPENDIX F – DTC and the Book-Entry Only System APPENDIX G – Form of Issuer Continuing Disclosure Certificate APPENDIX H – Form of Property Owner Disclosure Certificate APPENDIX I – Form of Opinion of Bond Counsel APPENDIX J – Community Facilities District Boundary Map

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

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

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of

an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion

contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the Community Facilities District, any other parties described in this Official Statement, or in the condition of property within the Community Facilities District since the date of this Official Statement.

Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Bonds

referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Bonds.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from

sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has

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

Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other

documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that stabilize

or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.

Bonds are Exempt from Securities Laws Registration. The issuance and sale of the Bonds have not been

registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement

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

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-

LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMMUNITY FACILITIES DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

Both the Saugus Union School District and Castaic Union School District maintain Internet web sites; however, the

content of those web sites is not incorporated by reference into this Official Statement.

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OFFICIAL STATEMENT

$18,030,000 COMMUNITY FACILITIES DISTRICT NO. 2006-1C

OF THE SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY SERIES 2013 SPECIAL TAX BONDS

INTRODUCTION

This Official Statement, including the cover page, inside cover and attached appendices, is

provided to furnish information regarding the bonds captioned above (the “Bonds”) to be issued by Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “Community Facilities District”).

This introduction is not a summary of this Official Statement. It is only a brief description of and

guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement.

Capitalized terms used but not defined in this Official Statement have the definitions given in the

Fiscal Agent Agreement (as defined below).

The Authority. The Saugus-Castaic School Facilities Financing Authority (the “Authority”) is a Joint Exercise of Powers Authority formed in August 2007 by the Saugus Union School District (the “Saugus School District”) and the Castaic Union School District (“Castaic School District”). The Saugus School District and Castaic School District are located in the Santa Clarita Valley, in the northern portion of Los Angeles County (the “County”). See “THE AUTHORITY.”

Property Ownership. As of June 15, 2013, the current owners of the taxable property within the Community Facilities District were as follows:

Property Owner Number of

Lots D.R. Horton Holding Los Angeles Company, Inc., a California corporation (“DR Horton”)

283 [1]

Individual homeowners 43 326

[1] Of the 283 lots shown as owned by DR Horton, six represent property for which DR Horton has paid into escrow

the purchase price payable to The Newhall Land and Farming Company (A California Limited Partnership), but transfer of title to this property to DR Horton will not occur until after recordation of the final map for the property and satisfaction of certain other conditions (expected in September 2013).

The taxable property in the Community Facilities District is intended for development as 326

single-family detached units. See “THE COMMUNITY FACILITIES DISTRICT - General.” For detailed information about DR Horton, current development status and proposed

development plans for the property in the Community Facilities District, see “PROPERTY OWNERSHIP” and “PROPOSED PROPERTY DEVELOPMENT.”

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The Community Facilities District. The Community Facilities District was formed and established by the Board of Trustees of the Saugus School District, acting as the Board of Directors of the Authority (the “Board”), as legislative body of the Community Facilities District, under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), pursuant to a resolution adopted by the Board following a public hearing, and a landowner election held on the same date at which the qualified electors of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved the levy of special taxes. See “THE BONDS – Authority for Issuance.”

The Community Facilities District was also formed pursuant to an agreement entitled

“Agreement for Formation of, and Funding by, Mello-Roos Community Facilities District and for Conveyance of School Site” dated as of May 2, 2006, by and between the Saugus School District and The Newhall Land and Farming Company (A California Limited Partnership) (“Newhall Land”), as amended by a First Amendment dated as of January 16, 2007, by and between the Saugus School District and Newhall Land; Second Amendment dated as of May 15, 2007, by and between the Saugus School District and Newhall Land; Third Amendment dated as of November 18, 2008, by and between the Saugus School District and Newhall Land; and Fourth Amendment dated as of February 21, 2012, by and between the Saugus School District and Newhall Land (collectively, the “CFD Funding Agreement”).

See “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS.” Authority for Issuance of the Bonds. The Bonds are issued pursuant to the Act, certain

resolutions adopted by the Board, including the Resolution of Issuance adopted on July 23, 2013 (the “Resolution of Issuance”), and a Fiscal Agent Agreement, dated as of July 1, 2013 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). See “THE BONDS – Authority for Issuance.”

The Board and the eligible landowner voters in the Community Facilities District have authorized

the Community Facilities District to incur bonded indebtedness in an amount not to exceed $25,000,000. See “THE BONDS – Authority for Issuance.”

Purpose of the Bonds. Proceeds of the Bonds will be used primarily to finance acquisition,

construction and completion of certain school facilities and improvements to be owned and operated by the Saugus School District and William S. Hart Union High School District (the “Hart School District”) and facilities to be owned and operated by the Santa Clarita Valley Sanitation District (the “Sanitation District”).

Bond proceeds will also (i) fund a deposit into the Reserve Fund for the Bonds (see “SECURITY

FOR THE BONDS - Reserve Fund”) and (ii) pay the costs of issuing the Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” and “FACILITIES TO BE FINANCED

WITH PROCEEDS OF THE BONDS.”

Redemption of Bonds Before Maturity. The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption from prepaid Special Taxes. See “THE BONDS – Redemption.”

Security and Sources of Payment for the Bonds. The Board will annually levy special taxes on the property in the Community Facilities District (the “Special Taxes”) in accordance with the Rate and Method of Apportionment for Community Facilities District No. 2006-1C of Saugus-Castaic School

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Facilities Financing Authority (the “Rate and Method”). The Bonds are secured by and payable from a first pledge of the net proceeds of the Special Taxes (as more particularly defined in the Fiscal Agent Agreement, the “Net Taxes”). The Bonds will be additionally secured by all moneys (net of the Administrative Expense Requirement) deposited in the Special Tax Fund (and its accounts), the Bond Fund, the Reserve Fund, the Redemption Fund, and, for a limited time, moneys available for transfer to the Bond Fund from the Letter of Credit Fund (up to the Stated Amount). See “SECURITY FOR THE BONDS.”

The Community Facilities District has covenanted in the Fiscal Agent Agreement to cause

foreclosure proceedings to be commenced and prosecuted against certain parcels with delinquent installments of the Special Taxes. For a more detailed description of the foreclosure covenant see “SECURITY FOR THE BONDS - Covenant to Foreclose.”

Appraisal. An appraisal of the property within the Community Facilities District dated June 12,

2013 (the “Appraisal”), was prepared by Stephen G. White, MAI of Fullerton, California (the “Appraiser”) in connection with issuance of the Bonds. The purpose of the appraisal was to ascertain the market value of the as-is condition of the taxable property in the Community Facilities District as of a May 15, 2013, date of value. Subject to the assumptions contained in the Appraisal, the Appraiser estimated that the taxable property within the Community Facilities District, subject to the lien of the Special Taxes and overlapping liens, had an estimated aggregate value of $79,370,000. See “THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value” and “APPENDIX C – Summary Appraisal Report” for further information on the Appraisal.

Market Absorption Study. A market absorption study with respect to the proposed

development of the property within the Community Facilities District dated May 28, 2013 (revised June 12, 2013) (the “Market Absorption Study”), was prepared by Empire Economics, Inc., Capistrano Beach, California (the “Market Absorption Consultant”) in connection with issuance of the Bonds. The purpose of the Market Absorption Study was to provide an estimate of the probable absorption schedules for the proposed single-family detached homes in the Community Facilities District. See "THE COMMUNITY FACILITIES DISTRICT – Market Absorption Study” and “APPENDIX D – Market Absorption Study.”

Risk Factors Associated with Purchasing the Bonds. Investment in the Bonds involves

risks that may not be appropriate for some investors. See “BOND OWNERS' RISKS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the Bonds.

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ESTIMATED SOURCES AND USES OF FUNDS The estimated proceeds from the sale of the Bonds will be deposited into the following funds

established under the Fiscal Agent Agreement:

SOURCES

Principal Amount of Bonds $18,030,000.00 Plus/Less: Original Issue Premium/Discount (345,421.75) Total Sources $17,684,578.25 USES

Deposit into Reserve Fund [1] $1,293,200.00 Deposit into Costs of Issuance Account [2] 256,000.00 Deposit into School Facilities Account of Construction Fund [3] 9,377,067.26 Deposit into Hart Facilities Account of Construction Fund [4] 4,818,435.99 Deposit into Sanitation Fees Account of Construction Fund [5] 1,714,500.00 Underwriter’s Discount 225,375.00 Total Uses $17,684,578.25 [1] Equals the Reserve Requirement. See “SECURITY FOR THE BONDS - Reserve Fund.” [2] Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel; the cost of

printing the Preliminary and final Official Statements; fees and expenses of the Fiscal Agent; reimbursement of developer advances; and the fees of the Financial Advisor, Market Absorption Consultant, Appraiser and Special Tax Consultant.

[3] Will be used to pay the costs of Saugus School District facilities. See “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS” below.

[4] Will be used to pay the costs of Hart School District facilities. See “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS” below.

[5] Will be used to pay Sanitation Fees for capital facilities of the Sanitation District. See “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS” below.

5

FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS The Community Facilities District is authorized to finance school facilities of the Saugus School

District (the “School Facilities”) and the Hart School District (the “Hart School District Facilities”), and Sanitation District capital facilities fees (“Sanitation Fees,” and together with the School Facilities and the Hart School District Facilities, the “Facilities”). A portion of the proceeds of the Bonds will be used to contribute to these costs. See “ESTIMATED SOURCES AND USES OF FUNDS.”

Facilities to be Financed

School Facilities. The School Facilities consist of the West Creek Elementary School, which

opened in 2010. The School Facilities will be funded with a portion of the Bonds, in partial satisfaction of the

Saugus School District’s obligation for acquisition of the school from Newhall Land (and its successors and assigns) under the CFD Funding Agreement (described below). The Bonds are anticipated to provide approximately $9,377,067 for School Facilities.

Hart School District Facilities. Hart School District Facilities may include the designing,

planning, constructing, leasing, or purchasing of school sites and buildings, as well as furniture, technology, and equipment with a useful life of at least five years, together with all other authorized school facilities with a useful life of at least five years, including, but not limited to, administrative and central support facilities, interim housing, and transportation facilities needed by the Hart School District to serve the student population to be generated as a result of development of the property within the Community Facilities District.

The proceeds of the Bonds that finance the Hart School District Facilities will satisfy all or a

portion of the obligations of the developers of the property in the Community Facilities District to pay Hart School District Facilities costs that are a precondition to receiving building permits. Those property owners (and their successors) will remain responsible to pay any Hart School District Facilities costs not funded with the proceeds of the Bonds.

Hart School District Facilities are funded pursuant to a Joint Community Facilities Agreement

entered into as of January 15, 2008 (the “Hart JCFA”), by and among the Authority, the Hart School District, and Newhall Land. The Bonds are anticipated to provide approximately $4,818,436 for Hart School District Facilities.

Sanitation Fees. Sanitation Fees are connection fees imposed by the Sanitation District on the

property in the Community Facilities District, and used for the construction of public sanitation facilities to be owned and operated by Sanitation District.

The proceeds of the Bonds that finance the Sanitation Fees will satisfy all or a portion of the

obligations of the developers of the property in the Community Facilities District to pay Sanitation Fees . Those property owners (and their successors) will remain responsible to pay any Sanitation Fees not funded with the proceeds of the Bonds.

Sanitation Fees are funded pursuant to a Joint Community Facilities Agreement dated as of

May 16, 2006, by and among the Saugus School District, the Sanitation District, and Newhall Land, as amended by the First Amendment to Joint Community Facilities Agreement, dated as of December 11, 2007, by and among the Authority, the Sanitation District, the Saugus School District, and Newhall

6

Land (as amended, the “Sanitation District JCFA”). The Bonds are anticipated to provide approximately $1,714,500 for Sanitation Fees.

CFD Funding Agreement

The CFD Funding Agreement provides for the formation of the Community Facilities District to

finance the acquisition and construction of the West Creek Elementary School in order to mitigate the anticipated impacts on School District facilities to be caused by, among other developments, the residential development of the property in the Community Facilities District. Newhall Land constructed the West Creek Elementary School pursuant to the CFD Funding Agreement.

The CFD Funding Agreement provides that the proceeds of bonds issued by the Community

Facilities District will be used to pay some or all the costs of the Saugus School District’s acquisition of the site and the West Creek Elementary School facilities from Newhall Land.

The CFD Funding Agreement provides that, upon request of Newhall Land, the Saugus School

District must issue certificates of compliance as required in order to obtain building permits for construction within the Community Facilities District now that the West Creek Elementary School has been completed and acquired by the Saugus School District (subject to the Saugus School District’s remaining obligation for the balance of the acquisition cost to the extent of bond proceeds of the Community Facilities District).

This section contains only a brief summary of the CFD Funding Agreement. Potential

purchasers of the Bonds are encouraged to review the entire CFD Funding Agreement, which is available from the Saugus School District.

7

THE BONDS This section generally describes the terms of the Bonds set forth in the Fiscal Agent Agreement,

which is summarized in more detail in APPENDIX E. Capitalized terms used but not defined in this section are defined in APPENDIX E.

General Bond Terms

Dated Date, Maturity and Authorized Denominations. The Bonds will be dated their date of

delivery and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple of $5,000.

Interest. Interest will be calculated on the basis of a 360-day year composed of twelve 30-day

months. The Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing March 1, 2014 (each, an “Interest Payment Date”) until the principal sum of the Bonds has been paid. However, if, at the maturity date of any Bond (or if the same is redeemable and is duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full accordance with the Fiscal Agent Agreement, that Bond will then cease to bear interest.

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

Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). See “APPENDIX F – DTC and the Book-Entry Only System.”

Payments of Interest and Principal. For so long as DTC is used as depository for the Bonds,

principal of, premium, if any, and interest payments on the Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the Bonds, for distribution to the beneficial owners of the Bonds in accordance with the procedures adopted by DTC.

The Bonds will be payable both as to principal and interest, and as to any premiums upon the

redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof will be payable

upon presentation thereof at the Principal Corporate Trust Office of the Fiscal Agent. Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication, unless:

(i) such date of authentication is an Interest Payment Date, in which event interest will be

payable from such date of authentication; (ii) the date of authentication is after a Record Date (as defined in the Fiscal Agent

Agreement) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from such Interest Payment Date; or

(iii) the date of authentication is prior to the close of business on the first Record Date, in

which event interest will be payable from the Delivery Date. However, if at the time of authentication of a Bond, interest is in default, interest on that Bond

will be payable from the last date on which the interest has been paid or made available for payment, or if no interest has been paid or made available for payment, interest will be payable from the Delivery Date.

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Interest on any Bond will be paid to the person whose name appears in the Bond Register as

the Owner of such Bond as of the close of business on the Record Date (which, during any period in which the Bonds are not subject to DTC’s book-entry system, will be Cede & Co.). Such interest will be paid by check of the Fiscal Agent mailed on the Interest Payment Date to such Bondowner by first class mail at his or her address as it appears on the Bond Register as of the Record Date; provided that, in the case of an Owner of $1,000,000 or more in aggregate principal amount of the Bonds, upon the Fiscal Agent's receipt of written request of such Owner prior to the Record Date accompanied by wire transfer instructions, such interest will be paid on the Interest Payment Date in immediately available funds by wire transfer to an account in the United States.

Authority for Issuance

Community Facilities District Proceedings. The Bonds are issued under the Act, the

Resolution of Issuance and the Fiscal Agent Agreement. In addition, as required by the Act, the Board of the Authority has taken the following actions with respect to establishing the Community Facilities District and authorizing issuance of the Bonds:

Resolutions of Intention: On January 15, 2008, the Board adopted Resolution No. 2008-

1 stating its intention to establish the Community Facilities District and authorize the levy of a special tax therein. On January 15, 2008, the Board adopted Resolution No. 2008-2 stating its intention to incur bonded indebtedness in an amount not to exceed $25,000,000 in the aggregate within the Community Facilities District for the purpose of financing the Facilities. See “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS.”

Resolution Approving Boundary Map: On January 15, 2008, the Board adopted

Resolution No. 2008-3 approving the boundary map for the Community Facilities District and ordering the recordation of the boundary map in the office of the County Recorder for Los Angeles.

Resolution Approving Joint Community Facilities Agreements: On December 11, 2007,

the Board adopted Resolution No. 2007-47 approving the Sanitation District JCFA and first amendment to the Sanitation District JCFA. On January 15, 2008, the Board adopted Resolution No. 2008-5 approving the Hart JCFA.

Resolution of Formation: Immediately following a noticed public hearing on February 19,

2008, the Board adopted Resolution No. 2008-12 (the “Resolution of Formation”), which established the Community Facilities District and authorized the levy of special taxes to fund authorized public facilities.

Resolution of Necessity: On February 19, 2008, the Board adopted Resolution No.

2008-13 declaring the necessity to incur bonded indebtedness and authorized the Community Facilities District to issue bonds secured by the special taxes to finance authorized public facilities in the authorized not-to-exceed amount of $25,000,000.

Landowner Election for the Community Facilities District and Declaration of Results: On

February 19, 2008, an election was held within the Community Facilities District in which the qualified electors approved a ballot proposition authorizing the Community Facilities District to incur bonded indebtedness in a maximum total amount of $25,000,000 to finance the acquisition and construction of the Facilities, the levy of a special tax and the establishment of an appropriations limit for the Community Facilities District. On February 19, 2008, the Board

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adopted Resolution No. 2008-14, by which the Board approved the canvass of the votes and declared the Community Facilities District to have the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit.

Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real

property records of the County on February 25, 2008. Ordinance Levying Special Taxes: On February 19, 2008, the Board held a first reading

of Ordinance No. 2008-1 levying the Special Taxes within the Community Facilities District. The second reading of the Ordinance was held on March 4, 2008.

Resolution of Issuance: On July 23, 2013, the Board adopted Resolution No. 2013-14

#01 approving issuance of the Bonds of the Community Facilities District in an amount not to exceed $25,000,000. Authority’s Goals and Policies. The Authority adopted its “Local Public Agency Goals and

Policies for Community Facilities Districts” on September 4, 2007, and has determined that the issuance of the Bonds conforms with it.

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Debt Service Schedule The following table presents the annual debt service on the Bonds (including sinking fund

redemptions), assuming there are no optional or special mandatory redemptions.

Year Ending September 1

Principal

Interest

Total Debt Service

2014 $240,000 $1,048,389.22 $1,288,389.22 2015 275,000 1,013,818.76 1,288,818.76 2016 285,000 1,003,506.26 1,288,506.26 2017 300,000 992,818.76 1,292,818.76 2018 310,000 981,568.76 1,291,568.76 2019 320,000 969,943.76 1,289,943.76 2020 335,000 953,943.76 1,288,943.76 2021 355,000 937,193.76 1,292,193.76 2022 370,000 919,443.76 1,289,443.76 2023 390,000 900,943.76 1,290,943.76 2024 410,000 881,443.76 1,291,443.76 2025 435,000 857,868.76 1,292,868.76 2026 460,000 832,856.26 1,292,856.26 2027 485,000 806,406.26 1,291,406.26 2028 510,000 778,518.76 1,288,518.76 2029 540,000 749,193.76 1,289,193.76 2030 575,000 717,468.76 1,292,468.76 2031 605,000 683,687.50 1,288,687.50 2032 645,000 648,143.76 1,293,143.76 2033 680,000 610,250.00 1,290,250.00 2034 720,000 570,300.00 1,290,300.00 2035 765,000 527,100.00 1,292,100.00 2036 810,000 481,200.00 1,291,200.00 2037 860,000 432,600.00 1,292,600.00 2038 910,000 381,000.00 1,291,000.00 2039 965,000 326,400.00 1,291,400.00 2040 1,020,000 268,500.00 1,288,500.00 2041 1,085,000 207,300.00 1,292,300.00 2042 1,150,000 142,200.00 1,292,200.00 2043 1,220,000 73,200.00 1,293,200.00 Total: $18,030,000 $20,697,208.14 $38,727,208.14

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Redemption Optional Redemption. The Bonds may be redeemed prior to maturity at the option of the

Community Facilities District from any source of funds other than prepayments of Special Taxes on any date commencing September 1, 2023, in whole, or in part, from such maturities as are selected by the Community Facilities District in writing in accordance with the Fiscal Agent Agreement, and by lot within a maturity, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The Term Bond maturing on September 1, 2018, is

subject to mandatory redemption before maturity on September 1, 2014, and on each September 1 thereafter to and including September 1, 2018, in accordance with the schedule set forth below. This Term Bond will be redeemed from Mandatory Sinking Payment amounts that have been deposited into the Sinking Fund Redemption Account of the Redemption Fund pursuant to the Fiscal Agent Agreement.

Sinking Fund

Redemption Date (September 1)

Mandatory

Sinking Payments 2014 $240,000 2015 275,000 2016 285,000 2017 300,000 2018 (maturity) 310,000

The Term Bond maturing on September 1, 2023, is subject to mandatory redemption before

maturity on September 1, 2019, and on each September 1 thereafter to and including September 1, 2023, in accordance with the schedule set forth below. This Term Bond will be redeemed from Mandatory Sinking Payment amounts that have been deposited into the Sinking Fund Redemption Account of the Redemption Fund pursuant to the Fiscal Agent Agreement.

Sinking Fund


Mandatory


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The Term Bond maturing on September 1, 2028, is subject to mandatory redemption before maturity on September 1, 2024, and on each September 1 thereafter to and including September 1, 2028, in accordance with the schedule set forth below. This Term Bond will be redeemed from Mandatory Sinking Payment amounts that have been deposited into the Sinking Fund Redemption Account of the Redemption Fund pursuant to the Fiscal Agent Agreement.

Sinking Fund


Mandatory




Sinking Fund


Mandatory




Sinking Fund


Mandatory

Sinking Payments 2034 $720,000 2035 765,000 2036 810,000 2037 860,000 2038 910,000 2039 965,000 2040 1,020,000 2041 1,085,000 2042 1,150,000 2043 (maturity) 1,220,000

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The Term Bonds to be so redeemed will be determined by lot, and will be redeemed at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date, without premium.

In the event of a partial redemption of a Term Bond pursuant to an optional redemption (as

described above) or special mandatory redemption from prepaid special taxes (as described below), Mandatory Sinking Payments for that Term Bond set forth above will reduced on a pro rata basis pursuant to calculations made by the Fiscal Agent.

Special Mandatory Redemption From Prepaid Special Taxes. The Bonds are subject to

special mandatory redemption prior to their stated maturities, in whole, or in part, on any Interest Payment Date for which timely notice can be given, from such maturities as are selected by the Community Facilities District in writing in accordance with the Fiscal Agent Agreement, and by lot within a maturity, in integral multiples of $5,000 from monies on deposit in the Prepayment Account of the Special Tax Fund and monies transferred from the Reserve Fund, upon payment of the redemption prices set forth below, which are expressed as a percentage of the principal amount of the Bonds to be redeemed, plus accrued interest to the date of redemption:

Redemption Date

Redemption Price

March 1, 2014 through March 1, 2021 103% September 1, 2021 and March 1, 2022 102 September 1, 2022 and March 1, 2023 101 September 1, 2023 and any Interest Payment Date thereafter 100

Selection of Bonds for Redemption. If less than all of the Outstanding Bonds are to be

redeemed, the Bonds to be redeemed will be from such maturities selected by the Community Facilities District, as provided in writing to the Fiscal Agent. Bonds within a single maturity shall be redeemed by lot in any manner that the Fiscal Agent deems appropriate.

The portion of any such Bond of a denomination of more than $5,000 to be redeemed shall be

in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat such Bond as representing that number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

If Bonds are to be redeemed on the same date pursuant to mandatory sinking fund redemption

and any other redemption event, the Fiscal Agent will first select the Bonds to be redeemed pursuant to mandatory sinking fund redemption, and will then select the Bonds to be redeemed pursuant to the other redemption event or events.

Purchase in Lieu of Redemption. In lieu of, or partially in lieu of, any optional redemption,

mandatory sinking fund redemption or special mandatory redemption, moneys deposited in an account of the Redemption Fund may be used to purchase the Outstanding Bonds that were to be redeemed with such funds. Purchases of Outstanding Bonds may be made by the Community Facilities District prior to the selection of Bonds for redemption by the Fiscal Agent, at public or private sale as and when and at such prices as the Community Facilities District may in its discretion determine, but only at prices (including brokerage or other expenses) not more than par plus accrued interest, and, in the case of funds in the Optional Redemption Account or Mandatory Redemption Account, the applicable premium to be paid in connection with the proposed redemption.

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Any accrued interest payable upon the purchase of Bonds may be paid from the Interest Account of the Bond Fund for payment of interest on the next following Interest Payment Date.

Notice of Redemption. At least 30 days but no more than 60 days prior to the redemption

date, the Fiscal Agent will mail by first class mail a copy of the redemption notice, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent thereto, and neither failure to receive such notice nor any defect therein will affect the validity of the proceedings for the redemption of such Bond, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of redemption has been given as provided in the Fiscal Agent Agreement will be conclusive as against all parties, and it will not be open to any Owner to show that he or she failed to receive notice of such redemption.

However, while the Bonds are subject to DTC’s book-entry system, the Fiscal Agent will be

required to give notice of redemption only to DTC as provided in the letter of representations executed by the Community Facilities District and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the Beneficial Owners of the Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption set forth in the Fiscal Agent Agreement.

Conditional Redemption Notice and Rescission of Redemption. Under the Fiscal Agent

Agreement, any notice of optional redemption will be cancelled and annulled if for any reason funds are not or will not be available on the date fixed for redemption for the payment in full of the Bonds then called for redemption. Such cancellation and annulment is not a default under the Fiscal Agent Agreement.

The Community Facilities District has the right to provide a conditional notice of optional

redemption to the Owner of any Bond, and to rescind any optional redemption for any reason on any date prior to the redemption date by written notice to the Owner of any Bond previously called for optional redemption.

Notice of rescission of optional redemption will be provided in the same manner notice of

optional redemption was originally provided. The actual receipt by the Owner of any Bond of notice of such rescission will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the validity of the rescission.

Effect of Redemption. If notice of redemption is duly given as provided in the Fiscal Agent

Agreement, and the amount necessary for the redemption is available for that purpose on the date fixed for such redemption, the following will apply:

(a) the Bonds, or portions thereof, designated for redemption, will, on the date fixed for

redemption, become due and payable at the redemption price thereof as provided in the Fiscal Agent Agreement, anything in the Fiscal Agent Agreement, or in the Bonds, to the contrary notwithstanding;

(b) upon presentation and surrender of the Bonds called for redemption at the Principal

Corporate Trust Office of the Fiscal Agent, or such other location as may be designated by the Fiscal Agent, those Bonds will be redeemed at the redemption price;

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(c) from and after the redemption date, the Bonds or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds or portions thereof will cease to bear further interest; and

(d) from and after the date fixed for redemption, no Owner of any of the Bonds or

portions thereof so designated for redemption will be entitled to any of the benefits of the Fiscal Agent Agreement, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.

Additional Bonds or Obligations Permitted Only for Refunding Purposes The Community Facilities District will not issue any additional bonds, notes or other similar

evidences of indebtedness payable, in whole or in part, out of Net Taxes except: (i) bonds issued to fully or partially refund the Outstanding Bonds; or (ii) subordinate bonds, notes or other similar evidences of indebtedness.

Registration, Transfer and Exchange

The following provisions regarding the exchange and transfer of the Bonds apply only during

any period in which the Bonds are not subject to DTC’s book-entry system. While the Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See “APPENDIX F – DTC and the Book-Entry Only System.”

Registration. The Fiscal Agent will keep, or cause to be kept, at the Principal Corporate Trust

Office of the Fiscal Agent, sufficient records for the registration and transfer of ownership of the Bonds, which will be open to inspection during regular business hours and upon reasonable notice by the Community Facilities District; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as provided in the Fiscal Agent Agreement.

Registration of Exchange or Transfer. Subject to the provisions of the Fiscal Agent

Agreement relating to book-entry bonds, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Corporate Trust Office of the Fiscal Agent, accompanied by delivery of a written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Bondowner or his or her duly authorized attorney. The Bonds may be exchanged at the Principal Corporate Trust Office of the Fiscal Agent for a like aggregate principal amount and maturity of Bonds of other authorized denominations. The Fiscal Agent may charge the Bondowner any tax or other governmental charge required with respect to such transfer or exchange.

The Fiscal Agent will not be required to register transfers or make exchanges of (i) Bonds for a

period of 15 days before the date established by the Fiscal Agent for selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption.

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SECURITY FOR THE BONDS This section generally describes the security for the Bonds set forth in the Fiscal Agent

Agreement, which is summarized in more detail in APPENDIX E. Capitalized terms used but not defined in the section are defined in APPENDIX E.

General

The payment of the principal of, and interest and any premium on the Bonds is secured by a

first pledge of the following:

• all revenues derived from the Net Taxes, and • available amounts held by the Fiscal Agent in the Special Tax Fund (and its

accounts), the Bond Fund (and its accounts), the Reserve Fund, the Redemption Fund (and its accounts), and, for a limited time, moneys available for transfer to the Bond Fund from the Letter of Credit Fund (up to the Stated Amount).

Amounts in the Construction Fund (and its accounts), the Administrative Expense Fund, the

Surplus School Facilities Fund, and the Rebate Fund are not pledged to the repayment of the Bonds. The Facilities to be financed with the proceeds of the Bonds are not in any way pledged to pay the debt service on the Bonds.

“Net Taxes” are defined in the Fiscal Agent Agreement as the amount of all “Gross Taxes”

(defined generally as the amount of all Special Taxes collected within the Community Facilities District, plus proceeds from the sale of property collected under the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of Special Taxes), less the “Administrative Expense Requirement” (defined as $30,000 per Fiscal Year).

Limited Obligation

The Bonds and interest thereon are not payable from the general fund of the Community

Facilities District or the Authority. Except with respect to the Net Taxes, neither the credit nor the taxing power of the Community Facilities District or the Authority is pledged for the payment of the Bonds or interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the Community Facilities District or the Authority or the forfeiture of any of their property.

The principal of and interest on the Bonds and premiums upon the redemption of any

thereof are not a debt of the Community Facilities District (except to the limited extent described in this Official Statement) or the Authority, the State of California nor any of its political subdivisions, within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon any property or income, receipts or revenues of the Community Facilities District or the Authority, except the Net Taxes that are, under the terms of the Fiscal Agent Agreement, set aside for the payment of the Bonds and interest thereon. Neither the members of the Board nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance.

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Special Taxes Covenant to Levy Special Taxes to Meet Special Tax Requirement. The Community

Facilities District will covenant in the Fiscal Agent Agreement that, subject to the Maximum Special Tax rates, it will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation, the enforcement of delinquent Special Taxes.

The Community Facilities District will fix and levy the amount of Special Taxes within the

Community Facilities District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund, an amount equal to the Administrative Expense Requirement and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes (up to the Maximum Special Tax Rates).

Manner of Collection. The Fiscal Agent Agreement provides that the Special Taxes are

payable and will be collected in the same manner and at the same time and in the same installment as the general taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. However, the Board may provide for direct collection of the Special Taxes in certain circumstances.

Because the Special Tax levy is limited to the Maximum Special Tax rates set forth in the Rate

and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the Bonds.

Rate and Method

General. The Special Taxes will be levied and collected according to the Rate and Method,

which provides the means by which the Board may annually levy the Special Taxes within the Community Facilities District, up to the Maximum Special Tax, and to determine the amount of the Special Taxes that will need to be collected each Fiscal Year from the “Taxable Property” within the Community Facilities District.

The following is a synopsis of the provisions of the Rate and Method, which should be read in

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

Minimum Annual Special Tax Requirements. All Property. The Rate and Method defines the minimum amount of money to be levied on

Taxable Property in the Community Facilities District (the “Minimum Annual Special Tax Requirement”) as the amount required in any Fiscal Year to pay the following:

• the debt service or other costs on all outstanding Bonds, • Administrative Expenses of the Community Facilities District (as further described in the

Rate and Method),

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• the costs associated with the release of funds from an escrow account, if any, and • any amount required to establish or replenish any reserve funds established in

association with the Bonds, less any amount in the special tax fund for the outstanding Bonds available in that Fiscal Year to pay debt service or other costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement.

In determining the Special Tax levies necessary to satisfy the Minimum Annual Special Tax Requirement in any particular Fiscal Year, the Community Facilities District, subject to applicable Maximum Special Tax amounts and Section 53321 of the Act, will include amounts sufficient to compensate for any reasonably anticipated delinquent payments of Special Taxes. The determination of anticipated delinquent payments of Special Taxes will include consideration of, among other relevant factors, delinquency rates for payments of Special Taxes levied in previous Fiscal Years in the Community Facilities District or community facilities districts comparable to the Community Facilities District.

Developed Property. The Rate and Method defines the “Minimum Annual Special Tax Requirement for Developed Property” in the Community Facilities District as the amount required in any Fiscal Year to pay the following:

• 110% of the debt service or other costs on all outstanding Bonds due in the next

succeeding calendar year, • Administrative Expenses of the Community Facilities District (as further described in the

Rate and Method), • the costs associated with the release of funds from an escrow account, if any, and • any amount required to establish or replenish any reserve funds established in

association with the Bonds, less any amount in the special tax fund for the outstanding Bonds available in that Fiscal Year to pay debt service or other costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement.

In determining the Special Tax levies necessary to satisfy the Minimum Annual Special Tax Requirement for Developed Property in any particular Fiscal Year, the Community Facilities District, subject to applicable Maximum Special Tax amounts and Section 53321 of the Act, will include amounts sufficient to compensate for any reasonably anticipated delinquent payments of Special Taxes. The determination of anticipated delinquent payments of Special Taxes will include consideration of, among other relevant factors, delinquency rates for payments of Special Taxes levied in previous Fiscal Years in the Community Facilities District or community facilities districts comparable to the Community Facilities District.

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Classification of Parcels. For each Fiscal Year, beginning with Fiscal Year 2008-09, (i) each Assessor’s Parcel within the Community Facilities District has been and will be assigned to a Zone in accordance with Exhibit A attached to the Rate and Method, (ii) each Assessor’s Parcel within a Zone has been and will be classified as Taxable Property or Exempt Property, and (iii) each Assessor's Parcel of Taxable Property has been and will be classified as Developed Property or Undeveloped Property, all as defined below.

“Taxable Property” means all Assessor’s Parcels that are not Exempt Property. “Exempt Property” is defined as the following: • Assessor’s Parcels owned by the State of California, Federal or other local

governments, • Assessor’s Parcels which are used as places of worship and are exempt from ad

valorem property taxes because they are owned by a religious organization, • Assessor’s Parcels used exclusively by a homeowners' association for non-

residential purposes, • Assessor’s Parcels with public or utility easements making impractical their

utilization for other than the purposes set forth in the easement, as reasonably determined by the Community Facilities District,

• Assessor’s Parcels developed or expected to be developed exclusively for non-

residential use, including any use directly servicing any non-residential property, such as parking, as reasonably determined by the Community Facilities District, and

• any other Assessor’s Parcels at the reasonable discretion of the Community

Facilities District. However, the Community Facilities District may not classify an Assessor’s Parcel as

Exempt Property if such classification would reduce the Acreage of all Taxable Property in a given Zone to less than the Minimum Net Taxable Acreage for that Zone, as set forth in Table 3 of the Rate and Method. Assessor's Parcels that cannot be classified as Exempt Property because such classification would reduce the Acreage of Taxable Property to less than the Minimum Net Taxable Acreage in a given Zone will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

“Developed Property” means all Assessor’s Parcels of Taxable Property for which Building Permits were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor's Parcels were created on or before January 1 of the prior Fiscal Year and that each Assessor's Parcel is associated with a Lot, as determined reasonably by the Community Facilities District.

“Undeveloped Property” means all Assessors Parcels of Taxable Property that are not

classified as Developed Property.

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In addition, each Assessor's Parcel of Developed Property will be assigned to a Special Tax class based on the Building Square Footage of the Unit as listed on the Building Permit issued for that Unit.

Maximum Special Taxes, Assigned Annual Special Tax and Backup Annual Special Tax.

The Maximum Special Tax for each Zone is defined in the Rate and Method as follows:

Developed Property. The Maximum Special Tax for a given Zone for any Fiscal Year is the greater of (i) the applicable Assigned Annual Special Tax for such Assessor’s Parcel or (ii) the applicable Backup Annual Special Tax for such Assessor’s Parcel.

• Assigned Annual Special Tax. The Assigned Annual Special Tax varies from $4,000.00 per Unit to $5,252.00 per Unit, based on the Building Square Footage of the Unit.

• Backup Annual Special Tax. The Backup Annual Special Tax for Developed

Property will be the rate per Lot per Zone. The Backup Annual Special Tax for each Lot in Zone A or Zone B will be calculated according to the following formula:

• the Assigned Annual Special Tax per acre of Acreage of Undeveloped

Property in the applicable Zone (as depicted in Table 2 of the Rate and Method), multiplied by

• the Minimum Net Taxable Acreage in the applicable Zone (as depicted

in Table 3 of the Rate and Method), divided by • Number of Lots in the applicable Zone.

The Backup Annual Special Tax for each Lot in Zone C will be $5,252.00.

The Backup Annual Special Tax is subject to adjustment if all or any portion of a Final Subdivision Map is changed or modified, as set forth in the Rate and Method. Undeveloped Property. The Maximum Special Tax for each Assessor’s Parcel for any

Fiscal Year is the Assigned Annual Special Tax for such Assessor’s Parcel shown in Table 2 of the Rate and Method, which varies from $9,822.62 per acre of Acreage in Zone C to $33,930.99 per acre of Acreage in Zone B. Annual Special Tax Remainder. In each Fiscal Year in which proceeds of Annual Special

Taxes levied on Developed Property are greater than the Minimum Annual Special Tax Requirement, the difference will be used by the Authority for acquisition, construction or financing school facilities that will benefit the residents of the Community Facilities District as determined by the Authority, in accordance with the Act and other applicable law.

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Method of Apportionment. Under the Rate and Method, the Community Facilities District will levy Annual Special Taxes each Fiscal Year, beginning with Fiscal Year 2008-09, as follows:

Step One: The Community Facilities District will Proportionately levy a Special Tax

on each Assessor’s Parcel of Developed Property up to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel to satisfy the Minimum Annual Special Tax Requirement For Developed Property.

Step Two: If the sum of the amounts to be levied in step one will be insufficient to

satisfy the Minimum Annual Special Tax Requirement, then the Community Facilities District will also Proportionately levy a Special Tax on each Assessor’s Parcel of Undeveloped Property, up to the Maximum Special Tax applicable to each such Assessor’s Parcel, to satisfy the Minimum Annual Special Tax Requirement.

Step Three: If the sum of the amounts to be levied pursuant to steps one and two will

be insufficient to satisfy the Minimum Annual Special Tax Requirement, then the Community Facilities District will, instead of the amounts levied pursuant to step one, and in addition to the amounts levied pursuant to step two, Proportionately levy a Special Tax on each Assessor’s Parcel of Developed Property, up to the Maximum Special Tax applicable to each such Assessor’s Parcel, to satisfy the Minimum Annual Special Tax Requirement.

Full Prepayment of Annual Special Taxes. The Special Tax obligation of an Assessor’s

Parcel of Developed Property or an Assessor’s Parcel of Undeveloped Property for which a Building Permit has been issued may be prepaid in full, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

• Any property owner prepaying his or her Special Tax obligation must also pay all

delinquent Special Taxes, interest and penalties owing on the Assessor's Parcel on which payment is being made, if any.

• No prepayment will be allowed unless the amount of Special Taxes that may be

levied on Taxable Property after such prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments in each future Fiscal Year on all Bonds that would remain outstanding after a portion of the Bonds is redeemed with such prepayment.

• No prepayment will be allowed unless such prepayment will not impair the

security of all currently outstanding Bonds. These determinations will include identifying all Assessors’ Parcels that are expected to

become Exempt Property. The Prepayment Amount is generally calculated as the present value of the current and future

Special Taxes applicable to the parcel being prepaid, less a credit for the corresponding reduction in the reserve requirement for the Bonds, plus the fees and administrative expenses of the Community Facilities District associated with the prepayment, all as set forth in further detail in APPENDIX B.

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Partial Prepayment of Annual Special Taxes. The Special Tax obligation of an Assessor's Parcel may be partially prepaid, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

• There are no delinquent Special Taxes, penalties, or interest charges

outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid.

• A party may provide written notice to the Community Facilities District of its

election to prepay a portion of the Special Tax obligation for a minimum of 15% (or a lesser percentage if approved by the Board) of the Assessor's Parcels within a Final Subdivision Map. Partial prepayment for such Assessor's Parcels must be made at the same time and must be based on the same prepayment percentage for all such Assessor's Parcels. The written notice will specify the percentage of the Special Tax obligations that the party desires to prepay for all Assessor's Parcels to be partially Prepaid. Within 30 days after receipt of such notice, Community Facilities District will determine the Partial Prepayment Amount in accordance with this Section I of the Rate and Method and will provide written notice of such determination to the party. The Special Tax obligation of an Assessor's Parcel of Developed Property may be partially Prepaid only prior to or concurrent with the close of escrow of a sale of a Unit constructed on that Assessor's Parcel to the initial homebuyer. In addition, the Special Tax obligation may not be partially Prepaid by an initial or subsequent homebuyer.

• No partial prepayment will be allowed unless the amount of Special Taxes that

may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, is at least 1.1 times the regularly scheduled annual interest and principal payments in each future Fiscal Year on all Bonds that would remain outstanding after a portion of the Bonds are redeemed with such partial prepayment.

• No prepayment will be allowed unless such prepayment will not impair the

security of all currently outstanding Bonds.

The Partial Prepayment Amount is calculated as the Prepayment Amount determined for full prepayment of Special Taxes, as set forth above, multiplied by the percent by which the owner of the Assessor’s Parcel is partially prepaying the Annual Special Tax obligation, all as set forth in further detail in APPENDIX B.

Claims. Any property owner claiming that the amount or application of the Special Tax levied in

a Fiscal Year is not correct may file a written claim with the Community Facilities District not later than 12 months after having paid the first installment of the Special Tax that is disputed. In order to be considered sufficient, any claim must: (i) specifically identify the property by address and Assessor's Parcel Number; (ii) state the amount in dispute and whether it is the whole amount or only a portion of the Special Tax; (iii) state all grounds on which the property owner is disputing the amount or application of the Special Tax, including a reasonably detailed explanation as to why the amount or application of such Special Tax is incorrect; (iv) include all documentation, if any, in support of the claim; and (v) be verified under penalty of perjury by the person who paid the Special Tax or his or her guardian, executor or administrator.

A representative(s) of the Community Facilities District (a "Representative") will promptly

review the claim, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the claim. The decisions of the Representative will be final and binding. If the Representative's decision requires that the Special Tax for an

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Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund will not be made (except for the last year of levy), but an adjustment will be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s) as the Representative's decisions indicates.

Duration of Special Tax Levy. Annual Special Taxes will be levied until the last series of

Bonds are paid in full, provided that Annual Special Taxes will not be levied after Fiscal Year 2050-51. Manner of Collection. The Annual Special Tax will be collected in the same manner and at the

same time as ordinary ad valorem property taxes, provided, however, that the Community Facilities District may collect Annual Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, including the ability to direct bill the properties within the Community Facilities District.

Covenant to Foreclose

Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that the

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

Foreclosure Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in

the payment of the Special Tax, the Community Facilities District may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale.

Such judicial foreclosure action is not mandatory. However, the Community Facilities District

has agreed in the Fiscal Agent Agreement that, on or about August 1 of each Fiscal Year, it will compare the amount of Special Taxes levied in the Community Facilities District to the amount of Special Taxes reported to the Community Facilities District as received by the County, and proceed as follows:

Individual Delinquencies. If the Community Facilities District determines that (i) any

single parcel in the Community Facilities District is subject to a Special Tax delinquency in the aggregate amount of $5,000 or more, or (ii) any owner owns one or more parcels subject to a Special Tax delinquency in an aggregate amount of $5,000 or more, then the Community Facilities District will send or cause to be sent a notice of delinquency (and a demand for immediate payment) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Community Facilities District within 90 days of such determination, to the extent permissible under applicable law.

Aggregate Delinquencies. If the Community Facilities District determines that the total amount of delinquent Special Taxes for the prior Fiscal Year for the Community Facilities District (including the total of individual delinquencies described above) exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the Community Facilities District will notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and (if the delinquency remains uncured) will commence foreclosure proceedings within 90 days of

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such determination against each parcel of land within the Community Facilities District with a Special Tax delinquency, to the extent possible under applicable law. Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No

assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Community Facilities District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be

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

Foreclosure by court action is subject to normal litigation delays, the nature and extent of which

are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the Community Facilities District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation. See “BOND OWNERS' RISKS - Bankruptcy.”

No Teeter Plan. Because the County has not elected to follow the procedures of the “Teeter

Plan” (which is the County's Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code), collections of Special Taxes will reflect actual delinquencies.

Special Tax Fund

Deposits. Under the Fiscal Agent Agreement, all Special Taxes and other amounts constituting

Gross Taxes collected by the Community Facilities District at any time (exclusive of (i) Prepaid Special Taxes received, which will be deposited into the Prepayment Account of the Special Tax Fund, and (ii) Special Taxes relating to property with respect to which a draw has been made on the corresponding Letter of Credit, or Cash Deposit, which will be deposited into the Letter of Credit Fund to be used to reimburse the Letter of Credit Bank or the Developer, as the case may be) will be transferred no later than 10 days after receipt thereof to the Fiscal Agent and will be held in the Special Tax Fund (except the amount equal to the Administrative Expense Requirement), which will be held by the Fiscal Agent for the benefit of the Bondowners.

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Disbursements. The Fiscal Agent will transfer or apply moneys in the Special Tax Fund (other than Prepaid Special Taxes) in the following order of priority:

(a) To the Administrative Expense Fund, an amount specified in writing by the

Community Facilities District, up to the Administrative Expense Requirement of $30,000. (b) To the Interest Account of the Bond Fund, an amount such that the balance in the

Interest Account one Business Day prior to each Interest Payment Date equals the installment of interest due on the Bonds on that Interest Payment Date. Monies in the Interest Account will be used for the payment of interest on the Bonds as it becomes due.

(c) To the Principal Account of the Bond Fund, an amount up to the amount needed to

make the principal payment due on the Bonds during the current Bond Year. (d) To the Sinking Fund Redemption Account of the Redemption Fund, an amount up to

the amount needed to make the Mandatory Sinking Payments due on the Bonds during the current Bond Year.

(e) To the Reserve Fund, the amount, if any, necessary to replenish the Reserve Fund

to the Reserve Requirement. (f) Provided all the amounts due in the current Bond Year are funded as described in (b),

(c), (d) and (e) above, to the extent there are additional Administrative Expenses, to the Administrative Expense Fund in the amount specified in writing by the Community Facilities District required to bring the balance therein to the amount needed to pay such expenses.

(g) Any remaining Special Taxes and other amounts constituting Gross Taxes will

remain in the Special Tax Fund subject to the provisions of (h), below. (h) Any remaining Special Taxes and other amounts constituting Gross Taxes, if any, will

remain in the Special Tax Fund until the end of the Bond Year. Provided there are no Special Taxes levied or projected to be levied on Undeveloped Property at the end of the Bond Year, any remaining funds in the Special Tax Fund not required to cure a delinquency in the payment of principal and interest on the Bonds (including payment of Mandatory Sinking Payments due during the current Bond Year), to restore the Reserve Fund as provided for in (e), above, or to pay current or pending Administrative Expenses as provided for in (a) and (f), above, will be deposited in the Surplus School Facilities Fund and used in accordance with the Fiscal Agent Agreement and will be free and clear of any lien under the Fiscal Agent Agreement or pledge to the Bondowners; provided, any funds required to cure any delinquency described above will be retained in the Special Tax Fund and expended or transferred at the earliest possible date.

Prepayment Account of the Special Tax Fund

Prepaid Special Taxes collected by the Community Facilities District (net of any costs of collection) will be transferred, no later than 10 days after receipt, to the Fiscal Agent and the Community Facilities District will direct the Fiscal Agent to deposit the Prepaid Special Taxes in the Prepayment Account of the Special Tax Fund. The Prepaid Special Taxes will be held in the Prepayment Account for the benefit of the Bondowners and will be transferred by the Fiscal Agent to the Mandatory Redemption Account of the Redemption Fund to call Bonds on the next date for which notice can be given in accordance with the special mandatory redemption provisions as set forth in the Fiscal Agent Agreement.

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Bond Fund

Principal and Interest Accounts. One Business Day before each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund or the Letter of Credit Fund (if applicable), or the Reserve Fund if sufficient moneys are unavailable in the Special Tax Fund or Letter of Credit Fund (if applicable), and deposit in the Principal Account and the Interest Account of the Bond Fund an amount equal to all of the principal and all of the interest due and payable on Bonds on the ensuing Interest Payment Date, less amounts on hand in the Bond Fund available to pay principal and interest on such Bonds.

Notwithstanding the foregoing, amounts in the Bond Fund resulting from transfers from the

Construction Fund pursuant to the Fiscal Agent Agreement will be used to pay the principal of and interest on such Bonds prior to the use of any other amounts in the Bond Fund for such purpose.

The Fiscal Agent will apply monies in the Interest Account and Principal Account to the payment

of interest and principal, respectively, on the Bonds on each Interest Payment Date.

Reserve Fund

General. In order to further secure the payment of principal of and interest on the Bonds, certain proceeds of the Bonds will be deposited into the Reserve Fund in order to satisfy the Reserve Requirement resulting from the issuance of the Bonds (see “ESTIMATED SOURCES AND USES OF FUNDS”).

See “APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement” for a

complete description of the timing, purpose and manner of disbursements from the Reserve Fund. Disbursements. Except as provided in the Fiscal Agent Agreement with respect to certain

investment earnings, monies in the Reserve Fund will be used solely for the following purposes:

(i) making transfers to the Bond Fund or Redemption Fund to pay the principal of, including Mandatory Sinking Payments, and interest on Bonds when due to the extent that monies in the Interest Account and the Principal Account of the Bond Fund or monies in the Sinking Fund Redemption Account, including any funds drawn from the Letter of Credit Fund, are insufficient for this purpose;

(ii) making any required transfer to the Rebate Fund upon written direction from the

Community Facilities District, (iii) making any transfers to the Bond Fund or Redemption Fund in connection with

prepayments of the Special Taxes; (iv) paying the principal and interest due on Bonds in the final Bond Year, and (v) application to the defeasance of Bonds in accordance with the Fiscal Agent

Agreement.

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Reserve Requirement. The “Reserve Requirement” is defined in the Fiscal Agent Agreement to mean, as of any date of calculation, an amount equal to the least of the following:

(i) 10% of the original principal amount of the Bonds, (ii) Maximum Annual Debt Service (defined as the maximum sum obtained for any

remaining Bond Year prior to the final maturity on the Bonds by totaling the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year whether at maturity or by redemption together with a premium thereon, if any premium is payable and (2) the interest payable on the aggregate principal amount of Bonds Outstanding in such Bond Year assuming the Bonds are retired as scheduled) or

(iii) 125% of average Annual Debt Service on the Bonds.

Letter of Credit Fund

Requirement to Provide Letter of Credit or Cash Deposit. As a condition precedent to issuance of the Bonds and prior to the Delivery Date, the Community Facilities District is required to cause DR Horton to provide one or more Letters of Credit or Cash Deposits, as applicable, in an aggregate amount equal to the Stated Amount, naming the Fiscal Agent as beneficiary.

The Fiscal Agent will establish a separate account for any Letters of Credit or Cash Deposits

provided by DR Horton. The requirements of the Fiscal Agent Agreement regarding the Letters of Credit and Cash

Deposits are applicable to DR Horton and its successors and assigns (with respect to Undeveloped Property and Developed Property) other than individual homeowners of residential assessor’s parcels with record title.

Stated Amount. The Fiscal Agent Agreement defines the “Stated Amount” as the estimated

annual amount of Special Taxes to be levied on property in the Community Facilities District (inclusive of the Administrative Expense Requirement, but exclusive of the 10% coverage amount related to debt service coverage) that is not owned by homeowners.

The initial Stated Amount for the DR Horton property is $1,124,565.37. The Stated Amount was

determined based on the projected Fiscal Year 2013-14 Special Taxes. No Cross Collateralization. Any Letter of Credit or Cash Deposit provided by DR Horton will

secure payment only of Special Taxes levied on property in the Community Facilities District secured by such Letter of Credit or Cash Deposit, as set forth in the Fiscal Agent Agreement, and will not secure the payment of Special Taxes with respect to any other property. The Letter of Credit or Cash Deposit does not secure the payment by homeowners of Special Taxes on the property secured by the Letter of Credit or Cash Deposit.

Duration and Renewal. A Letter of Credit or Cash Deposit will be in effect until individual

homeowners are record owners of 80% of the residential assessor’s parcels within the Community Facilities District.

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Other Provisions Relating to the Letters of Credit and Cash Deposits. See “APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement” for a complete description of the Letter of Credit Fund and other terms and provisions relating to the Letters of Credit and Cash Deposits, including provisions regarding recalculation of the Stated Amount, final release of each Letter of Credit or Cash Deposit, assessor’s parcel transfers between property owners (including future merchant builders, if any), draws on a Letter of Credit or Cash Deposit in the event of Special Tax delinquencies, and reimbursements following draws on a Letter of Credit or Cash Deposit.

Letter of Credit Bank Qualification. The Fiscal Agent Agreement defines the “Letter of

Credit Bank” as the issuer from time to time of a Letter of Credit and the respective successors and assigns of the issuer thereof and any surviving, resulting or transferee banking association or corporation with which, or into which, it may be consolidated or merged or to which it may transfer all of its banking business, provided that such entity shall have a minimum rating, at all times during the term of the Letter of Credit, of one of the following:

(1) Moody's long-term rating of “A2” and short-term rating of “P-1”; (2) S&P long-term rating of “A” and short-term rating of “A-1”; or (3) Fitch long term rating of “A+” and short-term rating of “F1”;

with any of the foregoing ratings to be evidenced by proof provided by the Letter of Credit Bank to the Community Facilities District and the Fiscal Agent in writing.

Compliance of DR Horton with Letter of Credit Requirement

DR Horton has satisfied the Letter of Credit requirement with a Letter of Credit in an amount equal to the initial Stated Amount for its property. The Letter of Credit was issued by JPMorgan Chase Bank, N.A. (“JPMorgan”) prior to the closing date. However, no assurance can be given that DR Horton will not substitute a Cash Deposit or a Letter of Credit issued by a different bank after the closing date.

The parent company of JPMorgan is listed on the New York Stock Exchange under the trading

symbol “JPM.” Information about JPMorgan’s parent company is contained in reports filed with the Securities and Exchange Commission and the Federal Deposit Insurance Corporation. Additional information regarding JPMorgan is available on the Internet at www.jpm.com. This Internet address is included for reference only, and the information that the Internet site contains is neither a part of this Official Statement nor incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of that information.

Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held

by the Fiscal Agent will be invested by the Fiscal Agent in Authorized Investments, as directed in writing by the Community Facilities District. See “APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement” for a definition of “Authorized Investments” and other restrictions on the investment of moneys in the funds and accounts held under the Fiscal Agent Agreement.

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THE AUTHORITY The following information relating to the Authority, the Saugus School District and the Castaic

School District is included only to supply general information regarding the Authority, the Saugus School District and the Castaic School District. Neither the faith and credit nor the taxing power of the Authority, the Saugus School District or the Castaic School District is pledged to payment of the Bonds, and the Bonds will not be payable from any of the revenues or assets of the Authority, the Saugus School District or the Castaic School District. None of the proceeds of the Bonds will be used by the Castaic School District. The Authority

Formation. The Authority was formed under an agreement entitled “Joint Exercise of Powers

Agreement Creating the Saugus-Castaic School Facilities Financing Authority” dated August 9, 2007 (the “JPA Agreement”), between the Saugus School District and Castaic School District, pursuant to the authority granted in Section 53316.2 of the Act and Sections 6500 et seq. of the California Government Code.

Board of Directors. Under the JPA Agreement, the Board of Trustees of the Saugus School

District acts as the Board of Directors of the Authority. Regional Economic and Demographic Information. For economic and demographic

information regarding the area in and around the Authority, see APPENDIX A.

The Saugus School District The Saugus School District is located in the Santa Clarita Valley in the northeastern part of the

County. It provides public education within an approximately 94-square mile area, serving the City of Santa Clarita and unincorporated areas of the County in the Santa Clarita Valley area, and providing education from kindergarten through 6th grade to approximately 10,500 students attending 15 schools. The administration headquarters of the Saugus School District are located at 24930 Avenue Stanford, Santa Clarita, California. For further information on the Saugus School District, see its Internet home page at www.saugus.k12.ca.us.

The Castaic School District

The Castaic School District is located in the Santa Clarita Valley in Los Angeles County. It

provides public education within an approximately 150-square mile area. Approximately 2,861 students are currently enrolled in the district's five preschools, three elementary schools and one middle school. The administration headquarters of the Castaic School District are located at 28131 Livingston Avenue, Valencia, California. For further information on the Castaic School District see its Internet home page at www.castaicusd.com.

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THE COMMUNITY FACILITIES DISTRICT

General

Description and Location. The Community Facilities District is located in an unincorporated portion of the County, northwest of the City of Santa Clarita. The Community Facilities District encompasses 242.85 gross acres and is a portion of the 966-acre master-planned community known as West Creek/West Hills.

The Community Facilities District contains three zones. The Bonds are secured by Special

Taxes levied within all the zones in the Community Facilities District. The Community Facilities District is located north of the intersection of Copper Hill Drive and

Decoro Drive, just to the west of San Francisquito Creek, and east of Saugus Union School District CFD No. 2006-1. Land uses surrounding the Community Facilities District include: the West Hills and West Creek communities; the master-planned community of Tesoro del Valle to the north; a wide swath of open space encompassing San Francisquito Creek to the east, beyond which is an active adult community; and vacant and graded land within the West Creek community planned for future development to the south.

The Community Facilities District contains four neighborhoods:

1) Belmont; 2) Highgate; 3) Milan; and 4) Monument.

The taxable property in the Community Facilities District is intended for development as 326 single-family detached units. See “PROPOSED PROPERTY DEVELOPMENT” below.

See “APPENDIX A – General Information About the City of Santa Clarita and Los Angeles

County” for demographic and other information regarding the City of Santa Clarita and the County. The boundary map showing the boundaries of the Community Facilities District is attached as APPENDIX J.

Gross and Anticipated Net Taxable Acres. The property in the Community Facilities District

currently contains approximately 243 gross acres, of which approximately 59 net acres are proposed for development as Taxable Property. Final Map No. 52445-03, which was recorded on December 1, 2010, created 320 single-family lots and conveyed to public agencies or homeowner associations the public roads and open space parcels shown therein. The public roads and open space parcels constitute Exempt Property under the Rate and Method.

The remaining 6 lots in the Community Facilities Districts are shown on Tentative Tract Map No.

52455-14, which was approved by the County of Los Angeles on July 3, 2012. A portion of Tentative Tract Map No. 52455-14 will, upon recordation, convey to public agencies or homeowner associations the public roads and open space parcels shown therein.

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The public roads and open space parcels that were conveyed under Final Map No. 52445-03, and will be conveyed under Tentative Tract Map No. 52455-14, constitute Exempt Property under the Rate and Method.

Projected Special Tax Revenues and Debt Service Coverage

Once the Community Facilities District is fully built out, the Rate and Method is structured to

produce Special Tax revenues from the Assigned Annual Special Tax on Developed Property that, when applied to the projected debt service on the Bonds, is anticipated to result in a debt service coverage ratio of 110% for the life of the Bonds. See “PROPOSED PROPERTY DEVELOPMENT” for the current status of development in the Community Facilities District. See also “SECURITY FOR THE BONDS - Rate and Method” for a description of the method of apportionment under the Rate and Method.

The table below shows the property owners’ estimated proportionate share of the projected

Special Tax levy for Fiscal Year 2013-14. It assumes that the current status of property development remains unchanged. See “PROPERTY OWNERSHIP” and “PROPOSED PROPERTY DEVELOPMENT.”

Table 1

Share of Projected Fiscal Year 2013-14 Special Tax Levy for Each Owner

Owner DR Horton Individual

Homeowners Total Developed [1]

Number of Lots 60 43 103 Projected Special Tax Levy [2] $264,158.00 $198,918.00 $463,076.00 Estimated Share of Special Tax Levy 20.04% 15.09% 35.12%

Undeveloped Number of Lots 223 0 223 Projected Special Tax Levy [2] $855,312.16 0 $855,312.16 Estimated Share of Special Tax Levy 64.88% 0.00% 64.88%

Total Number of Lots 283 43 326 Projected Special Tax Levy [2] $1,119,470.16 $198,918.00 $1,318,388.16 [3] Estimated Share of Special Tax Levy 84.91% 15.09% 100.00%

[1] Represents parcels classified as “Developed Property” under the Rate and Method, which is generally defined

as property for which building permits were issued on or before May 1 of the prior Fiscal Year. See “SECURITY FOR THE BONDS – Rate and Method.” As of June 15, 2013. See “PROPOSED PROPERTY DEVELOPMENT – Current Development Status.”

[2] Represents the projected Annual Special Tax levy to satisfy the Minimum Annual Special Tax Requirement. See “SECURITY FOR THE BONDS – Rate and Method.”

[3] Of this amount, $30,000 represents the Administrative Expense Requirement, which will be transferred to the Administrative Expense Fund and will not be available for debt service. See “SECURITY FOR THE BONDS – Special Tax Fund.”

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Market Absorption Study The Market Absorption Study was prepared to provide an estimate of the probable absorption

schedules for the Belmont, Highgate and Monument neighborhoods of the Community Facilities District. The Milan project with 43 homes has already had its homes constructed and marketed; all of these are occupied by individual homeowners. Based on the market assumptions contained therein, the Market Absorption Study projected the following absorption rates for those neighborhoods:

2013: The three projects, Highgate, Belmont and Monument, entered the marketplace in

April 2013, and they are expected to have 54 escrow closings.

2014: The three projects are expected to have 108 escrow closings. 2015: The three projects are expected to have 92 escrow closings, with Highgate and

Belmont closing out. 2016: The final project, Monument, is expected to close its remaining 29 homes.

These estimated absorption schedules for the residential projects in the Community Facilities

District are subject to change due to potential shifts in economic/real estate market conditions and/or the development strategy by the developer/builder. In addition, these estimated absorption schedules, which represent escrow closings to homeowners, are subject to the Assumptions and Qualifications set-forth in the Market Absorption Study.

Neither the Community Facilities District nor the Authority makes any representation as to the

accuracy or completeness of the Market Absorption Study. The Market Absorption Study is attached as APPENDIX D and should be reviewed in its entirety.

Appraised Property Value

The Appraisal. The Appraisal was prepared to ascertain the market value of the as-is condition

of the taxable property in the Community Facilities District, consisting of the 326 single-family detached units proposed to be developed on the property in the Community Facilities District. The estimated market value contained in the Appraisal is as of a May 15, 2013, date of value. The Appraisal was intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice for a Summary Appraisal Report, and with the appraisal standard proposed by the California Debt and Investment Advisory Commission.

Basis for Appraisal and Assumptions. The property rights appraised were of a fee simple

interest subject to easements of record and the lien of the Special Taxes. The Appraisal was based on certain assumptions and limiting conditions set forth in APPENDIX

C, including the following: (a) the Appraiser received an estimate of the remaining costs (including fees) to get the subject lots from their as-is condition to finished lots from DR Horton, which were integral in the valuation analysis and which the Appraiser relied upon as being reasonably accurate and reliable and (b) the Appraiser relied on the Market Absorption Study for the projected product size, pricing and estimated absorption or sell-off of the proposed homes to be built in the Community Facilities District.

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As of the May 15, 2013, date of value, the property in the Community Facilities District was in the following condition:

Milan Neighborhood: 43 completed-sold homes owned by individual homeowners. Highgate Neighborhood: 3 completed-unsold homes, 18 homes under construction, and

58 vacant lots. Belmont Neighborhood: 3 completed-unsold homes, 16 homes under construction, and

72 vacant lots. Monument Neighborhood: 4 completed-unsold homes, 16 homes under construction,

and 93 vacant lots.

Value Estimate. The Appraiser estimated that, as of the May 15, 2013, date of value, the market value of the as-is condition of the taxable property within the Community Facilities District (subject to the lien of the Special Taxes) was as follows:

Neighborhood Appraised Value

Milan $28,380,000 Highgate 13,940,000 Belmont 16,030,000

Monument 21,020,000 Total: $79,370,000

Valuation Methods. The Appraiser estimated the value of the property in the Community

Facilities District using the Sales Comparison Approach for the completed-sold and completed-unsold homes, the Cost Approach for the homes under construction, and the Sales Comparison Approach for the vacant lots. The lots were considered as if in a “finished lot” condition (defined as the condition of residential land in a subdivision for detached units in which building pads are fully improved and ready for units to be built), then a deduction was made for the estimated remaining costs and fees to get the lots from the as-is condition to finished lots. This reflects that the lots have all development entitlements, infrastructure improvements completed, finish grading completed, all in-tract utilities extended to the property line of each lot, street improvements completed, common area improvements/landscaping (associated with the tract) completed, resource agency permits (if necessary), and all development fees paid, exclusive of building permit fees, in accordance with the conditions of approval of the specific tract map.

The Authority and the Community Facilities District make no representation as to the accuracy

or completeness of the Appraisal. See APPENDIX C for the Summary Appraisal Report.

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Appraised Value-to-Burden Ratio The table below shows the projected value-to-burden ratio for the Taxable Property in the

Community Facilities District based on the appraised values set forth in the Appraisal and the proposed principal amount of the Bonds.

The principal amount of the Bonds has been allocated among the neighborhoods based on the

projected Fiscal Year 2013-14 Special Tax levy. See “– Projected Special Tax Revenues and Debt Service Coverage” above.

No assurance can be given that the amounts shown in this table will conform to those ultimately

realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes.

Table 2 Appraised Values and Value-to-Burden Ratios

Allocated by Projected Fiscal Year 2013-14 Special Tax Levy

Planning Area (Neighborhood)

Total Number of Lots Appraised Value [1]

Projected Fiscal Year

2013-14 Special Tax

Levy

Percent of Fiscal Year

2013-14 Special Tax Levy

Principal Amount of Bonds [2]

Value-to-Burden Ratio [3]

DR Horton Highgate 79 $13,940,000 $286,562.59 21.74% $3,918,970 3.56:1 Belmont 91 16,030,000 341,982.11 25.94 4,676,876 3.43:1 Monument 113 21,020,000 490,925.46 37.24 6,713,794 3.13:1

DR Horton Total 283 50,990,000 1,119,470.16 84.91 15,309,639 3.33:1 Individual Homeowners

Milan 43 28,380,000 198,918.00 15.09 2,720,361 10.43:1 Total 326 $79,370,000 $1,318,388.16 100.00% $18,030,000 4.40:1

[1] Market value estimated by the Appraiser as of May 15, 2013. [2] The principal amount of the Bonds has been allocated based on the percentage of the Fiscal Year 2013-14

Special Tax Levy. [3] Actual value-to-burden ratio per unit may vary. Source: Willdan Financial Services.

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Direct and Overlapping Governmental Obligations Certain local agencies provide public services and assess property taxes, assessments, special

taxes and other charges on the property in the Community Facilities District. Many of these local agencies have outstanding debt. The direct and overlapping obligations affecting the property in the Community Facilities District as of May 7, 2013 are shown in the following table. The table was prepared by National Tax Data, Inc., doing business in California as California Tax Data, and is included for general information purposes only. The Community Facilities District has not reviewed this report for completeness or accuracy and makes no representation in connection therewith.

Table 3

Direct and Overlapping Governmental Obligations SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

COMMUNITY FACILITIES DISTRICT NO. 2006-1C

I. Assessed Value

2012-2013 Secured Roll Assessed Value

$37,670,761

II. Secured Property Taxes

Description on Tax Bill Type

Total Parcels Total Levy

% Applicable Parcels Levy

Combined Ad Valorem Tax Charges AVALL 2,345,189 $12,543,097,636.78 0.00357% 322 $447,940.06

County of Los Angeles Flood Control 1982BA 2,125,350 110,350,862.51 0.00012 4 132.79

County of Los Angeles Library Assessments

SPTXLIBRARY 406,404 11,627,218.44 0.07923 322 9,212.42

County of Los Angeles Lighting Maintenance District LLMD 187,649 1,225,159.35 0.00245 6 30.00

County of Los Angeles LLD No. 1 (Annexation A) LLMD 3,098 75,507.55 8.95593 316 6,762.40

County of Los Angeles LLD No. 4, Zone 4 (MWD Railroad) LLMD 1,675 32,975.06 15.98917 318 5,272.44

County of Los Angeles LLD No. 4, Zone 69 (MWD Railroad) LLMD 724 10,596.28 36.04265 318 3,819.18

County of Los Angeles LLD No. 4, Zone 69 (West Creek Canyon Estates) LLMD 724 430,587.13 36.09327 318 155,412.96

County of Los Angeles LLD No. 4, Zone 77 (West Creek Park) LLMD 1,675 126,358.61 15.98826 318 20,202.54

County of Los Angeles Mosquito Abatement District VECTOR 1,103,845 8,681,275.57 0.02853 320 2,476.80

County of Los Angeles Regional Park & Open Space District 1915 2,345,605 80,675,717.04 0.00322 322 2,594.28

County of Los Angeles Solid Waste Service Charge TRASH 239,406 1,181,767.40 0.00653 22 77.22

County of Los Angeles Trauma and Emergency Services PARAMED 2,168,304 270,009,953.23 0.00059 11 1,604.57

Los Angeles County Fire Department Special Tax FIRE 875,347 74,394,684.26 0.00813 322 6,050.66

Los Angeles County Sanitation District No. 32 SWR/WTR 69,101 22,643,668.69 0.03775 36 8,547.00

2012-2013 TOTAL PROPERTY TAX LIABILITY

$670,135.32

TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2012-2013 ASSESSED VALUATION

1.78%

III. Land Secured Bond Indebtedness

Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding %

Applicable Parcels Amount

County of Los Angeles Regional Park & Open Space District 1915 $686,835,000 $142,870,000 0.00322% 322 $4,600

Saugus-Castaic School Facilities Financing Authority CFD No. 2006-1C CFD 0 0 100.00000 322 0

TOTAL OUTSTANDING LAND SECURED BOND INDEBTEDNESS [1]

$4,600

Authorized Direct and Overlapping Bonded Debt Type Authorized Unissued

% Applicable Parcels Amount

County of Los Angeles Regional Park & Open Space District 1915 $859,000,000 $172,165,000 0.00322% 322 $5,544

Saugus-Castaic School Facilities Financing Authority CFD No. 2006-1C CFD 0 0 100.00000 285 0

TOTAL UNISSUED LAND SECURED BOND INDEBTEDNESS [1]

$5,544 TOTAL OUTSTANDING AND UNISSUED LAND SECURED BOND INDEBTEDNESS (1)

$10,144

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IV. General Obligation Bond Indebtedness

Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding %

Applicable Parcels Amount

Castaic Lake Water Agency GOB 1976 GOB $18,600,000 $0 0.11885% 322 $0

Castaic Union School District GOB 1993 GOB 20,111,140 6,621,777 0.24460 108 16,197


Santa Clarita Community College District GOB 2001 GOB 82,105,069 61,364,095 0.11710 322 71,854


Saugus Union School District GOB 1993 GOB 10,199,467 4,495,431 0.20194 214 9,078

Saugus Union School District GOB 2002 GOB 47,999,804 38,996,533 0.20194 214 78,749

William S. Hart Union High School District GOB 2001 GOB 157,996,106 110,548,487 0.11708 322 129,429


TOTAL OUTSTANDING GENERAL OBLIGATION BOND INDEBTEDNESS [1]

$793,028

Authorized Direct and Overlapping Bonded Debt Type Authorized Unissued

% Applicable Parcels Amount

Castaic Lake Water Agency GOB 1976 GOB $18,600,000 $0 0.11885 322 $0

Castaic Union School District GOB 1993 GOB 20,115,000 3,860 0.24460 108 9


Santa Clarita Community College District GOB 2001 GOB 82,110,000 4,931 0.11710 322 6


Saugus Union School District GOB 1993 GOB 10,200,000 533 0.20194 214 1

Saugus Union School District GOB 2002 GOB 48,000,000 196 0.20194 214 0

William S. Hart Union High School District GOB 2001 GOB 158,000,000 3,894 0.11708 322 5


TOTAL UNISSUED GENERAL OBLIGATION BONDED DEBT [1]

$170,401 TOTAL OF ALL OUTSTANDING AND OVERLAPPING BONDED DEBT

$797,628

TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING BONDED DEBT

$973,573

[1] Additional bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced

fiscal year. Source: National Tax Data, Inc.

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Estimated Tax Burden on Single Family Home The following table sets forth the estimated total tax burden on a single family detached unit

containing 3,370 building square feet (a home size selected by the Special Tax Consultant as a conservative representative of the proposed single-family units to be constructed in the Community Facilities District), based on estimated tax rates for Fiscal Year 2012-13.

Table 4

Estimated Fiscal Year 2012-13 Tax Rates (Single Family Detached Units

Containing 3,370 Building Square Feet) [1]

Assessed Valuations and Property Taxes Percent of Total Assessed Value Amount

Estimated Base Sales Price $630,000.00

Ad Valorem Property Taxes General Purposes 1.000000% $6,300.00 Ad Valorem Tax Overrides Special Water 0.070600 444.78 Community College 0.030799 194.03 High Schools 0.039479 248.72 Elementary Schools 0.041855 263.69 Total Ad Valorem Property Taxes $7,451.22

Assessments, Special Taxes and Parcel Charges County of Los Angeles Solid Waste Service Charge $3.51 County of Los Angeles Lighting and Landscape Area District #4, Zone 69 488.72 County of Los Angeles Lighting and Landscape Area District #4, Zone 69 12.01 County of Los Angeles Lighting and Landscape Area District #1, Annex A 21.40 County of Los Angeles Regional Park and Open Space District 21.39 County of Los Angeles Lighting and Landscape Area District #4, Zone 77 63.53 County of Los Angeles Lighting and Landscape Area District #4, Zone 77 16.58 County of Los Angeles Trauma and Emergency Services 143.82 County of Los Angeles Library Services 28.61 Greater Los Angeles County Vector Control District 7.74 County of Los Angeles Sanitation District No. 32 231.00 Los Angeles County Fire Department Special Tax 62.26 Saugus Union School District CFD No. 2006-1C 4,364.00 Total Assessments, Special Taxes and Parcel Charges $5,464.57

Total Property Taxes $12,915.79 Total Effective Tax Rate 2.05% [1] This sample property tax bill is a projection based on the (i) Fiscal Year 2012-13 levies (other than the Community Facilities

District’s levy) and (ii) Fiscal Year 2013-14 projected special tax levy for the Community Facilities District. This sample property tax bill also represents a single-family residence with building square footage of 3,370.

Source: Willdan Financial Services.

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Property Tax Collection History The following table sets forth the delinquency rate in the collection of ad valorem property taxes

within the Community Facilities District for Fiscal Year 2012-13.

2012-13

Property Tax Levy

Number of Parcels

Subject to Levy

Amount Delinquent

Number of

Parcels Delinquent

Percentage Delinquent

$607,023.55 285 $1,655.26 2 0.27% Source: National Tax Data, Inc., based on data from May 5, 2013.

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PROPERTY OWNERSHIP The information about DR Horton and the property in the Community Facilities District contained

in this section of the Official Statement has been provided as indicated by representatives of DR Horton and Willdan Financial Services and has not been independently confirmed or verified by the Underwriter, Authority, or Community Facilities District. None of the Underwriter, Authority, or Community Facilities District makes any representation as to the accuracy or adequacy of the information contained in this section. There may be material adverse changes in this information after the date of this Official Statement.

The information in this section regarding ownership of certain taxable property in the Community

Facilities District has been included because it is considered relevant to an informed evaluation of the Bonds. The inclusion of information related to DR Horton should not be construed to suggest that the Bonds, or the Special Taxes that will be used to pay the Bonds, are recourse obligations of DR Horton or any other property owner in the Community Facilities District. A property owner may sell or otherwise dispose of land within the Community Facilities District or a development, or any interest in such development, at any time.

See “SECURITY FOR THE BONDS” and “BOND OWNERS’ RISKS – Payment of Special Tax Is Not a Personal Obligation of the Property Owners” and “- Property Tax Delinquencies.”

All Property

The table below shows the ownership of all taxable property within the Community Facilities

District, and the number of units expected to be constructed in each neighborhood, as of June 15, 2013.

Table 5

Property Ownership

Property Owner Milan Highgate Belmont Monument

Total Expected Units at Completion

DR Horton 0 79 91 113 [2] 283 Individual Homeowners 43 [1] 0 0 0 43

Totals: 43 79 91 113 326 _________________________ [1] This neighborhood was developed by KB Home of California, Inc., who constructed, sold, and closed

escrow on all 43 lots. [2] Of the 113 lots shown as owned by DR Horton, 6 lots represent property for which DR Horton has paid into

escrow the purchase price payable to Newhall Land, but transfer of title to this property to DR Horton will not occur until after recordation of the final map for the property and satisfaction of certain other conditions (expected in September 2013).

Source: DR Horton (as to property owned by DR Horton only); Willdan Financial Services (as to Individual Homeowners).

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Developed and Undeveloped Property The table below shows the ownership of the taxable property classified as Developed Property

and Undeveloped Property under the Rate and Method as of June 15, 2013, which represents the units expected to be subject to the Special Tax levy for Fiscal Year 2013-14. See “THE COMMUNITY FACILITIES DISTRICT – Projected Special Tax Revenues and Debt Service Coverage.”

Table 6

Property Ownership of Developed and Undeveloped Property and Projected Share of Fiscal Year 2013-14 Special Tax Levy

Property Owner Milan Highgate Belmont Monument

Total DR Horton Number of Developed Lots 0 21 19 20 60 Projected Special Tax Levy [1] $0.00 $84,000.00 $85,670.00 $94,488.00 $264,158.00 DR Horton Number of Undeveloped Lots [2] 0 58 72 93 223 Projected Special Tax Levy [1] $0.00 $202,562.59 $256,312.11 $396,437.46 $855,312.16 Individual Homeowners Number of Developed Lots 43 0 0 0 43 Projected Special Tax Levy [1] $198,918.00 $0.00 $0.00 $0.00 $198,918.00 TOTALS Number of Lots 43 79 91 113 326 Projected Special Tax Levy [1] $198,918.00 $286,562.59 $341,982.11 $490,925.46 $1,318,388.16 [3]

_________________________ [1] Represents the projected Annual Special Tax levy to satisfy the Minimum Annual Special Tax Requirement. [2] Of the 93 Undeveloped Lots shown as owned by DR Horton, 6 Undeveloped Lots represent property for which DR

Horton has paid into escrow the purchase price payable to The Newhall Land and Farming Company, but transfer of title to this property to DR Horton will not occur until after recordation of the final map for the property and satisfaction of certain other conditions (expected in September 2013).

[3] Of this amount, $30,000 represents the Administrative Expense Requirement, which will be transferred to the Administrative Expense Fund and will not be available for debt service. See “SECURITY FOR THE BONDS – Special Tax Fund.”

Source: Willdan Financial Services.

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DR Horton D.R. Horton Los Angeles Holding Company Inc., a California corporation, which markets its

homes under the tradename “D.R. Horton America’s Builder” (“DR Horton” or the “Developer”), plans to develop 283 of the proposed 326 homes in the Community Facilities District.

The Developer is a subsidiary of D.R. Horton, Inc., a Delaware corporation (the “Parent Company”), a public company whose common stock is traded on the New York Stock Exchange under the symbol “DHI.” Founded in 1978 and headquartered in Fort Worth, Texas, the Parent Company has operations in 77 markets in 26 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. The Parent Company and its subsidiaries, including the Developer, design, construct, market and sell single-family detached homes, townhomes, duplexes, triplexes and condominiums primarily to entry level and move-up buyers.

History of Property Tax Payments; Loan Defaults; Litigation; and Bankruptcy. In

connection with the issuance of the Bonds, an authorized representative of DR Horton will execute a certificate (the “Certificate”) containing the following representations (among others). For purposes of these representations, the following apply:

(a) The term “Actual Knowledge” means the knowledge that the officer signing the

Certificate currently has as of the date of the Certificate or has obtained through (i) interviews with such officers and responsible employees of DR Horton as the officer signing the Certificate has reasonably determined are likely, in the ordinary course of his or her respective duties, to have knowledge of the matters set forth in the Certificate, and (ii) reviews of documents that were reasonably necessary for the officer signing the Certificate to obtain knowledge of the matters set forth in the Certificate. DR Horton notes that its parent company, D.R. Horton, Inc., including its subsidiaries such as DR Horton and Affiliates, have undergone several restructurings, including office closures and division consolidations. Individuals who are no longer with the various entities have not been contacted.

(b) The term “Affiliate” of DR Horton means any person directly (or indirectly through one or

more intermediaries) presently under managerial control of DR Horton and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the property in the Community Facilities District, or to DR Horton’s ability to pay the Special Taxes prior to delinquency).

(c) The term “Property” means the property currently owned by DR Horton within the

Community Facilities District. Loan Defaults. To the Actual Knowledge of the officer signing the Certificate, neither DR

Horton nor any of its Affiliates is currently in material default on any loans, lines of credit, agreements, or other contractual or financial obligations, or in breach of any applicable law, regulation, judgment or decree, and no event has occurred and is continuing that would constitute such a default or breach, the result of which could materially adversely affect the ability of DR Horton:

(i) to own, develop and sell the Property, as described in this Official Statement, (ii) to pay Special Taxes on the Property (to the extent the responsibility of DR Horton) prior

to delinquency,

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(iii) to carry on its business as presently conducted and as described in this Official

Statement, or (iv) to perform its obligations under the Property Owner Continuing Disclosure Certificate. No Litigation. To the Actual Knowledge of the officer signing the Certificate, there is no

litigation, inquiry, investigation or administrative proceeding before or by any court, regulatory agency, public board or body pending against DR Horton (with service of process to DR Horton having been accomplished), or to the actual knowledge of the officer signing the Certificate, overtly threatened against DR Horton, or to the actual knowledge of the officer signing the Certificate, pending or overtly threatened against any Affiliate of DR Horton, in each case which, if successful, could reasonably be expected to:

(i) materially adversely affect the ability of DR Horton to own, develop and sell the Property,

as described in this Official Statement, (ii) materially adversely affect the ability of DR Horton to pay Special Taxes on the Property

(to the extent the responsibility of DR Horton) prior to delinquency, (iii) materially adversely affect the ability of DR Horton to carry on its business as presently

conducted and as described in this Official Statement, (iv) materially adversely affect the ability of DR Horton to perform its obligations under the

Property Owner Continuing Disclosure Certificate, (v) challenge, question the validity or enforceability of, or restrain or enjoin the performance

of, the Special Taxes, the Bonds, the Resolution of Issuance, the Fiscal Agent Agreement, the Property Owner Continuing Disclosure Certificate or the Bond Purchase Contract, or

(vi) restrain or enjoin collection of Special Taxes or other sums to be pledged to pay the

principal of and interest on the Bonds. Special Tax and Assessment Delinquencies. To the Actual Knowledge of the officer signing

the Certificate, neither DR Horton nor any of its Affiliates is currently in default in, or has ever defaulted to any material extent in, the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in California that was not cured within the fiscal year in which the special tax or assessment was levied.

No Bankruptcy. (i) DR Horton, and to the Actual Knowledge of the officer signing the

Certificate, its Affiliates, are able to pay their respective bills as they become due; (ii) neither DR Horton nor, to the actual knowledge of the officer signing the Certificate, any of its Affiliates, has filed for bankruptcy or been declared bankrupt in the last 10 years; and (iii) to the actual knowledge of the officer signing the Certificate, neither DR Horton nor any of its Affiliates has any proceedings pending (with service of process to DR Horton having been accomplished) or overtly threatened in which DR Horton or any of its Affiliates may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its respective debts or obligations, be granted an extension of time to pay its respective debts or obligations, or be granted a reorganization or readjustment of its respective debts or obligations.

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PROPOSED PROPERTY DEVELOPMENT

Current Development Status General. The taxable property in the Community Facilities District is currently in the following

stages of development:

• Undeveloped: undeveloped lots that have not received a building permit. • Developed and Under Active Construction: property that has received a building permit

and is currently under active home construction. • Completed Homes: property with completed units, representing either units that have

been sold to individual homeowners or units that are currently owned by DR Horton. The table below sets forth the development status of the property as of June 15, 2013:

Current Development Status (June 15, 2013)

Property Owner Milan Highgate Belmont Monument Total

DR Horton Developed [1] 0 21 19 20 60 Undeveloped [2] 0 58 72 93 [3] 223

DR Horton Subtotal 0 79 91 113 283 Individual Homeowners Completed Homes 43 0 0 0 43

Totals: 43 79 91 113 326 _________________________

[1] Under the Rate and Method, “Developed Property” is defined generally as property for which building permits were issued on or before May 1 of the prior Fiscal Year. See “SECURITY FOR THE BONDS – Rate and Method.”

[2] Represents property that is not currently classified as Developed Property under the Rate and Method. See “SECURITY FOR THE BONDS – Rate and Method.”

[3] Of the 93 undeveloped lots shown as owned by DR Horton, 6 lots represent property for which DR Horton has paid into escrow the purchase price payable to The Newhall Land and Farming Company, but transfer of title to this property to DR Horton will not occur until after recordation of the final map for the property and satisfaction of certain other conditions (expected in September 2013).

Source: DR Horton (as to property owned by DR Horton only); Willdan Financial Services (as to Individual Homeowners). Highgate Neighborhood: DR Horton owns 79 lots. Of these lots, 3 models have been

constructed, 18 production units are under construction, and the remaining 58 lots are undeveloped. Belmont Neighborhood: DR Horton owns 91 lots. Of these lots, 3 models have been

constructed, 16 production units are under construction, and the remaining 72 lots are undeveloped. Monument Neighborhood: There are 113 lots in the Monument neighborhood. Of these lots, 4

models have been constructed, 16 production units are under construction, and 87 lots are undeveloped. The remaining 6 lots represent property for which DR Horton has paid into escrow the purchase price of such property payable to The Newhall Land and Farming Company, but transfer of title to this property to DR Horton will not occur until after recordation of the final map for the property and satisfaction of certain other conditions (expected in September 2013).

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Building permits issued by the County (which has land use jurisdiction over the property in the Community Facilities District) generally are valid for six months after their date of issuance. A County representative performs a progress inspection on lots with outstanding building permits every six months, as a result of which the County representative may extend the building permits for another six-month period, or the building permits may be deemed to have expired. No assurances can be given that the building permits for those parcels that pulled building permits will not expire before active development can begin.

Under the Rate and Method, a parcel that has been classified as Developed Property following

the issuance of a building permit will continue to be classified as Developed Property and taxed accordingly even if the building permit for that parcel expires or is refunded.

If a building permit is not extended for a given parcel, the parcel may be subject to additional

requirements that were implemented after the issuance of the original building permit, such as fee increases, increases in set-back requirements, and other land use regulations.

Infrastructure Development and Financing Plans

DR Horton Development Plans and Onsite Infrastructure Development. As of June 15,

2013, DR Horton owned 277 of the 326 lots within the Community Facilities District and was awaiting the transfer of 6 additional lots from The Newhall Land and Farming Company upon recordation of Tract Map No. 52445-14 (expected in September 2013). In connection with the development of its property into finished lot condition, DR Horton is responsible for the development of the onsite infrastructure for its taxable property in the Community Facilities District.

Below is DR Horton’s proposed development by neighborhood as of June 15, 2013. No

assurances can be made that DR Horton or any other current or future owner of property within the Community Facilities District will have the resources, willingness, and ability to successfully complete development activities on the property within the Community Facilities District. No representation is made as to the ability (financial or otherwise) or willingness of DR Horton or any other owner of property within the Community Facilities District to complete development as currently planned. DR Horton may alter or suspend its development for any reason.

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Proposed Construction and Sales Schedule

Neighborhood Phase No. of Units Begin Production Home Construction

First Home Sale Closings

Last Home Sale Closings

Highgate Models 3 November 2012* July 2015 July 2015 1 9 November 2012* June 2013 August 2013 2 9 March 2013* August 2013 October 2013 3 13 May 2013* November 2013 March 2014 4 10 August 2013 March 2014 June 2014 5 7 March 2014 July 2014 September 2014 6 11 May 2014 September 2014 December 2014 7 11 September 2014 January 2015 March 2015 8 6 December 2014 March 2015 June 2015 Subtotal: 79

Belmont Models 3 November 2012* November 2015 December 2015 1 8 November 2012* June 2013* August 2013 2 8 March 2013* September 2013 November 2013 3 11 August 2013 December 2013 March 2014 4 9 November 2013 March 2014 June 2014 5 10 February 2014 June 2014 September 2014 6 11 June 2014 October 2014 January 2015 7 11 August 2014 January 2015 April 2015 8 13 January 2015 May 2015 September 2015 9 7 June 2015 October 2015 November 2015 Subtotal: 91

Monument Models 4 November 2012* February 2016 March 2016

1 9 November 2012* June 2013* September 2013 2 7 March 2013* September 2013 November 2013 3 12 July 2013 November 2013 March 2014 4 6 November 2013 March 2014 May 2014 5 10 January 2014 May 2014 August 2014 6 7 April 2014 August 2014 October 2014 7 13 June 2014 October 2014 March 2015 8 7 November 2014 March 2015 May 2015 9 9 January 2015 May 2015 August 2015 10 8 April 2015 August 2015 October 2015 11 10 June 2015 October 2015 January 2016 12 5 September 2015 January 2016 February 2016 13 6 [1] TBD TBD TBD Subtotal: 113

Grand Total 283 _________________________ * Actual. [1] DR Horton proposes to construct 113 homes within its monument neighborhood; however, the lots for the last six

proposed units in Monument are located within Tentative Tract Map No. 52445-14. These six lots are currently owned by The Newhall Land and Farming Company. Once the final map is recorded and certain other conditions are satisfied, these six lots will be transferred to DR Horton.

Source: DR Horton

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A summary of the proposed product mix by neighborhood is provided below.

Proposed Product Mix (As of June 15, 2013)

Neighborhood

No. of Units

No. of Model Types

Approx. Square Footage

Actual/Projected Base Home

Sales Prices [1]

Highgate Plan #1 22 1 2,627 $555,000 Highgate Plan #2 27 1 2,761 570,000 Highgate Plan #3 30 1 2,969 595,000 Highgate Total 79 3 Belmont Plan #1 22 1 2,892 $615,000 Belmont Plan #2 26 1 3,370 630,000 Belmont Plan #3 26 1 3,705 650,000 Belmont Plan #4 17 0 3,529 655,000 Belmont Total 91 3 Monument Plan #1 [2] 29 1 3,553 $670,000 Monument Plan #2 [2] 32 1 3,822 710,000 Monument Plan #3 [2] 33 1 3,968 720,000 Monument Plan #4 19 1 3,529 700,000 Monument Total 113 4 Grand total 283

_________________________ [1] Base home sales prices shown are as of June 15, 2013, and exclude the builder’s estimate of lot premiums, the sale

of options and extras and any incentives being offered. See “APPENDIX C - Summary Appraisal Report” for the base home sale prices used by the Appraiser in preparing the Appraisal.

[2] Two of the six proposed lots in Tentative Tract Map No. 52445-14 have been assigned to each of the first three Monument plans; provided, however, that DR Horton has not made a final decision as to the type of unit that will be constructed on this property. These six lots are currently owned by The Newhall Land and Farming Company. Once the final map is recorded and certain other conditions are met, these six lots will be transferred to DR Horton.

Source: DR Horton No assurance can be given that home construction will be carried out on the schedule and

according to the plans outlined above, or that DR Horton’s construction and sale plans will not change after the date of this Official Statement. Moreover, such schedule, the anticipated sales prices, and other projections are based on current estimates and are subject to change based on a variety of factors, including construction delays, economic and market conditions, and actual sales absorption rates.

DR Horton Financing Plan. As of June 1, 2013, DR Horton has expended approximately

$32,288,067 in various site development and home construction costs, including carrying costs, related to its property in the Community Facilities District, but excluding land acquisition costs. DR Horton estimates that it will require an additional $116,573,631 to complete its site development and home construction within the Community Facilities District, including related carrying costs such as property tax and Special Tax payments, until full sell-out of its proposed homes in the Community Facilities District. To date, DR Horton has financed its land acquisition and various site development and home construction costs related to its property in the Community Facilities District through internally generated funds. DR Horton expects to use home sales and internal funding to complete its development within the Community Facilities District; however, home sales revenues for DR Horton’s

47

projects are not segregated and set aside for completing such projects. Home sales revenue is swept daily from DR Horton’s divisions for use in operations, to pay down debt and for other corporate purposes and might get diverted to other company needs at the discretion of management. Notwithstanding the foregoing, DR Horton believes that it will have sufficient funds available to complete its proposed development in the Community Facilities District, commensurate with the development timing described in this Official Statement.

DR Horton has provided the financial information shown in the table below, which shows the sources and uses of funds through June 28, 2013, and the projected total sources and uses of funds, for its proposed development plan.

Proposed Development Plan

Sources and Uses As of June 28, 2013

Through

June 28, 2013 Projected Total Revenue: Home Sales Revenue $ 0 $182,515,000 Costs: Home Construction $13,600,000 $ 70,084,000 Engineering, Fees & Mapping 4,411,900 9,727,000 Financing Cost 0 9,126,000 Grading 2,847,477 3,666,000 Sewer, Storm Drain, Water 4,064,161 5,772,000 Street Improvements 1,837,614 3,407,000 Dry Utilities 1,804,630 2,190,000 Landscaping & Walls 1,081,975 5,499,000 Other Costs/Reimbursables 2,208,637 7,277,000 Sales & Marketing 0 1,826,000 Overhead & G&A 0 25,552,100 Property Taxes 431,673 4,735,598

Total Costs $32,288,067 $148,861,698 Net Operating Cash Flow $(32,288,067) $ 33,653,302 Equity Proceeds $32,288,067 $ 148,861,698 Equity Repayments $0 $(182,515,000) Net Project Cash Flow $0 $0

Although DR Horton expects to have sufficient funds available to complete its development in

the Community Facilities District, commensurate with the development timing described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining development and home construction costs will be available from DR Horton or any other source when needed. None of DR Horton, its Parent Company, or any of its related entities is under any legal obligation of any kind to expend funds for the remaining development of and construction of homes on its property in the Community Facilities District. Any contributions by DR Horton or its Parent Company to fund the costs of such development and home construction are entirely voluntary. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete DR Horton’s planned development within the Community Facilities District and other financing is not put into place, there

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could be a shortfall in the funds required to complete the proposed development by DR Horton within the Community Facilities District and portions of the project may not be developed. Entitlement Status

Subdivision Map Status. All of the taxable property in the Community Facilities District is

being developed in accordance with Final Tract Map No. 52445-03 and Tentative Tract Map No. 52455-14, as shown below:

Tract

Neighborhood

Total Number of Lots

Final Map Recorded

52445-03 Milan 43 Final – Recorded 12/1/10 52445-03 Highgate 79 Final – Recorded 12/1/10 52445-03 Belmont 91 Final – Recorded 12/1/10 52445-03 Monument 107 Final – Recorded 12/1/10 52455-14 Monument 6 TTM – Not Recorded

326 _________________________ Source: DR Horton (as to property owned or being developed by DR Horton only)

Utilities. It is expected that utility services for the taxable property in the Community Facilities

District will be provided by the following: • Water: Valencia Water Company • Sanitary Sewer: Los Angeles County Sanitation • Stormwater Drainage: Los Angeles County • Electricity: Southern California Edison • Gas: Southern California Gas • Telephone: AT&T • Cable: Time Warner Cable/AT&T

Environmental Conditions CEQA Review and Litigation. On July 26, 2005, the County recertified the Environmental

Impact Report (“EIR”) under the California Environmental Quality Act (“CEQA”) in connection with certain development approvals for the West Hills/West Creek Project within the Community Facilities District and all litigation has been settled.

Environmental and Man-Made Hazards. The EIR assessed the potential for environmental

safety issues which may occur on the project site and recommended mitigation measures that would reduce potentially significant impacts to below the thresholds of significance. The EIR identified 16 abandoned oil wells on the project site that were used for crude oil production. Newhall Land has represented that the mitigation measures set forth in the EIR (including remediation of the sites of the abandoned oil wells to the satisfaction of the State and County, and capping the closed wells in compliance with Division of Oil and Gas requirements) have been implemented, in all material respects.

Seismic Activity. The EIR notes that, although no known historically active earthquake faults

traverse the property within the Community Facilities District, the San Gabriel Fault (and its associated Alquist-Priolo Earthquake Fault Zone) is located south of the property. The EIR further notes that the property within the Community Facilities District, along with the rest of the Santa Clarita Valley and

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surrounding areas, will be subject to hazards associated with seismic activity. The EIR concluded that the proposed improvements within the Community Facilities District would not be subject to geologic or geotechnical hazards if the recommended mitigation measures were implemented during grading. Newhall Land has represented that the mitigation measures set forth in the EIR have been implemented, in all material respects.

Jurisdictional Streambeds and Riparian Habitat. The entitlements obtained in order to allow

the development of the property in the Community Facilities District (including the Community Facilities District), and specifically certain flood control improvements, drainage improvements, and bridges affecting tributaries of the Santa Clara River, include numerous permits and agreements protecting streambed, habitat and endangered or threatened species. These permits and agreements were issued by the State Regional Water Quality Control Board, the California Department of Fish and Game, and the U.S. Army Corps of Engineers. Newhall Land has represented that the development activities within the Community Facilities District have been carried out in accordance with the requirements contained in these permits and agreements, and that all mitigation measures set forth in these permits and agreements have been implemented, in all material respects.

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BOND OWNERS' RISKS The purchase of the Bonds described in this Official Statement involves a degree of risk that

may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision.

Limited Obligation of the Community Facilities District to Pay Debt Service

The Community Facilities District has no obligation to pay principal of and interest on the Bonds

if Special Tax collections are delinquent, other than from amounts, if any, on deposit in the Reserve Fund, amounts drawn on the Letter of Credit or Cash Deposit and deposited in the Bond Fund (but only for so long as the Letter of Credit or Cash Deposit is required to be in place), or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. The Community Facilities District is not obligated to advance funds to pay debt service on the Bonds.

The foreclosure and sale process in California can be lengthy and subject to delay, meaning

that the Community Facilities District’s receipt of the proceeds of any tax sale or foreclosure and sale of parcels with a Special Tax delinquency could be delayed. See “– Bankruptcy” below and “SECURITY FOR THE BONDS – Covenant to Foreclose” above.

Levy and Collection of the Special Tax

General. The principal source of payment of principal of and interest on the Bonds is the

proceeds of the annual levy and collection of the Special Tax against property within the Community Facilities District.

Limitation on Maximum Special Tax Rate. The annual levy of the Special Tax is subject to

the maximum annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds.

No Relationship Between Property Value and Special Tax Levy. Because the Special Tax

formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct relationship.

Factors that Could Lead to Special Tax Deficiencies. The following are some of the factors

that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:

Transfers to Governmental Entities. The number of parcels of Taxable Property could

be reduced through the acquisition of Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels.

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Property Tax Delinquencies. Failure of the owners of Taxable Property to pay property taxes (and, consequently, the Special Tax), or delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Special Tax revenues. See “–Property Tax Delinquencies” below. For a summary of recent property tax collection and delinquency rates in the Community Facilities District, see “THE COMMUNITY FACILITIES DISTRICT – Property Tax Collection History.”

Disproportionate Burden on Developed Property. Development of a parcel of Taxable

Property more rapidly than development of other parcels of Taxable Property could result in the application of development factors in the Special Tax formula to the parcel and resulting in an increased tax burden on the parcel of Taxable Property.

Similarly, development of other parcels of Taxable Property less rapidly than expected

could result in a delay in application of development factors in the Special Tax formula to the other parcels of Taxable Property and result in an increased tax burden on the parcel of Taxable Property. Delays Following Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent

Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE BONDS – Covenant to Foreclose” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County.

If sales or foreclosures of property are necessary, there could be a delay in payments to owners

of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Community Facilities District of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE BONDS – Covenant to Foreclose.”

The ability of the Community Facilities District to collect interest and penalties specified by State

law and to foreclose against properties having delinquent Special Tax installments may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”) has or obtains an interest. The FDIC would obtain such an interest by taking over a financial institution that has made a loan that is secured by property within the Community Facilities District. See “ – Exempt Properties – Property Owned by FDIC” below.

Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the

ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of such military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service if the court concludes the ability to pay such taxes or assessments is materially affected by reason of such service.

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Payment of Special Tax Is Not a Personal Obligation of the Property Owners An owner of Taxable Property is not personally obligated to pay the Special Taxes. Rather, the

Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Special Tax and a foreclosure sale by the Community Facilities District, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the Community Facilities District has no recourse against the owner. Appraised Values

The Appraisal summarized in APPENDIX C estimates the market value of the Taxable Property

within the Community Facilities District. This market value is merely the opinion of the Appraiser as of the date of value set forth in the Appraisal, and is subject to the assumptions and limiting conditions stated in the Appraisal. The Community Facilities District has not sought an updated opinion of value by the Appraiser subsequent to the date of value of the Appraisal, or an opinion of the value of the Taxable Property by any other appraiser. A different opinion of value might be rendered by a different appraiser.

The opinion of value assumes a sale by a willing seller to a willing buyer, each having similar

information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.

In addition, the opinion of value is made as of the date of value set forth in the Appraisal, based

upon facts and circumstances existing as of the date of value. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from the facts and circumstances at the time the Appraisal was prepared.

No assurance can be given that any of the Taxable Property in the Community Facilities District

could be sold for the estimated market value contained in the Appraisal if that property should become delinquent in the payment of Special Taxes and be foreclosed upon.

Property Values and Property Development

The value of Taxable Property within the Community Facilities District is a critical factor in

determining the investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the Authority’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land development and land values could be adversely affected by economic and other factors beyond the Authority’s control, such as a general economic downturn or downturn of the residential housing market, adverse judgments in future litigation that could affect the scope, timing or viability of development, relocation of employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, wildfire, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions.

The Authority has not evaluated development risks. Since these are largely business risks of

the type that property owners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the Authority is issuing the Bonds without regard to any such evaluation. Thus, the creation of the Community

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Facilities District and issuance of the Bonds in no way implies that the Authority has evaluated these risks or their reasonableness. On the contrary, the Authority has made no such evaluation.

The following is a discussion of specific risk factors that could affect the timing or scope of

property development in the Community Facilities District or the value of property in the Community Facilities District.

Land Development. Land values are influenced by the level of development in the area in

many respects. First, undeveloped or partially developed land is generally less valuable than developed land and provides less security to the owners of the Bonds should it be necessary for the Authority to foreclose on undeveloped or partially developed property due to the nonpayment of Special Taxes.

Second, failure to complete development on a timely basis could adversely affect the land

values of those parcels that have been completed. Lower land values would result in less security for the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the Special Tax. See “THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to-Burden Ratio.” No assurance can be given that the proposed development within the Community Facilities District will be completed, and in assessing the investment quality of the Bonds, prospective purchasers should evaluate the risks of noncompletion.

Risks of Real Estate Investment Generally. Continuing development of land within the

Community Facilities District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of individual property owners, water or electricity shortages, and other similar factors. Development in the Community Facilities District may also be affected by development in surrounding areas, that may compete with the Community Facilities District. In addition, land development operations are subject to comprehensive federal, state and local regulations, including environmental, land use, zoning and building requirements. There can be no assurance that proposed land development operations within the Community Facilities District will not be adversely affected by future government policies, including, but not limited to, governmental policies to restrict or control development, or future growth control initiatives. There can be no assurance that land development operations within the Community Facilities District will not be adversely affected by these risks. A slowdown of the development process could adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Taxes. In that event, there could be a default in the payment of the Bonds.

Risks Related to Availability of Mortgage Loans. The current state of the worldwide capital

markets has adversely affected the availability of mortgage loans to homeowners, including potential buyers of homes within the Community Facilities District. Any such unavailability could hinder the ability of the current homeowners to resell their homes, or the sale of newly completed homes in the future.

Natural Disasters. The value of the Taxable Property in the future can be adversely affected

by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The areas in and surrounding the Community Facilities District, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes and landslides. See “PROPOSED PROPERTY DEVELOPMENT – Environmental Conditions.”

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Other natural disasters could include, without limitation, floods, landslides, wildfires, droughts or tornadoes. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear.

Legal Requirements. Other events that may affect the value of Taxable Property include changes in the law or application of the law. Such changes may include, without limitation, local growth control initiatives, local utility connection moratoriums and local application of statewide tax and governmental spending limitation measures.

Hazardous Substances. One of the most serious risks in terms of the potential reduction in

the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.

The appraised values set forth in this Official Statement do not take into account the possible

reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the Community Facilities District is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the Community Facilities District is not aware of them.

Further, it is possible that liabilities may arise in the future with respect to any of the Taxable

Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but that may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of Taxable Property that is realizable upon a delinquency.

See “PROPOSED PROPERTY DEVELOPMENT – Environmental Conditions.”

Concentration of Property Ownership As of the date of issuance of the Bonds, DR Horton will be responsible for a substantial portion

of the projected Special Tax levy for the Community Facilities District. See Table 1 above. Although DR Horton has provided a Letter of Credit in connection with the issuance of the Bonds, the Letter of Credit and Cash Deposit requirement may not be in effect during the entire term of the Bonds. Any failure by DR Horton to pay installments of the Special Tax when due could result in an insufficiency of

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Special Tax proceeds to meet debt service obligation on the Bonds and the depletion of the Reserve Fund prior to receipt of proceeds from the sale of foreclosed property or payment of the delinquent Special Tax. In that event, there could be a delay or failure in payments of the principal of and interest on the Bonds.

Duration of Letter of Credit; No Cross Collateralization

As a condition precedent to issuance of the Bonds and prior to the Delivery Date, the Community Facilities District is required to cause DR Horton to provide one or more Letters of Credit or Cash Deposits, as applicable, in an aggregate amount equal to the Stated Amount, naming the Fiscal Agent as beneficiary. The Stated Amount is generally calculated based on the estimated annual amount of Special Taxes to be levied on property in the Community Facilities District owned by DR Horton. See “SECURITY FOR THE BONDS - Letter of Credit Fund.” DR Horton has provided a single Letter of Credit issued by JPMorgan in the entire initial Stated Amount of $1,124,565,37. See “SECURITY FOR THE BONDS - Compliance of DR Horton with Letter of Credit Requirements.” A Letter of Credit or Cash Deposit will be in effect until individual homeowners are record owners of 80% or more of the residential assessor’s parcels within the Community Facilities District. The requirements of the Fiscal Agent Agreement regarding the Letters of Credit and Cash Deposits are applicable to DR Horton and its successors and assigns (with respect to Undeveloped Property and Developed Property) other than individual homeowners of residential assessor’s parcels with record title.

Any Letter of Credit will pertain only to the property in the Community Facilities District owned

by DR Horton and its successors or assigns in the Community Facilities District and will not cross collateralize the Special Taxes with respect to other property. The Letter of Credit or Cash Deposit does not secure the payment by homeowners of Special Taxes on the property secured by the Letter of Credit or Cash Deposit.

Purchasers of the Bonds should not expect a Letter of Credit to be in effect throughout the term

of the Bonds. There is also no guarantee that any Letter of Credit will be renewed or extended.

Property Tax Delinquencies General. Delinquencies in the payment of property taxes and, consequently, the Special

Taxes, can occur because the owners of delinquent parcels may not have received property tax bills from the County in a timely manner, including situations in which the County initially sent property tax bills to the property developer or merchant builder at a time when the parcels in question had already been sold to individual homeowners. Delinquencies can also reflect economic difficulties and duress by the property owner. See “THE COMMUNITY FACILITIES DISTRICT – Property Tax Collection History.”

Sustained or increased delinquencies in the payment of the Special Taxes could cause a draw

on the Reserve Fund established for the Bonds and perhaps, ultimately, a default in the payment on the Bonds.

Measures to Mitigate Consequences of Continuing Delinquencies. The Community

Facilities District intends to take certain actions designed to mitigate the impact of future delinquencies, including: enforcing the lien of the Special Taxes through collection procedures that will include foreclosure actions under certain circumstances (see “SECURITY FOR THE BONDS – Covenant to Foreclose”); and increasing the levy of Special Taxes against non-delinquent property owners in the Community Facilities District, to the extent permitted under the Rate and Method and the Act and to the extent the Special Taxes are not already being levied at the maximum Special Tax rate.

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Other Possible Claims Upon the Value of Taxable Property

While the Special Taxes are secured by the Taxable Property, the security only extends to the

value of such Taxable Property that is not subject to priority and parity liens and similar claims. The table in the section entitled “THE COMMUNITY FACILITIES DISTRICT – Direct and

Overlapping Governmental Obligations” shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. The table also states the additional amount of general obligation bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property.

In addition, other governmental obligations may be authorized and undertaken or issued in the

future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the Bonds.

In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all

other taxes, assessments and charges also collected on the tax roll are on a parity. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro rata basis. Although the Special Taxes will generally have priority over non-governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See “– Bankruptcy” below.

Exempt Properties

Exemptions Under Rate and Method and the Act. Certain properties are exempt from the

Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the Community Facilities District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See “SECURITY FOR THE BONDS – Rate and Method.”

In addition, although the Act provides that if property subject to the Special Tax is acquired by a

public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.

Property Owned by FDIC. The ability of the Community Facilities District to collect interest and

penalties specified by State law and to foreclose the lien of a delinquent Special Tax installment may be limited in certain respects with regard to property in which the FDIC has or obtains an interest. The

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FDIC has asserted a sovereign immunity defense to the payment of special taxes and assessments. The Community Facilities District is unable to predict what effect this assertion would have in the event of a delinquency on a parcel within the Community Facilities District in which the FDIC has or obtains an interest.

In addition, although the FDIC does not claim immunity from ad valorem property taxation, it

requires a foreclosing entity to obtain FDIC's consent to foreclosure proceedings. Prohibiting a foreclosure on property owned by the FDIC could reduce the amount available to pay the principal of and interest on the Bonds. Either outcome would cause a draw on the Reserve Fund established for the Bonds and perhaps, ultimately, a default in the payment on the Bonds.

No investigation has been made as to whether the FDIC or any other governmental entity

currently owns or has an interest in any property in the Community Facilities District.

Depletion of Reserve Fund The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. See

“SECURITY FOR THE BONDS – Reserve Fund.” The Reserve Fund will be used to pay principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within the Community Facilities District. If the Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the Bondowners under the Fiscal Agent Agreement. However, because the Special Tax levy is limited to the Maximum Special Tax rates, it is possible that no replenishment would be possible if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus it is possible that the Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes. Bankruptcy

The payment of the Special Tax and the ability of the Community Facilities District to foreclose

the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished,

bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds.

In addition, the amount of any lien on property securing the payment of delinquent Special

Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent Special Taxes not being paid in full.

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To the extent that property in the Community Facilities District continues to be owned by a

limited number of property owners, the chances are increased that the Reserve Fund established for the Bonds could be fully depleted during any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would not be available in the Reserve Fund to make up shortfalls resulting from delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a timely basis.

Disclosure to Future Purchasers

The Community Facilities District has recorded a notice of the Special Tax lien in the Office of

the County Recorder. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such special tax obligation in the purchase of a parcel of land or a home in the Community Facilities District or the lending of money secured by property in the Community Facilities District. The Act and the Goals and Policies require the subdivider of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with these requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. No Acceleration Provisions

The Bonds do not contain a provision allowing for their acceleration in the event of a payment

default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Under the Fiscal Agent Agreement, a Bondholder is given the right for the equal benefit and protection of all Bondowners similarly situated to pursue certain remedies. See “APPENDIX E – Summary of Certain Provisions of the Fiscal Agent Agreement.” So long as the Bonds are in book-entry form, DTC will be the sole Bondholder and will be entitled to exercise all rights and remedies of Bondholder.

Loss of Tax Exemption

As discussed under the caption “LEGAL MATTERS – Tax Exemption,” interest on the Bonds

might become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the Community Facilities District in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the Bonds were to become includable in gross income for purposes of federal income taxation, the Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Taxes. See “THE BONDS – Redemption.”

Voter Initiatives

Under the California Constitution, the power of initiative is reserved to the voters for the purpose

of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was

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approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.

Any such initiative may affect the collection of fees, taxes and other types of revenue by local

agencies such as the Community Facilities District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Bonds.

Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees,

Assessments, and Charges—Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges.

On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority

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

The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the

landowners within the Community Facilities District who constituted the qualified electors at the time of such voted authorization. The Community Facilities District believes, therefore, that issuance of the Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26.

Like their antecedents, Proposition 218 and Proposition 26 are likely to undergo both judicial

and legislative scrutiny before the impact on the Community Facilities District and its obligations can be determined. Certain provisions of Proposition 218 and Proposition 26 may be examined by the courts for their constitutionality under both State and federal constitutional law, the outcome of which cannot be predicted.

Secondary Market for Bonds

There can be no guarantee that there will be a secondary market for the Bonds or, if a

secondary market exists, that any Bonds can be sold for any particular price. Prices of bond issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.

No assurance can be given that the market price for the Bonds will not be affected by the

introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the Internal Revenue Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the Bonds or obligations that present similar tax issues as the Bonds.

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LEGAL MATTERS

Legal Opinions

The legal opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond

Counsel, approving the validity of the Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX I. A copy of the legal opinion will be attached to each Bond.

Jones Hall, A Professional Law Corporation, San Francisco, California, will pass upon certain

legal matters for the Community Facilities District as disclosure counsel. Bowie, Arneson, Wiles & Giannone, Newport Beach, California, will pass upon certain legal matters for the Community Facilities District as special counsel to the Authority. Nossaman LLP, Irvine, California, is serving as counsel to the Underwriter.

Tax Exemption

In the opinion of Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel,

subject however, to certain qualifications described herein, under existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). In the further opinion of Bond Counsel, interest on the Bonds is not an item of tax preference for purposes of federal alternative minimum taxes imposed on individuals and corporations, although Bond Counsel observes that such interest is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation’s alternative minimum tax liabilities.

The opinions of Bond Counsel set forth in the preceding paragraph are subject to the condition

that the Community Facilities District complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that such interest be, or continue to be, excluded from gross income for federal income tax purposes. The Community Facilities District has covenanted to comply with each such requirement.

Failure to comply with certain of such requirements may cause the inclusion of such interest in

gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. The Fiscal Agent Agreement and other related documents refer to certain requirements, covenants and procedures which may be changed and certain actions that may be taken, upon the advice or with an opinion of nationally recognized bond counsel. No opinion is expressed by Bond Counsel as to the effect on any Bond or interest thereon if such change is made or action is taken upon the advice or approval of counsel other than Bond Counsel.

In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California

personal income taxation. Owners of the Bonds should be aware that the ownership or disposition of, or the accrual or

receipt of interest on the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding or concerning any other tax consequences related to the ownership or disposition of the accrual or receipt of interest on the Bonds other than as expressly set forth above.

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See APPENDIX I for the proposed form of the opinion of Bond Counsel. Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds,

and, unless separately engaged, Bond Counsel is not obligated to defend the Authority or the Community Facilities District, as applicable, or the Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the Internal Revenue Service. Under current procedures, parties other than the Authority or the Community Facilities District, as applicable, and their respective appointed counsel, including the Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt Bonds is difficult, obtaining an independent review of Internal Revenue Service positions with which the Community Facilities District legitimately disagrees may not be practicable. Any action of the Internal Revenue Service, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of Bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Community Facilities District, Authority, as applicable, or the Owners to incur significant expense.

Original Issue Discount; Premium Bonds. To the extent the issue price of any maturity of the

Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes and State personal income taxes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of the Bonds with original issue discount, including the treatment of purchasers who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public.

The Bonds purchased, whether at original issuance or otherwise, for an amount greater than

their principal amount payable at maturity (or, in some cases, at their earliest call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a purchaser’s basis in a Premium Bond, and under United States Treasury Regulations, the amount of tax-exempt interest received, will be reduced by the amount of amortizable bond premium property allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

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Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption. Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion.

No Litigation

At the time of delivery of the Bonds, the Community Facilities District will certify that there is no

action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body that is pending for which the Community Facilities District has been served with process or threatened, which:

• in any way questions the powers of the Board or the Community Facilities

District, or • in any way questions the validity of any proceeding taken by the Board in

connection with the issuance of the Bonds, or • wherein an unfavorable decision, ruling or finding could materially adversely

affect the transactions contemplated by the Bond Purchase Contract, or • which, in any way, could adversely affect the validity or enforceability of the

resolutions of the Board adopted in connection with the formation of the Community Facilities District or the issuance of the Bonds, the Bonds, the Fiscal Agent Agreement, the Issuer Continuing Disclosure Certificate or the Bond Purchase Contract, or

• to the knowledge of the Community Facilities District, which in any way questions

the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes, or

• in any other way questions the status of the Bonds under State tax laws or

regulations.

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CONTINUING DISCLOSURE

The Community Facilities District The Community Facilities District will covenant for the benefit of owners of the Bonds to provide

certain financial information and operating data relating to the Bonds by not later than seven months after the end of the Community Facilities District’s fiscal year, or January 31 each year based on the Community Facilities District’s current fiscal year end of June 30 (the “Annual Report”) and to provide notices of the occurrence of certain listed events.

These covenants have been made in order to assist the Underwriter in complying with

Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of listed events by the Community Facilities District is set forth in APPENDIX G.

The Community Facilities District has not failed to comply, in any material respect, with an

undertaking under the Rule in the past five years. The Saugus School District, on certain occasions, has filed annual reports after their respective due dates for certain of its outstanding lease revenue bonds and general obligation bonds; but, it has made corrective filings for all known instances of non-compliance during the past five years and has otherwise not failed to comply, in any material respect, with an undertaking under the Rule in the past five years.

The Property Owner

General. DR Horton will covenant in a continuing disclosure certificate, the form of which is set

forth in “APPENDIX H – Form of Property Owner Disclosure Certificate” (the “Property Owner Continuing Disclosure Certificate”), for the benefit of holders and beneficial owners of the Bonds, to provide certain information relating to itself and the status of its property within the Community Facilities District on a semi-annual basis, and provide notices of the occurrence of certain enumerated events.

A default under the Property Owner Continuing Disclosure Certificate will not, in itself, constitute

an Event of Default under the Fiscal Agent Agreement, and the sole remedy under any Property Owner Continuing Disclosure Certificate in the event of any failure of DR Horton or the Dissemination Agent to comply will be an action to compel specific performance.

Termination of Reporting Obligations. DR Horton may terminate its obligations under the

Property Owner Continuing Disclosure Certificate at such time as the property owned by DR Horton within the Community Facilities District is no longer obligated to pay 10% or more of the Special Taxes within the Community Facilities District.

If DR Horton sells property to another entity and the property transferred is responsible for 10%

or more of the special taxes to be levied in the Community Facilities District in the next fiscal year, then DR Horton will be relieved of its obligations as to the property transferred only if buyer entity assumes the continuing disclosure obligations under DR Horton’s undertaking with respect to the property transferred; however, a buyer of property will not be required to enter into an assumption agreement if it is already a party to a continuing disclosure certificate in form and substance similar to Appendix H, and under which the property conveyed to it will become subject to future Semi-Annual Reports.

Prior Compliance with Continuing Disclosure Undertakings. DR Horton has not failed to

comply, in any material respect, with an undertaking under the Rule in the past five years.

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NO RATINGS

The Community Facilities District has not made, and does not contemplate making, any

application to a rating agency for a rating on the Bonds. No such rating should be assumed from any credit rating that the Authority or the Community Facilities District may obtain for other purposes. Prospective purchasers of the Bonds are required to make independent determinations as to the credit quality of the Bonds and their appropriateness as an investment.

UNDERWRITING

The Bonds are being purchased by the Stifel, Nicolaus & Company, Incorporated, at a purchase price of $17,459,203.25 (which represents the aggregate principal amount of the Bonds ($18,030,000.00), less an original issue discount of $345,421.75, less an underwriter's discount of $225,375.00).

The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of

the Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.

The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the

offering price stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

PROFESSIONAL FEES In connection with the issuance of the Bonds, fees or compensation payable to certain

professionals are contingent upon the issuance and delivery of the Bonds. Those professionals include:

• the Underwriter; • Jones Hall, A Professional Law Corporation, as Disclosure Counsel; • Bowie, Arneson, Wiles & Giannone, as Bond Counsel and District Counsel; • Nossaman LLP, as Underwriter’s Counsel; • Keygent LLC, as Financial Advisor; • A portion of the fees of Willdan Financial Services, as Special Tax Consultant; and • U.S. Bank National Association, as Fiscal Agent.

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EXECUTION The execution and delivery of the Official Statement by the Community Facilities District have

been duly authorized by the Board of Trustees of the Saugus-Castaic School Facilities Financing Authority, acting as the legislative body of the Community Facilities District.

COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF THE SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY By: Joan Lucid

Joan Lucid, Ed.D., Superintendent,

Saugus Union School District, on behalf of Community Facilities District No. 2006-1C

of the Saugus-Castaic School Facilities Financing Authority


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APPENDIX A

GENERAL INFORMATION ABOUT THE CITY OF SANTA CLARITA AND THE COUNTY OF LOS ANGELES

The following information is included only for the purpose of supplying general information

regarding the City of Santa Clarita and the County of Los Angeles. This information is provided only for general informational purposes, and provides prospective investors limited information about the area in and around the Community Facilities District and its economic base. It should not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the Bonds is payable from any sources other than Net Taxes received by the Community Facilities District. See "SECURITY FOR THE BONDS."

General Information

The Authority is located in the Santa Clarita Valley area of northern Los Angeles County. The area is composed of seven communities: Canyon Country, Newhall, Saugus and Valencia, which are located in the city limits of the City, and the unincorporated communities of Castaic, Stevenson Ranch and Val Verde. These communities are briefly described below.

The City. The City of Santa Clarita (the "City") was officially incorporated as a general law city on December 15, 1987 after a ballot measure was passed by the City's residents. The City operates under a council-manager form of government and provides, either directly or under contract with the County, a full range of municipal services including public safety, public works, parks and recreation and community development.

Canyon Country is the City's most populous community, and also features some industrial uses

and several neighborhood shopping plazas. Newhall represents the area's oldest established community, dating to its founding in 1876

along a key rail line. Newhall is an older diverse residential area with significant commercial and restaurant uses. The Newhall area has served as the locale for Disney Movie Ranch, Gene Autry's Melody Ranch, a park and nature center, and film star William S. Hart's former ranch, now a museum.

Saugus owes its existence to the Southern Pacific Railroad Line and was the home of a original

railroad station. Saugus is a mix of new residential areas amid established neighborhoods, with additional commercial and retail centers.

Valencia is a master-planned community, developed by the Newhall Land and Farming

Company. Based on the Valencia Master Plan, this community features a balance of business and residential land uses. Valencia includes park-like neighborhoods, golf courses and lighted landscaped walkways connecting homes, schools, shopping and recreational facilities, including Six Flags Magic Mountain.

Castaic is one of Santa Clarita Valley's major recreation area, with its lake serving as the center

of the area's swimming, sailing, fishing, boating and water skiing. Because of its proximity to the San Joaquin Valley, this community is also a connection point in the north-south trucking network.

Stevenson Ranch is a newer community, located west of the City. It has both residential and

commercial uses.

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Val Verde is a small rural resort area in the hilly northwestern portion of the Santa Clarita Valley, adjacent to Ventura County.

Newhall Ranch is an area that encompasses some 12,000 acres west of Valencia, which is

being develop by the Newhall Land and Farming Company. The Newhall Ranch Specific Plan permits 21,600 homes, 1,000 acres of commercial, business park and mixed use development, with approximately 6,200 acres of open space.

The County. Located along the southern coast of California, Los Angeles County covers about

4,080 square miles. It measures approximately 75 miles from north to south and 70 miles from east to west. The county includes Santa Catalina and San Clemente Islands and is bordered by the Pacific Ocean and Ventura, San Bernardino and Orange Counties.

Almost half of the county is mountainous and some 14 percent is a coastal plain known as the Los Angeles Basin. The low Santa Monica mountains and Hollywood Hills run east and west and form the northern boundary of the Basin and the southern boundary of the San Fernando Valley. The San Fernando Valley terminates at the base of the San Gabriel Mountains whose highest peak is over 10,000 feet. Beyond this mountain range the rest of the county is a semi-dry plateau, the beginning of the vast Mojave Desert.

According to the Los Angeles County Regional Planning Commission, the 86 incorporated cities in the county cover about 1,344 square miles or 27 percent of the total county. About 16 percent of the land in the County is devoted to residential use and over two thirds of the land is open space and vacant.

Population

The following table shows population estimates for the City, the County and the State of

California for the past five years.

CITY OF SANTA CLARITA, COUNTY OF LOS ANGELES POPULATION ESTIMATES

Area 2008 2009 2010 2011 2012 City of Santa Clarita 174,355 175,103 176,056 176,779 177,445 Los Angeles County 9,785,474 9,801,096 9,822,121 9,847,712 9,884,632 State of California 36,704,375 36,966,713 37,223,900 37,427,946 37,678,563

Source: State of California, Department of Finance, as of January 1.

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Employment and Industry

The area of the Community Facilities District is included in the Los Angeles–Long Beach–Glendale Metropolitan District, which is comprised of Los Angeles County. Los Angeles County civilian labor force figures are shown in the following table. These figures are County-wide and may not necessarily reflect employment trends in the Community Facilities District.

The table below lists employment by industry group for Los Angeles County for the past five years for which data is available.

COUNTY OF LOS ANGELES Annual Average Labor Force

Employment by Industry Group

2007 2008 2009 2010 2011 Civilian Labor Force 4,872,500 4,934,800 4,904,300 4,910,500 4,924,400 Employment 4,625,600 4,565,500 4,335,200 4,291,400 4,318,900 Unemployment 246,900 369,300 569,000 619,100 605,500 Unemployment Rate 5.1% 7.5% 11.6% 12.6% 12.3% Wage and Salary Employment: (1) Agriculture 7,500 6,900 6,200 6,200 5,500 Natural Resources and Mining 4,400 4,400 4,100 4,100 4,000 Construction 157,600 145,200 117,300 104,500 103,500 Manufacturing 449,200 434,500 389,200 373,200 365,400 Wholesale Trade 227,000 223,700 204,500 203,300 207,200 Retail Trade 426,000 416,500 387,000 386,000 390,900 Trans., Warehousing, Utilities 165,600 163,100 151,200 150,600 149,900 Information 209,800 210,300 191,200 191,500 195,600 Financial and Insurance 163,600 153,900 142,300 137,800 137,500 Real Estate, Rental & Leasing 80,300 79,400 73,800 71,700 71,900 Professional and Business Services 605,400 582,600 529,800 527,500 540,400 Educational and Health Services 492,700 505,800 514,600 522,000 534,800 Leisure and Hospitality 397,900 401,600 385,600 384,800 392,800 Other Services 147,100 146,100 137,900 136,700 135,000 Federal Government 51,100 51,100 48,700 51,600 49,000 State Government 81,000 82,400 82,000 80,700 82,700 Local Government 463,700 470,300 465,200 447,300 433,500 Total All Industries (2) 4,129,600 4,077,600 3,830,300 3,779,300 3,799,600

(1) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.

(2) May not add due to rounding. Source: State of California Employment Development Department.

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Employment

The table below lists the major employers in the Los Angeles County area. Major private employers in the Los Angeles area include those in aerospace, health care, entertainment, electronics, retail and manufacturing. Major public sector employers include public universities and schools, the State of California and Los Angeles County.

COUNTY OF LOS ANGELES

Major Employers (Listed Alphabetically)

October 2012

Employer Name Location Industry AHMC Healthcare Inc Alhambra Hospitals All Nations Church Lake View Terrace Churches American Honda Motor Co Inc Torrance Alternative Fuels California Institute of Tech Pasadena Schools-Universities & Colleges Academic California State-Northridge Northridge Schools-Universities & Colleges Academic Cedars-Sinai Medical Ctr West Hollywood Hospitals Century Plaza Towers Los Angeles Office Buildings & Parks Contractor State License Ctr Burbank Insurance Edison Carrier Solutions Rosemead Fiber Optics-Equipment & Systems (Mfrs) FX NETWORKS LLC Los Angeles Television-Cable & CATV Kaiser Sunset Los Angeles Hospitals LAC & USC MEDICAL CTR Los Angeles Hospitals Long Beach City Hall Long Beach City Government-Executive Offices Long Beach Memorial Med Ctr Long Beach Hospitals Los Angeles County Sheriff Monterey Park Sheriff Los Angeles Police Dept Los Angeles Police Departments Nestle USA Inc Glendale Food Products & Manufacturers Pomona Valley Hospital Med Ctr Pomona Hospitals Pro Parts Canoga Park Automobile Parts & Supplies-Retail-New Providence Holicross Med Ctr Sylmar Health Services Santa Monica College Santa Monica Schools-Universities & Colleges Academic Sony Pictures Entertainment Culver City Motion Picture Producers & Studios UCLA Los Angeles Schools-Universities & Colleges Academic UCLA Health System Los Angeles Schools-Universities & Colleges Academic Walt Disney Co Burbank Motion Picture Producers & Studios

Source: State of California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database, 2013 1st Edition.

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Commercial Activity

In 2009, the State Board of Equalization converted the business codes of sales and use tax permit holders to North American Industry Classification System codes. As a result of the coding change, retail stores data for 2009 and after is not comparable to that of prior years.

A summary of historic taxable sales within the City during the past five years in which data is

available is shown in the following table. Total taxable sales during the first two quarters of calendar year 2011 in the City were reported to be $1,238,367,000, a 7.3% increase over the total taxable sales of $1,154,074,000 reported during the first two quarters of calendar year 2010. Annual figures for calendar year 2011 and 2012 are not yet available.

CITY OF SANTA CLARITA

Taxable Transactions (Dollars in Thousands)

Year

Retail Permits

on July 1

Retail Stores Taxable

Transactions

Total Permits on

July 1

Total Outlets Taxable

Transactions 2006 3,128 $2,401,919 6,409 $2,857,875 2007 3,068 2,394,449 6,381 2,868,199 2008 3,216 2,162,984 6,456 2,648,654 2009 (1) 3,966 1,901,065 5,823 2,326,235 2010 (1) 4,198 2,005,679 6,025 2,403,176

(1) Data not comparable to prior years. “Retail” category now includes “Food Services.” Source: State of California, Board of Equalization. A summary of historic taxable sales within the County during the past five years in which data is

available is shown in the following table. Total taxable sales during the first two quarters of calendar year 2011 in the County were reported to be $60,690,827,000, an 8.25% increase over the total taxable sales of $56,064,900,000 reported during the first two quarters of calendar year 2010. Annual figures for calendar year 2011 and 2012 are not yet available.


Taxable Transactions (Dollars in Thousands)

Year

Retail Permits

on July 1

Retail Stores Taxable

Transactions

Total Permits on

July 1

Total Outlets Taxable

Transactions 2006 142,512 $95,554,193 295,701 $136,162,552 2007 142,380 96,095,711 290,344 137,820,418 2008 146,999 89,810,309 289,802 131,881,744 2009 (1) 175,461 78,444,115 264,928 112,744,727 2010 (1) 182,491 82,175,416 271,293 116,942,334

(1) Data not comparable to prior years. “Retail” category now includes “Food Services.” Source: State of California, Board of Equalization.

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Construction Trends Provided below are the building permits and valuations for the City and the County for calendar

years 2007 through 2011.

CITY OF SANTA CLARITA New Construction

(Dollars in Thousands)

2007 2008 2009 2010 2011 Permit Valuation New Single-family $64,464.0 $4,4067.1 $30,609.4 $40,284.7 $33,706.0 New Multi-family 5,357.3 5,090.1 5,109.6 3,559.0 0.0 Res. Alterations/Additions 14,994.1 8,453.8 8,455.0 5,668.5 5,335.8

Total Residential 84,815.4 57,611.0 44,173.9 49,512.2 39,041.8 New Commercial 42,032.9 70,315.7 5,000.0 3,052.5 8,749.2 New Industrial 0.0 8,628.0 0.0 0.0 7,500.0 New Other 13,290.8 18,300.1 1,067.9 1,981.6 62,570.0 Com. Alterations/Additions 38,178.3 53,586.1 34,123.1 35,483.9 29,218.4

Total Nonresidential $93,502.0 $150,829.9 40,191.0 40,518.1 108,037.6 New Dwelling Units Single Family 199 111 75 98 81 Multiple Family 24 31 30 20 0 TOTAL 223 142 105 118 81

Source: Construction Industry Research Board, Building Permit Summary.


New Construction (Dollars in Thousands)

2007 2008 2009 2010 2011 Permit Valuation New Single-family $2,047,773.3 $1,134,121.1 $798,305.0 $922,092.0 $1,026,679.4 New Multi-family 2,101,560.8 1,409,062.3 521,793.7 810,621.4 1,225,553.4 Res. Alterations/Additions 1,898,228.2 1,411,332.6 1,073,157.9 1,109,768.6 1,431,581.5

Total Residential 5,956,562.3 3,954,515.0 2,393,256.6 2,842,482.0 3,683,814.3 New Commercial 1,858,923.4 1,517,965.4 513,381.3 521,995.6 612,800.9 New Industrial 108,827.3 134,587.0 40,084.0 55,772.9 135,976.2 New Other 766,205.8 680,228.1 462,139.0 436,807.8 286,119.7 Com. Alterations/Additions 2,005,199.0 2,157,857.2 1,657,939.6 1,662,362.9 1,774,207.9

Total Nonresidential $4,739,155.4 $4,490,637.8 2,673,543.9 2,676,939.1 2,809,104.7 New Dwelling Units Single Family 7,509 3,539 2,131 2,439 2,338 Multiple Family 12,854 10,165 3,522 5,029 8,052 TOTAL 20,363 13,704 5,653 7,468 10,390

Source: Construction Industry Research Board, Building Permit Summary.

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Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and non-tax

payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), non-tax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”

The following table summarizes the total effective buying income for the County of Los Angeles,

the State and the United States for the period 2007 through 2011.

COUNTY OF LOS ANGELES Effective Buying Income

2007 through 2011

Year

Area

Total Effective Buying Income (000’s Omitted)

Median Household Effective

Buying Income 2007 City of Santa Clarita $4,606,140 $66,567

Los Angeles County 202,646,560 43,710 California 814,894,438 48,203 United States 6,300,794,040 41,792

2008 City of Santa Clarita $4,682,665 $67,810 Los Angeles County 206,127,855 44,653 California 832,531,445 48,952 United States 6,443,994,426 42,303




Source: The Nielsen Company (US), Inc.


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APPENDIX B

RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2006-1C

OF SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

RMA_FINAL Page 1 of 13 January 15, 2008

Rate & Method of Apportionment for Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority

The following sets forth the Rate and Method of Apportionment for the levy and collection of Special Taxes of Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority ("CFD No. 2006-1C"). CFD No. 2006-1C shall levy and collect a Special Tax each Fiscal Year in an amount determined through the application of the Rate and Method of Apportionment described below. Until the termination of the Special Tax as set forth in Section J herein, all of the real property in CFD No. 2006-1C, shall be taxed for the purposes, to the extent, and in the manner herein provided, except for any portion of such real property (i) that is exempted by law or by the provisions hereof or (ii) for which a notice of cessation of Special Tax has been recorded by the Saugus-Castaic School Facilities Financing Authority ("Authority").

Section A: Definitions The terms hereinafter set forth have the following meanings: "Acreage" means the number of acres of land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, CFD No. 2006-1C may rely on the land area shown on the applicable Final Subdivision Map. "Act" means the Mello-Roos Community Facilities Act of 1982 as amended, being Chapter 2.5, (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means any ordinary and necessary expense incurred by the Authority on behalf of CFD No. 2006-1C related to the determination of the amount of the levy of Special Taxes, the collection of Special Taxes (including, without limitation, the reasonable expenses of collecting delinquent Special Taxes), the administration of Bonds, the proportionate payment of salaries and benefits of any Authority representative whose duties are directly related to the administration of CFD No. 2006-1C, and costs otherwise incurred in order to carry out the authorized purposes of CFD No. 2006-1C. "Annual Special Tax" means the Special Tax actually levied in a Fiscal Year on an Assessor’s Parcel. "Assessor’s Parcel" means a lot or parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number within the boundaries of CFD No. 2006-1C. "Assessor’s Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number. "Assessor’s Parcel Number" or "APN" means that number assigned to an Assessor’s Parcel by the County for purposes of identification. "Assigned Annual Special Tax" means the Special Tax of that name described in Section D. "Backup Annual Special Tax" means the Special Tax of that name described in Section E. "Board" means the Board of Directors of the Saugus-Castaic School Facilities Financing Authority, acting as the legislative body of CFD No. 2006-1C or the Board's authorized administrative delegate.


"Bond Index" means the national Bond Buyer Revenue Bond Index, commonly referred to as the 25-Bond Revenue Index. In the event the 25-Bond Revenue Index ceases to be published, the Bond Index used thereafter shall, as nearly as possible, be a comparable index for revenue bonds maturing in 30 years with an average rating equivalent to Moody's A1 and S&P's A+, as reasonably determined by CFD No. 2006-1C. "Bonds" means one or more series of bonds secured by Special Taxes and authorized by the qualified electors of, and issued by, CFD No. 2006-1C, or any refunding bonds thereof. "Building Permit" means a permit for the construction of one or more Units within CFD No. 2006-1C issued by the County, or other public agency in the event the County no longer issues permits for the construction of Units within CFD No. 2006-1C. "Building Square Footage" or "BSF" means, consistent with Government Code Section 65995, the square footage of area within the perimeter of a Unit, exclusive of any carports, walkways, garages, overhangs, patios, enclosed patios, detached accessory structure, or similar areas, as determined by reference to the Building Permit for such Unit. "County" means the County of Los Angeles, State of California. "Developed Property" means all Assessor’s Parcels of Taxable Property for which Building Permits were issued on or before May 1 of the prior Fiscal Year, provided that each such Assessor's Parcel is associated with a Lot created on or before January 1 of the prior Fiscal Year as reasonably determined by CFD No. 2006-1C. "Discount Rate" means the rate used for the present value calculation in figuring the Present Value of Taxes, which shall be (i) the most recently published Bond Index prior to Bond issuance or (ii) the Yield On The Bonds after Bond issuance. "Exempt Property" means all Assessors’ Parcels designated as being exempt from Special Taxes pursuant to Section K. "Final Subdivision Map" means a final tract map, parcel map, condominium plan, lot line adjustment, or functionally equivalent map or instrument that creates Lots, recorded in the Office of the County Recorder. "Fiscal Year" means the period commencing on July 1 of any year and ending the following June 30. "Lot" means an individual legal lot created by a Final Subdivision Map for which a Building Permit for residential construction has been or could be issued. Notwithstanding the foregoing, in the case of an individual legal lot created by such a Final Subdivision Map upon which condominium units are entitled to be developed but for which a condominium plan has not been recorded, the number of Lots allocable to such legal lot for purposes of calculating the Backup Annual Special Tax applicable to such Final Subdivision Map shall equal the number of condominium units which are permitted to be constructed on such legal lot as shown on such Final Subdivision Map. "Maximum Special Tax" means the Special Tax of that name described in Section C.


"Minimum Annual Special Tax Requirement" means the amount required in any Fiscal Year to pay: (i) the debt service or other costs on all outstanding Bonds, (ii) Administrative Expenses of CFD No. 2006-1C, (iii) the costs associated with the release of funds from an escrow account, and (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, less (v) any amount in the funds or accounts for the outstanding Bonds available in that Fiscal Year to pay debt service or other costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement. In determining the Special Tax levies necessary to satisfy the Minimum Annual Special Tax Requirement in any particular Fiscal Year, CFD No. 2006-1C, subject to applicable Maximum Special Tax amounts and Section 53321 of the Act, shall include amounts sufficient to compensate for any reasonably-anticipated delinquent payments of Special Taxes. The determination of anticipated delinquent payments of Special Taxes shall include consideration of, among other relevant factors, delinquency rates for payments of Special Taxes levied in previous Fiscal Years in CFD No. 2006-1C and/or community facilities districts comparable to CFD No. 2006-1C. "Minimum Annual Special Tax Requirement For Developed Property" means the amount required in any Fiscal Year to pay: (i) 110% of the debt service or other costs on all outstanding Bonds due in the next succeeding calendar year, (ii) Administrative Expenses of CFD No. 2006-1C, (iii) the costs associated with the release of funds from an escrow account, and (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, less (v) any amount in the funds or accounts for the outstanding Bonds available in that Fiscal Year to pay debt service or other costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, or trust agreement. In determining the Special Tax levies necessary to satisfy the Minimum Annual Special Tax Requirement for Developed Property in any particular Fiscal Year, CFD No. 2006-1C, subject to applicable Maximum Special Tax amounts and Section 53321 of the Act, shall include amounts sufficient to compensate for any reasonably-anticipated delinquent payments of Special Taxes. The determination of anticipated delinquent payments of Special Taxes shall include consideration of, among other relevant factors, delinquency rates for payments of Special Taxes levied in previous Fiscal Years in CFD No. 2006-1C and/or community facilities districts comparable to CFD No. 2006-1C. "Minimum Net Taxable Acreage" means the applicable Acreage for each Zone listed in Table 3 of Section K. "Partial Prepayment Amount" means the amount required to prepay a portion of the ongoing Special Tax obligation for an Assessor’s Parcel, as described in Section I. "Prepaid" means that the obligation associated with an Assessor's Parcel for payment of future annual installments of the Special Taxes authorized to be levied by CFD No. 2006-1C pursuant to the Act and this Rate and Method of Apportionment has been satisfied, in whole or in part, by means of a payment to CFD No. 2006-1C pursuant to Sections H or I. "Prepayment Administrative Fees" means the fees and expenses associated with a prepayment, including, without limitation, the costs of computing the Prepayment Amount or Partial Prepayment Amount, costs of redeeming Bonds, and/or costs of preparing and recording any notices to evidence the prepayment and/or redemption of Bonds. "Prepayment Amount" means the amount required to prepay in full and terminate the ongoing Special Tax obligation in full for an Assessor’s Parcel, as described in Section H. "Present Value of Taxes" means, as of the date of the calculation, the amount of any Special Tax applicable to an Assessor's Parcel in the then-current Fiscal Year not yet paid plus the present value of the expected Special Tax levy applicable to such Assessor's Parcel in future Fiscal Years.


The number of future Fiscal Years used for the present value calculation shall be either (i) if no Bonds have been issued, the lesser of (a) 30 years or (b) the number of Fiscal Years remaining, excluding the then-current Fiscal Year, from the date of prepayment to Fiscal Year 2050/2051, or (ii) if Bonds have been issued, the number of Fiscal Years remaining, excluding the then-current Fiscal Year, from the date of prepayment to the date of final maturity of any Bonds outstanding at the time of prepayment. The present value shall be calculated using the Discount Rate. "Proportionately" means that the ratio of the Annual Special Tax to the applicable Assigned Annual Special Tax is equal for all applicable Assessors’ Parcels; provided that, if the Special Tax levied on an Assessor's Parcel in any particular Fiscal Year is the Maximum Special Tax then applicable to that Assessor's Parcel, such Special Tax shall be deemed to have been Proportionately levied in that Fiscal Year. "Reserve Fund Credit" means, for each party wishing to prepay the Special Tax obligation of an Assessor's Parcel, an amount equal to the lesser of (i) the reduction in the reserve requirement for the outstanding Bonds resulting from the redemption of Bonds with the applicable Prepaid Special Taxes or (ii) the amount calculated by subtracting the new reserve requirement assuming the redemption of outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the date of prepayment, but no reserve fund credit will be given if such amount is less than zero. In the event that a surety bond or other credit instrument satisfies the reserve requirement, or if no Bonds have been issued, no Reserve Fund Credit shall be given. "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-1C pursuant to the Act and this Rate and Method of Apportionment. "Taxable Property" means all Assessor's Parcels that are not Exempt Property. "Undeveloped Property" means all Assessor's Parcels of Taxable Property that are not Developed Property. "Unit" means each residential dwelling unit capable of being conveyed separately from adjacent or other residential dwelling units. "Yield On The Bonds" means the arbitrage yield for the most recent series of Bonds issued. "Zone" means the areas identified as a Zone on Exhibit A to this Rate & Method of Apportionment. "Zone A" means all property located within the area identified as Zone A of CFD No. 2006-1C in Exhibit A, subject to interpretation by CFD No. 2006-1C as described in Section B. "Zone B" means all property located within the area identified as Zone B of CFD No. 2006-1C in Exhibit A, subject to interpretation by CFD No. 2006-1C as described in Section B. "Zone C" means all property located within the area identified as Zone C of CFD No. 2006-1C in Exhibit A, subject to interpretation by CFD No. 2006-1C as described in Section B. Section B: Classification of Assessor's Parcels For each Fiscal Year, commencing with Fiscal Year 2008/2009, CFD No. 2006-1C shall: (i) assign each Assessor’s Parcel to a Zone in accordance with Exhibit A; (ii) classify each Assessor's Parcel within each Zone as Taxable Property or Exempt Property; (iii) classify each Assessor's Parcel of Taxable Property as Developed Property or Undeveloped Property; and (iv) assign each Assessor's Parcel of Developed Property to a Special Tax class based on the Building Square


Footage of the Unit attributable to that Assessor's Parcel as specified on the Building Permit issued for that Assessor's Parcel. Section C: Maximum Special Taxes 1. Developed Property

The Maximum Special Tax for each Assessor’s Parcel classified as Developed Property for any Fiscal Year shall be the amount determined by the greater of (i) the application of the Assigned Annual Special Tax for such Assessor's Parcel as set forth in Table 1 of Section D or (ii) the application of the Backup Annual Special Tax for such Assessor's Parcel.

2. Undeveloped Property

The Maximum Special Tax for each Assessor’s Parcel classified as Undeveloped Property for any Fiscal Year shall be the amount determined by the application of the Assigned Annual Special Tax for such Assessor's Parcel as set forth in Table 2 of Section D.

Section D: Assigned Annual Special Taxes

1. Developed Property The Assigned Annual Special Tax for each Assessor’s Parcel of Developed Property in any

Zone shall be the amount determined by reference to Table 1 according to the Building Square Footage of the Unit.

Table 1

Assigned Annual Special Tax for Developed Property in Zones A, B and C

Building Square Footage Assigned Annual Special Tax

< 3,000 $4,000.00 per Unit

3,000 – 3,525 $4,364.00 per Unit

3,526 – 3,650 $4,633.00 per Unit

3,651 – 4,000 $4,875.00 per Unit

4,001 – 4,300 $4,983.00 per Unit

> 4,300 $5,252.00 per Unit

2. Undeveloped Property The Assigned Annual Special Tax for an Assessor’s Parcel classified as Undeveloped

Property shall be the amount per acre of Acreage determined by reference to Table 2 according to the applicable Zone within which the Assessor's Parcel is located.


Table 2

Assigned Annual Special Tax for Undeveloped Property

Zone Assigned Annual

Special Tax

A $33,525.95 per acre of

Acreage

B $33,930.99 per acre of

Acreage

C $9,822.62 per acre of

Acreage Section E: Backup Annual Special Taxes Each Fiscal Year, commencing with Fiscal Year 2008/2009, each Assessor’s Parcel of Developed Property shall be subject to a Backup Annual Special Tax. The Backup Annual Special Tax for Developed Property shall be a rate per Lot per Zone. The Backup Annual Special Tax for each Lot in Zone A or Zone B shall be calculated according to the following formula.

U x A

B = ---------- L The terms above have the following meanings: B = Backup Annual Special Tax per Lot in the applicable Zone in each Fiscal Year U = Assigned Annual Special Tax per acre of Acreage of Undeveloped Property in the

applicable Zone as set forth in Table 2 of Section D A = Minimum Net Taxable Acreage in the applicable Zone as set forth in Table 3 of Section K L = Number of Lots in the applicable Zone The Backup Annual Special Tax for each Lot in Zone C shall be $5,252.00. Notwithstanding the foregoing, if all or any portion of a Final Subdivision Map is subsequently changed or modified, then the Backup Annual Special Tax for each Assessor’s Parcel of Developed Property in such Final Subdivision Map area that is changed or modified shall be a rate per square foot of Acreage calculated as follows: 1. Determine the total Backup Annual Special Taxes anticipated to apply to the changed or

modified Final Subdivision Map area prior to the change or modification.

2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision Map area, as reasonably determined by CFD No. 2006-1C.

3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup

Annual Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision Map area for all remaining Fiscal Years in which the Special Tax may be levied. The Backup Annual


Special Tax for an Assessor’s Parcel of Developed Property in a Final Subdivision Map that is not changed or modified shall not be recalculated.

Section F: Annual Special Tax Remainder In each Fiscal Year in which proceeds of Annual Special Taxes on Developed Property are greater than the Minimum Annual Special Tax Requirement, the difference shall be used by the Authority for acquisition, construction or financing school facilities that will benefit the residents of CFD No. 2006-1C as determined by the Authority, in accordance with the Act and other applicable law. Section G: Method of Apportionment of the Annual Special Tax Commencing Fiscal Year 2008/2009 and for each subsequent Fiscal Year until terminated according to Section J, CFD No. 2006-1C shall levy Special Taxes as follows: Step One: CFD No. 2006-1C shall Proportionately levy a Special Tax on each Assessor’s

Parcel of Developed Property up to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel to satisfy the Minimum Annual Special Tax Requirement For Developed Property.

Step Two: If the sum of the amounts to be levied in step one will be insufficient to satisfy the

Minimum Annual Special Tax Requirement, then CFD No. 2006-1C shall also Proportionately levy a Special Tax on each Assessor’s Parcel of Undeveloped Property, up to the Maximum Special Tax applicable to each such Assessor’s Parcel, to satisfy the Minimum Annual Special Tax Requirement.

Step Three: If the sum of the amounts to be levied pursuant to steps one and two will be

insufficient to satisfy the Minimum Annual Special Tax Requirement, then instead of the amounts levied pursuant to step one, but in addition to the amounts levied pursuant to step two, CFD No. 2006-1C shall Proportionately levy a Special Tax on each Assessor’s Parcel of Developed Property, up to the Maximum Special Tax applicable to each such Assessor’s Parcel, to satisfy the Minimum Annual Special Tax Requirement.

Section H: Full Prepayment of Special Taxes The Special Tax obligation of an Assessor's Parcel may be Prepaid at the times and subject to the conditions set forth in this section. As a condition to such prepayment, any delinquent Special Taxes, interest, penalties and expenses attributable to such Assessor's Parcel also must be paid to CFD No. 2006-1C. Such request for prepayment may be made at any time. 1. Full Prepayment Times and Conditions The Special Tax obligation of an Assessor’s Parcel of Developed Property or an Assessor’s

Parcel of Undeveloped Property for which a Building Permit has been issued or may be issued may be Prepaid in full if and only if the Assessor's Parcel is a Lot as defined herein. The party intending to prepay the Special Tax obligation shall provide CFD No. 2006-1C with written notice of intent to prepay. Within thirty (30) days of receipt of such written notice, CFD No. 2006-1C shall determine the Prepayment Amount for such Assessor's Parcel and shall notify such party of the Prepayment Amount for the Assessor's Parcel.


2. Calculation of Prepayment Amount

The Prepayment Amount shall be calculated according to the following formula:

P = PVT – RFC + PAF

The terms above have the following meanings:

P = Prepayment Amount PVT = Present Value of Taxes RFC = Reserve Fund Credit PAF = Prepayment Administrative Fees

Prior to the issuance of Bonds, the expected Special Tax levy for purposes of calculating the Present Value of Taxes for an Assessor's Parcel of Developed Property will be the Assigned Annual Special Tax for such Assessor's Parcel. Prior to the issuance of Bonds, the expected Special Tax levy for purposes of calculating the Present Value of Taxes for an Assessor's Parcel of Undeveloped Property for which a Building Permit has been issued will be the Assigned Annual Special Tax set forth in Table 1 that, consistent with the BSF specified in such Building Permit, will be applicable to such Assessor's Parcel once such Assessor's Parcel is classified as Developed Property. The expected Special Tax levy for purposes of calculating the Present Value of Taxes for an Assessor's Parcel of Undeveloped Property for which a Building Permit has not been issued will be the Backup Annual Special Tax for such Assessor's Parcel, determined in accordance with Section E and assuming, for purposes of such calculation, that the Assessor's Parcel is Developed Property. After the issuance of Bonds, the expected Special Tax levy for purposes of calculating the Present Value of Taxes for an Assessor's Parcel for which a Building Permit has been issued will be the Assigned Annual Special Tax for such Assessor's Parcel.

If the Prepayment Amount is paid to CFD No. 2006-1C prior to the issuance of Bonds, the amount representing the Present Value of Taxes attributable to the prepayment shall be deposited into a separate account held with the Authority to fund facilities authorized to be financed by CFD No. 2006-1C. If the Prepayment Amount is paid to CFD No. 2006-1C after the issuance of Bonds, the amount representing the Present Value of Taxes attributable to the prepayment less the Reserve Fund Credit attributable to the prepayment shall be deposited into an applicable account or fund established under the applicable trust agreement, indenture or fiscal agent agreement and used to redeem Bonds. To the extent that there are amounts remaining after calling the maximum amount of Bonds possible, such amounts shall be used to pay debt service on the Bonds. The amount representing the Prepayment Administrative Fees attributable to the prepayment shall in either case be retained and used by CFD No. 2006-1C to pay or reimburse the Authority for Prepayment Administrative Fees.

3. Full Prepayment Procedures and Limitations

With respect to any Assessor’s Parcel for which the Special Tax obligation has been Prepaid in full, CFD No. 2006-1C shall indicate in the records of CFD No. 2006-1C that there has been a prepayment of the Special Tax obligation and shall cause a suitable notice to be prepared and recorded in compliance with the Act to indicate the prepayment of the Special Tax obligation and the release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay the Special Tax shall cease. If the Special Tax for the current Fiscal Year has been levied by the County but not yet been paid, CFD No. 2006-1C shall take one of the following actions in connection with a prepayment: (i) if it is feasible for CFD No. 2006-1C to notify the County and have the Special Tax for the Assessor's Parcel seeking prepayment removed from the tax roll prior to delinquency, CFD No. 2006-1C shall do so, and the full amount of the Prepayment Amount


shall be paid to CFD No. 2006-1C as part of the prepayment, or (ii) if removing the Special Tax from the tax roll for the Assessor's Parcel seeking prepayment is not feasible, then CFD No. 2006-1C shall direct the party wishing to prepay the Special Tax to (a) pay the County tax bill for the entire Fiscal Year directly to the County and provide CFD No. 2006-1C a receipt evidencing the payment, and (b) pay to CFD No. 2006-1C an amount equal to the Prepayment Amount less that amount of the Special Tax paid directly to the County by the party wishing to prepay. A notice shall not be recorded with the County indicating that the Special Tax obligation has been Prepaid in full until after CFD No. 2006-1C receives the receipt for the payment of the current Fiscal Year taxes and the amount calculated pursuant to (b) above.

Notwithstanding anything to the contrary, no prepayment will be allowed unless, as reasonably determined by CFD No. 2006-1C (i) the amount of Special Taxes that may be levied on Taxable Property after such prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments in each future Fiscal Year on all Bonds that would remain outstanding if a corresponding portion of the Bonds were to be redeemed with such prepayment, and (ii) such prepayment will not impair the security of all then-outstanding Bonds. Such determinations shall include, among other factors, identification and consideration of all Assessors’ Parcels that are expected to become Exempt Property.

Section I: Partial Prepayment of Special Taxes The Special Tax obligation of an Assessor's Parcel may be partially Prepaid at the times and subject to the conditions set forth in this section. As a condition to such partial prepayment, any delinquent Special Taxes, interest, penalties and expenses attributable to such Assessor's Parcel also must be paid to CFD No. 2006-1C. Such request for partial prepayment may be approved or disapproved by the Board in its discretion. 1. Partial Prepayment Times and Conditions

A party may provide written notice to CFD No. 2006-1C of such party's election to prepay a portion of the Special Tax obligation for a minimum of fifteen percent (15%) (or a lesser percentage if approved by the Board) of the Assessor's Parcels within a Final Subdivision Map. Partial prepayment for such Assessor's Parcels must be made at the same time and must be based on the same prepayment percentage for all such Assessor's Parcels. The written notice shall specify the percentage of the Special Tax obligations that the party desires to prepay for all Assessor's Parcels to be partially Prepaid. Within thirty days after receipt of such notice, CFD No. 2006-1C shall determine the Partial Prepayment Amount in accordance with this Section I and shall provide written notice of such determination to the party. The Special Tax obligation of an Assessor's Parcel of Developed Property may be partially Prepaid only prior to or concurrent with the close of escrow of a sale of a Unit constructed on that Assessor's Parcel to the initial homebuyer. In addition, the Special Tax obligation may not be partially Prepaid by an initial or subsequent homebuyer.

2. Calculation of Partial Prepayment Amount

The Partial Prepayment Amount shall be calculated according to the following formula:

PP = PH x F

The terms above have the following meanings:


PP = the Partial Prepayment Amount PH = the Prepayment Amount calculated according to Section H F = the percent by which the Special Tax obligation is being partially Prepaid If the Partial Prepayment Amount is paid to CFD No. 2006-1C prior to issuance of Bonds, the amount representing the Present Value of Taxes attributable to the partial prepayment shall be deposited into a separate account held with the Authority to fund facilities authorized to be financed by CFD No. 2006-1C. If the Partial Prepayment Amount is paid to CFD No. 2006-1C after the issuance of Bonds, the amount representing the Present Value of Taxes attributable to the partial prepayment less the Reserve Fund Credit attributable to the partial prepayment shall be deposited into an appropriate account or fund established under the applicable trust agreement, indenture, or fiscal agent agreement and used to redeem Bonds. To the extent that there are amounts remaining after calling the maximum amount of Bonds possible, such amounts shall be used to pay debt service on the Bonds. The amount representing the partial Prepayment Administrative Fees attributable to the partial prepayment shall in either case be retained and used by CFD No. 2006-1C to pay or reimburse the Authority for Prepayment Administrative Fees.

3. Partial Prepayment Procedures and Limitations

With respect to any Assessor’s Parcel for which the Special Tax obligation is partially Prepaid, CFD No. 2006-1C shall indicate in the records of CFD No. 2006-1C that there has been a partial prepayment of the Special Tax obligation and shall prepare and cause a suitable notice to be recorded in compliance with the Act to indicate the partial prepayment of the Special Tax obligation and the partial release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such Prepaid portion of the Special Tax shall cease. If the Special Tax for the current Fiscal Year has been levied by the County but not yet been paid, CFD No. 2006-1C shall take one of the following actions in connection with a partial prepayment: (i) if it is feasible for CFD No. 2006-1C to notify the County and have the Special Tax for the Assessor's Parcel seeking partial prepayment adjusted on the tax roll prior to delinquency, CFD No. 2006-1C shall do so, and the full amount of the Partial Prepayment Amount shall be paid to CFD No. 2006-1C as part of the partial prepayment, or (ii) if adjusting the Special Tax on the tax roll for the Assessor's Parcel seeking partial prepayment is not feasible, then CFD No. 2006-1C shall direct the party wishing to partially prepay the Special Tax to (a) pay the County tax bill for the entire Fiscal Year directly to the County and provide CFD No. 2006-1C a receipt evidencing the payment, and (b) pay to CFD No. 2006-1C an amount equal to the Partial Prepayment Amount less that amount of the Special Tax paid directly to the County by the party wishing to partially prepay. A notice shall not be recorded with the County indicating payment of the Special Tax until after CFD No. 2006-1C receives the receipt for the payment of the current Fiscal Year taxes and the amount calculated pursuant to (b) above.

Notwithstanding anything to the contrary, no partial prepayment will be allowed unless, as reasonably determined by CFD No. 2006-1C (i) the amount of Special Taxes that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments in each future Fiscal Year on all Bonds that would remain outstanding if a corresponding portion of the Bonds were to be redeemed with such partial prepayment, and (ii) such partial prepayment will not impair the security of all then-outstanding Bonds. Such determinations shall include, among other factors, identification and consideration of all Assessors’ Parcels that are expected to become Exempt Property.


Section J: Termination of Special Tax CFD No. 2006-1C shall levy Special Taxes until the last series of Bonds are paid in full, provided that CFD No. 2006-1C shall not levy Special Taxes after Fiscal Year 2050/2051. In addition, CFD No. 2006-1C shall not levy any Special Taxes with respect to any Assessor’s Parcel for which the ongoing Special Tax obligation has been paid in full and a notice of cessation of Special Tax has been recorded in accordance with Section H. Section K: Exemptions CFD No. 2006-1C shall classify as Exempt Property (i) Assessor’s Parcels owned by the State of California, Federal or other local governments, (ii) any Assessor’s Parcels used as a place of worship and exempt from ad valorem property taxes because it is owned by a religious organization, (iii) Assessor’s Parcels used exclusively by a homeowners' association for non-residential purposes, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, as reasonably determined by CFD No. 2006-1C, (v) Assessor’s Parcels developed or expected to be developed exclusively for non-residential use, including any use directly serving any non-residential property, such as parking, as reasonably determined by CFD No. 2006-1C, and (vi) any other Assessor’s Parcels at the reasonable discretion of CFD No. 2006-1C, provided that no such classification would reduce the Acreage of all Taxable Property in a given Zone to less than the Minimum Net Taxable Acreage as shown in Table 3. Notwithstanding the above, CFD No. 2006-1C shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the Acreage of all Taxable Property in a given Zone to less than the Minimum Net Taxable Acreage for such Zone. Assessor's Parcels that cannot be classified as Exempt Property because such classification would reduce the Acreage of Taxable Property to less than the Minimum Net Taxable Acreage in a given Zone, will continue to be classified as Developed Property or Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

Table 3

Minimum Net Taxable Acreage

Zone Acres of Acreage

A 27.82 acres of Acreage

B 17.65 acres of Acreage

C 4.73 acres of Acreage

Section L: Claims Any property owner claiming that the amount or application of the Annual Special Tax in any particular Fiscal Year is not correct may file a written claim with CFD No. 2006-1C not later than twelve (12) months after having paid the first installment of the Special Tax for that Fiscal Year. Written claims must reference CFD No. 2006-1C and should be sent to the Saugus-Castaic School Facilities Financing Authority, c/o the Saugus Union School District, and to the attention of the Assistant Superintendent of Business Services. In order to be considered sufficient, any claim must: (i) specifically identify the property by address and Assessor's Parcel Number; (ii) state the amount in dispute and whether it is the whole amount or only a portion of the Special Tax; (iii) state all grounds on which the property owner is disputing the amount or application of the Special Tax,


including a reasonably detailed explanation as to why the amount or application of such Special Tax is incorrect; (iv) include all documentation, if any, in support of the claim; and (v) be verified under penalty of perjury by the person who paid the Special Tax or his or her guardian, executor or administrator. A representative(s) of the Authority ("Representative") will promptly review the claim, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the claim. The decisions of the Representative shall be final and binding. If the Representative's decision requires that the Special Tax for an Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s) as the Representative's decisions shall indicate. Section M: Manner of Collection The Annual Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-1C may collect Annual Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, including, without limitation, direct billing of the properties within CFD No. 2006-1C. Section N: Interpretation This Rate and Method of Apportionment may be interpreted at any time by the Authority in order to cure any ambiguity, inconsistency or omission, or to cure or correct any defective provision, contained in this Rate and Method of Apportionment, or in regard to matters or questions arising under this Rate and Method of Apportionment, as the Authority deems necessary or desirable, provided that such interpretation does not materially adversely affect the rights of the owners of Taxable Property within CFD No. 2006-1C. K:\CLIENTS2\SAUGUS_CASTAIC.JPA\Saugus\Financing Authority\Final Docs\RMA\RMA_FINAL_Redlined Version.doc


Exhibit A Zone Map of CFD No. 2006-1C (See Attachment)

~.------------SHEET 1 OF2

L

"EXHIBIT A" ZONE MAP OF THE RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF THE


LEGEND Proposed Boundaries of Community Facilities District No. 2006-1C

p;?Z/2Z/Zd Zone A

IXXXX>OOOOI Zone B

LftiZr,rJ ZoneC

Reference is hereby made to the Aa8eesor maps of the County of Los Angeles for

an exact description of the linea and dimensions of each lot and parcel.

PREPARED BY DOLINKA GROUP

J

~.-----------SHEET20F2 "EXHIBIT A" ZONE MAP

OF THE RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF THE


ZONE A

That portion of parcel 2 of Parcel Map 25802, as per map filed in book 338 pages 23 through 48 inclusive of Parcel Maps, in the office of the County Recorder of Los Angeles County lying northerly of the following described line: Beginning at the northerly terminus of that line on the westerly boundary of said parcel 2 with a bearing on north 20°27'45"west and length of 417.09 feet; thence, leaving said westerly boundary north 43°11 '05" east a distance of 351.05 feet; thence, south 74°26'39" east a distance of 683.95 feet; thence, north 09°05'49" east a distance of 949.26 feet to a point on the easterly line of said parcel 2.

ZONEB

That portion of parcel 2 of Parcel Map 25802, as per map filed in book 338 pages 23 through 48 inclusive of Parcel Maps, in the office of the County Recorder of Los Angeles County lying southerly of the following described line: Beginning at the northerly terminus of that line on the westerly boundary of said parcel 2 with a bearing on north 20°27'45"west and length of 417.09 feet; thence, leaving said westerly boundary north 43°11'05" east a distance of 351.05 feet; thence, south 7 4 °26'39" east a distance of 683.95 feet; thence, north 09°05'49" east a distance of 949.26 feet to a point on the easterly line of said parcel 2, but excluding therefrom all of the area within Zone C described below.

ZONEC

Beginning at the northerly terminus of a line on the westerly boundary of said parcel2 having a bearing of north 23°30'18" west and length of 210.54'; thence, leaving said westerly boundary north 80°13'57" east a distance of 541.87'; thence, south 49°31'10" east a distance of 597.35'; thence, south 35°10'59" west a distance of 442.80'; thence, south 55°01 '04" west a distance of 420.84' to a point on the northerly right of way of Alta Vista Avenue; thence, along the northerly line of Alta Vista Avenue and westerly line of parcel 2 to the point of beginning.

C-1

APPENDIX C

SUMMARY APPRAISAL REPORT

SUMMARY APPRAISAL REPORT

COVERING

Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority

(West Hills) DATE OF VALUE: SUBMITTED TO:

May 15, 2013 Saugus Union School District 24930 Avenue Stanford Santa Clarita, CA 91355

Attn: Cynthia Shieh Assistant Superintendent of Business

DATE OF REPORT: SUBMITTED BY:

June 12, 2013 Stephen G. White, MAI 1370 N. Brea Blvd., Suite 255 Fullerton, CA 92835

June 12, 2013 Saugus Union School District Re: Community Facilities District No. 2006-1C 24930 Avenue Stanford (West Hills) Santa Clarita, CA 91355 Attn: Cynthia Shieh Assistant Superintendent of Business Dear Ms. Shieh: In accordance with your request and authorization, I have completed an appraisal of the taxable property within the above-referenced Community Facilities District (CFD). The taxable properties consist of a total of 326 single-family lots that are comprised within four different product types of homes, of which one product type is built and sold-out and the other three are currently under construction. More specifically, the taxable properties to be appraised are summarized by product type name and builder as follows:

Milan (KB Home): 43 completed-sold homes Highgate (D.R. Horton): 3 completed-unsold homes (models), 18 homes under construction, 58

vacant lots Belmont (D.R. Horton): 3 completed-unsold homes (models), 16 homes under construction, 72 vacant

lots Monument (D.R. Horton): 4 completed-unsold homes (models), 16 homes under construction, 93

vacant lots The purpose of this appraisal is to estimate the separate aggregate market values of the as is condition of each of these four product types, reflecting the status of completed homes, homes under construction and vacant lots as of the date of value. The appraised values are also allocated to developed property (lots with a building permit) and undeveloped property (vacant lots without building permits), and allocated by ownership (individual homeowners for Milan or the builder for the other three product types). In addition, the appraised values reflect the proposed CFD bond financing together with the effective tax rates of approximately 2.0%, including special taxes for this CFD and other overlapping debt. Based on the general inspections of the subject properties and analysis of matters pertinent to value, the following conclusions of market value have been arrived at, subject to the Assumptions and Limiting Conditions, and as of May 15, 2013:

MS. CYNTHIA SHIEH JUNE 12, 2013 PAGE 2

No. Product Type (Builder) Lots Developed Undeveloped Total Milan (KB Home)

Individual Homeowners: 43 $28,380,000 $0 $28,380,000 Highgate (D.R. Horton)

D.R. Horton Ownership: 79 $7,470,000 $6,470,000 $13,940,000 Belmont (D.R. Horton)

D.R. Horton Ownership: 91 $7,280,000 $8,750,000 $16,030,000 Monument (D.R. Horton)

D.R. Horton Ownership: 113 $8,785,000 $12,235,000 $21,020,000

TOTALS 326 $51,915,000 $27,455,000 $79,370,000

(SEVENTY-NINE MILLION THREE HUNDRED SEVENTY THOUSAND DOLLARS)

(Note: The Individual Homeowners category represents completed-sold homes, and the D.R. Horton Ownership category represents completed-unsold homes which comprise the models, homes under construction and vacant lots.)

The following is the balance of this 47-page Summary Appraisal Report which includes the Certification, Assumptions and Limiting Conditions, definitions, property data, exhibits, valuation and market data from which the value conclusions were derived. Sincerely, Stephen G. White, MAI (State Certified General Real Estate Appraiser No. AG013311)

SGW:sw Ref: 13010B

TABLE OF CONTENTS PAGES Certification……………………………………………………………... 5 Assumptions and Limiting Conditions………………………………….. 6-7 Purpose and Intended Use/User of the Appraisal, Scope of the

Appraisal, Date of Value, Property Rights Appraised, Definitions ………………………………………………………. 8-9

GENERAL PROPERTY DATA Location Map, Location, Description of Surroundings, Map

of West Hills, Overview of West Creek/West Hills, Streets and Access, Utilities, Zoning/Approvals, Drainage/Flood Hazard, Topography/Views, Soil/Geologic/ Seismic Conditions, Environmental Conditions, Title Report, Residential Market Overview, Highest & Best Use……………… 10-18

MILAN (KB HOME)………………….….………….……….…….….…….… 19-24 HIGHGATE (D.R. HORTON)……………………..…………..……….……… 25-32 BELMONT (D.R. HORTON)…………………..…..……….…..…….…….….. 33-38 MONUMENT (D.R. HORTON) ….…….……………………………………… 39-44 ADDENDA Qualifications of Appraiser……………………………………………… 45-47

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CERTIFICATION

I certify that, to the best of my knowledge and belief:

The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions.

I have no present or prospective interest in the properties that are the subject of this

report, and no personal interest with respect to the parties involved.

I have no bias with respect to the properties that are the subject of this report or to the parties involved with this assignment.

My engagement in this assignment was not contingent upon developing or reporting

predetermined results.

My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal.

I have made a general inspection of the properties that are the subject of this report.

No one provided significant real property appraisal assistance to the person signing this Certification, other than data research by my associate, Kirsten Patterson.

I have not performed a previous appraisal of the subject properties within the three years prior to this assignment.

The reported analyses, opinions, and conclusions were developed, and this report has

been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

The use of this report is subject to the requirements of the Appraisal Institute relating to

review by its duly authorized representatives. As of the date of this report, I have completed the requirements of the continuing education program of the Appraisal Institute. Stephen G. White, MAI (State Certified General Real Estate Appraiser No. AG013311)

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ASSUMPTIONS AND LIMITING CONDITIONS This appraisal has been based upon the following assumptions and limiting conditions:

1. No responsibility is assumed for the legal descriptions provided or for matters pertaining to legal or title considerations. Title to the properties is assumed to be good and marketable unless otherwise stated.

2. The properties are appraised free and clear of any or all liens or encumbrances unless

otherwise stated.

3. Responsible ownership and competent property management are assumed.

4. The information furnished by others is believed to be reliable, but no warranty is given for its accuracy.

5. All engineering studies, if applicable, are assumed to be correct. Any plot plans or

other illustrative material in this report are included only to help the reader visualize the property.

6. It is assumed that there are no hidden or unapparent conditions of the properties,

subsoil, or structures that render them more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them.

7. It is assumed that the properties are in full compliance with all applicable federal,

state and local environmental regulations and laws unless the lack of compliance is stated, described and considered in the appraisal report.

8. It is assumed that the properties conform to all applicable zoning and use regulations

and restrictions unless a nonconformity has been identified, described and considered in the appraisal report.

9. It is assumed that all required licenses, certificates of occupancy, consents and other

legislative or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in the report are based.

10. It is assumed that the use of the land and improvements is confined within the

boundaries or property lines of the properties described and that there are no encroachments or trespasses unless noted in the report.

11. Unless otherwise stated in this report, the existence of hazardous materials, which

may or may not be present on the properties, was not observed by the appraiser. However, the appraiser is not qualified to detect such substances. The presence of such substances may affect the value of the property, but the values estimated in this

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ASSUMPTIONS AND LIMITING CONDITIONS, Continuing appraisal are based on the assumption that there is no such material on or in the properties that would cause a loss in value. No responsibility is assumed for such conditions or for any expertise or engineering knowledge required to discover them. The client should retain an expert in this field, if desired.

12. Possession of this report, or a copy thereof, does not carry with it the right of publication, unless otherwise authorized. It is understood and agreed that this report will be utilized in the Preliminary Official Statement and the Official Statement, as part of the CFD bond issuance.

13. The appraiser, by reason of this appraisal, is not required to give further consultation or testimony or to be in attendance in court with reference to the properties in question unless arrangements have previously been made.

14. The appraiser obtained the estimated costs to complete to get the lots to finished condition in the Highgate, Belmont and Monument product types from D.R. Horton, and these costs are integral in the valuation analyses and have been relied upon as being reasonably accurate and reliable.

15. The appraiser relied upon the Market Absorption Study prepared by Empire Economics, Inc. dated May 28, 2013 (Revised June 12, 2013) for the projected product pricing and absorption for the Highgate, Belmont and Monument product types.

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PURPOSE AND INTENDED USE/USER OF THE APPRAISAL

The purpose of this appraisal is to estimate the aggregate market value by product type of the taxable property located within Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (West Hills), reflecting the proposed CFD bond financing. It is intended that this Summary Appraisal Report is to be used by the client, the financing team and others as required as part of the CFD bond issuance.

SCOPE OF THE APPRAISAL

It is the intent of this appraisal that all appropriate data considered pertinent in the valuation of the subject properties be collected, confirmed and reported in a Summary Appraisal Report, in conformance with the Uniform Standards of Professional Appraisal Practice and the guidelines of the California Debt and Investment Advisory Commission. This has included a general inspection of the subject properties and their surroundings; obtaining of pertinent property data on the subject properties, including review of various maps and documents relating to the properties and the existing and planned home development; researching recent comparable land sales and home sales from a variety of sources; review of the Market Absorption Study dated May 28, 2013 by Empire Economics, Inc.; and analysis of all of the data to the value conclusions.

DATE OF VALUE

The date of value for this appraisal is May 15, 2013.

PROPERTY RIGHTS APPRAISED

This appraisal is of the fee simple interest in the subject properties, subject to the CFD special tax and assessment liens.

DEFINITION OF MARKET VALUE

The most probable price that the specified property interest should sell for in a competitive market after a reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under duress. (The Dictionary of Real Estate Appraisal, Fifth Edition)

DEFINITION OF FINISHED LOT

This term describes the condition of residential lots in a single-family subdivision for detached homes in which the lots are fully improved and ready for homes to be built. This reflects that the lots have all development entitlements, infrastructure improvements completed, finish grading completed, all in-tract utilities extended to the property line of each lot, street improvements completed, common area improvements/landscaping (associated with the tract) completed, resource agency permits (if necessary), and all

9

DEFINITION OF FINISHED LOT, Continuing development fees paid, exclusive of building permit fees, in accordance with the conditions of approval of the specific tract map.

DEFINITION OF BLUE-TOP LOT

This term describes residential lots in a single-family subdivision for detached homes in which the lots and streets have been rough graded, and the offsite infrastructure of streets and utilities are completed to the tract, but not within the tract.

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LOCATION MAP

11

GENERAL PROPERTY DATA LOCATION

The subject properties are located westerly of Copper Hill Dr., extending southerly from West Hills Dr. to Alta Vista Ave. This location is in unincorporated Los Angeles County area, nearby to the northwest of the City of Santa Clarita, and with a Valencia mailing address. This location is also ±2 miles easterly of the I-5 Freeway and ±7 miles northwest of Highway 14.

DESCRIPTION OF SURROUNDINGS

The subject property is part of the master-planned community of West Creek/West Hills, which is located on both sides of Copper Hill Dr. west of the San Francisquito Creek and southwesterly of Tesoro del Valle Dr. The West Hills portion of the community, including the subject properties in this appraisal, lies to the west and northwest of Copper Hill Dr. and the West Creek portion of the community lies to the southeast of Copper Hill Dr. To the northeast and east of the northerly portion of the subject properties is the balance of the West Hills community, including the West Creek Academy elementary school. A neighborhood of homes called Castillo was built and sold by Lennar from 2007 to 2011, the product type called Mosaic by Lennar has just recently opened for sale, and there are many vacant lots remaining for future development. In addition, there is a 220-unit apartment complex called Vistas of West Hills that was built in 2009. Beyond West Hills to the north and northeast is the master-planned community of Tesoro del Valle which has been developed in recent years. It comprises a total of nearly 1,100 homes ranging from detached condos up to estate homes on large lots. The homes range in size from about 1,500 s.f. to just over 5,000 s.f. within 10 different tracts or product types. The community also includes an elementary school, two large parks, a recreation center with clubhouse, pools, spa, sport courts and lake, athletic fields, a historical site/museum and open space along San Francisquito Creek. Adjacent to the east of the southerly part of the subject properties, along the westerly side of Copper Hill Dr., is Fire Station 156 of the Los Angeles County Fire Department and to the south of this is vacant land planned to be developed with the ±45,000 s.f. West Hills Plaza retail center. Across Copper Hill Dr. to the east and northeast is the West Creek part of the community which includes many completed homes, homes under construction and land for future development, as well as the Tesoro Village retail center and Rio Norte Junior High School. Beyond West Creek to the south is a neighborhood of townhomes, detached condos and single-family homes built from 2000 to 2002.

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DESCRIPTION OF SURROUNDINGS, Continuing

To the southwest and west of the subject properties are the Rye Canyon Business Park and the Mann Biomedical Park which are situated on the former ±375-acre Lockheed campus and include industrial, manufacturing, warehouse, R&D and office components. In summary, the subject properties are located in a newer residential area at the northerly end of the Santa Clarita Valley that has been developing over the past 10 years.

OVERVIEW OF WEST CREEK/WEST HILLS

West Creek/West Hills is a 966-acre community that was master-planned by The Newhall Land and Farming Company. Thus far, most of the homes have been built by Lennar Homes of California, but the four product types in the portion of West Hills covered by this appraisal have been or are being built by KB Home and D.R. Horton. The community is expected to comprise a total of approximately 2,300 dwelling units upon build-out, plus two large neighborhood retail centers, two schools, plus parks, open space and many other recreation amenities. The residential product includes the wide range of small to large single-family detached homes, attached townhomes, and a 220-unit apartment complex. There will be two retail centers including the ±74,000 s.f. Tesoro Village center built in 2005 and the future West Hills Plaza planned for ±45,000 s.f. of retail space. The Rio Norte Junior High School was completed in 2003 and the West Creek Academy elementary school opened in 2010. Recreational amenities include a 17-acre community park, a small village park, three private recreation centers with pools, paseo paths, the San Francisquito Creek trail, and nearly 483 acres of permanent open space. There is also a pedestrian bridge over Copper Hill Dr. near West Creek Dr. for access between the West Creek and West Hills areas. The West Creek area is located on the east and southeast side of Copper Hill Dr. It currently has two different product types of detached homes that are under construction called Toscana and Lavello, and three neighborhoods that have recently sold out including two townhome projects called Artisan and Esperto, and a tract of detached condos called Aria. In addition, the Artenati, Estrella and Patina projects are built-out, the Sonrisa and Claridad townhome projects are planned for future development, and there are several other Planning Areas consisting of vacant land that are planned for future development of detached homes. The West Creek Community Park comprises the circular park in the center of the community with large grass areas, playground, basketball/sport court, covered picnic areas and walking trails. In addition, it includes The Club at West Creek with the recreation center building and fenced areas with several pools and barbecue areas.

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OVERVIEW OF WEST CREEK/WEST HILLS, Continuing The West Hills area is located on the northwesterly side of Copper Hill Dr. and primarily will be a gated community of detached homes terracing up the hills to the north and west, except for the existing apartment complex and the retail site along Copper Hill Dr. that are not within the gated area. Two product types of homes called Castillo and Milan have been completed, and there are four active projects currently being built including Mosaic by Lennar Homes and Belmont, Highgate and Monument at West Hills by D.R. Horton. In addition, there are various remaining vacant lots in near finished condition which are planned for future development. It is noted that the southwesterly portion of West Hills is the subject of this appraisal and comprises a total of 326 single-family lots within four different product types of existing and/or planned homes.

STREETS AND ACCESS

The primary access to the subject properties is by West Hills Dr. at the northerly end and Alta Vista Ave. at the southerly end. Then, the in-tract streets of Iron Village Dr., Farrier Dr. and Blacksmith Dr. form a loop access that connects through the community from West Hills Dr. to Alta Vista Ave. These primary streets have been constructed but other in-tract streets are in only rough graded condition at this point in time. The overall community is gated on West Hills Dr. several blocks northwesterly of Copper Hill Dr., and also on Blacksmith Dr. nearby to the northeast of Alta Vista Ave.

UTILITIES

All utilities are available to the community, and have been or will be installed in the major streets and in-tract streets as part of the development of the community. The utilities are provided as follows: Water: Valencia Water Company Sewer: Los Angeles County Sanitation District Electric: Southern California Edison Gas: Southern California Gas Telephone: AT&T Cable: Time Warner Cable/AT&T

ZONING/APPROVALS

The subject properties are zoned RPD or Residential Planned Development which generally permits the existing and planned single-family residential development on the subject lots. The more specific approvals for the development are by final Tract Map No. 52455-03 recorded in Book 1364, Pages 22 through 66 in the Office of the County Recorder of Los Angeles County, and Vesting Tract Map No. 52455-14 (for the 6 lots in the Monument product type) which has been approved and is anticipated to record in July or August 2013.

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DRAINAGE/FLOOD HAZARD Drainage is along the in-tract streets and in master-planned facilities that have been or will be constructed throughout the community. The overall drainage is in accordance with the topography of the area, being to the south and southeast toward San Francisquito Creek. Per FEMA Flood Insurance Rate Map Nos. 065043 0805F dated 9/26/08, the subject property is in Zone D which is outside of the 100-year floodplain.

TOPOGRAPHY/VIEWS

The lots in the West Hills area generally slope and terrace up to the north and northwest from Copper Hill Dr. Thus, some of the peripheral subject lots have good views of the Santa Clarita Valley to the south, and some other lots have territorial views of nearby hills and canyons.

SOIL/GEOLOGIC/SEISMIC CONDITIONS Per information provided by the builder/developer and applicable to all of the West Creek/West Hills community, all landslides and oil wells that needed to be mitigated are part of the Mitigation Monitoring Report and were part of the grading plan. It was also indicated that the community is in the influence of the Alquist-Priolo special studies zone, as there is an Earthquake Fault Zone running northwest-southeast through the area about a mile or more to the southwest. This appraisal has assumed that all grading has been properly completed and that there are no abnormal soil or geologic conditions that would affect the development of the lots as existing and planned.

ENVIRONMENTAL CONDITIONS Per information provided by the builder/developer and applicable to all of the West Creek/West Hills community, all required environmental permits have been obtained including the certification of the Environmental Impact Report. Due to the close proximity to the San Francisquito Creek, the required U.S. Army Corps of Engineers 404 Permit, California Department of Fish and Game 1603 Permit and California Regional Water Quality Control Board 401 Permit were obtained. In addition, a planting plan was instituted for native tree mitigation.

TITLE REPORT A Preliminary Report by First American Title Company dated January 27, 2011 covering 13 of the Milan product type lots was reviewed. Pertinent exceptions to title included the lien of special tax for Community Facilities District 2006-1C as recorded February 25, 2008; CC&R’s; various easements for utilities; and dedications as shown on the tract map for easements for utilities and flood control.

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TITLE REPORT, Continuing In addition, a Preliminary Report by First American Title Company dated March 9, 2012 covering all lots in the Highgate, Belmont and Monument product types was reviewed. Pertinent exceptions to title included the lien of special tax for Community Facilities District 2006-1C as recorded February 25, 2008; various easements for utilities including roadway accesses and slopes, water tank site and flood control purposes; and other dedications as shown on the tract map for various easements for utilities. It is noted that these exceptions are fairly typical for residential subdivisions and have been incorporated into the tract maps so as to provide for the lots to be developable with homes. It is also assumed that there are no other exceptions to title which would have a negative effect on the existing or planned homes.

RESIDENTIAL MARKET OVERVIEW

In general, the residential market throughout Los Angeles County has been improving during late 2012 and early 2013, as reflected by higher volumes of home sales as well as increasing median prices. The improving market conditions are due to higher demand which is driven in large part by low interest rates and a relatively low supply of available homes which results in an upward push on prices. Recovery in the economy and returning consumer confidence has brought many first time homebuyers back into the market, as well as existing homeowners with equity in their homes who are able to purchase a larger and higher priced home while taking advantage of low interest rates. However, investors with cash continue to provide stiff competition for the average mortgage-dependant buyer as lending standards remain tight. Discounted short sales and foreclosures now comprise a smaller share of overall sales, resulting in higher median prices. These improving market conditions are evident by a 9.7% increase in sales volume in Los Angeles County from April 2012 to April 2013 and a 27.4% increase in median prices over that same period, per statistics compiled by DataQuick. The improving market conditions have also been evident specifically in Valencia. In the subject zip code of 91354, statistics compiled by DataQuick indicate a total of 20 single-family home sales for April 2013 with a median price of $420,000, which is 8% higher than the median price for April 2012. A study by First Team Real Estate for single-family homes in the same Valencia zip code indicates that the active inventory (available homes) as of a month ago was 47, which was 18% higher than 6 months prior but 50% lower than a year prior. In addition, the pending and sold inventory of 91 homes as of a month ago was 6% higher than 6 months prior and just 1% higher than a year prior. Lastly, the average

17

RESIDENTIAL MARKET OVERVIEW, Continuing sale price of $432,329 as of a month ago was similar to that of 6 months prior but 10% higher than a year prior. Homebuilders are also trying to keep up with demand for new homes in the Santa Clarita Valley. As discussed later in this report relating to recent residential land or bulk lot sales, D.R. Horton purchased 283 lots in the West Hills community in April 2012; KB Home purchased 43 lots in May 2011 in the West Hills community and 54 lots in September 2012 in the River Village community; The New Home Company purchased 315 lots in October 2012 along Soledad Canyon Rd. just to the south of the River Village community; and Williams Homes purchased 137 lots in May 2013 along Soledad Canyon Rd. near Whites Canyon Rd. and 79 lots in July 2012 on Sierra Hwy. near Golden Valley Rd. These sales reflect significant builder demand for large bulk acquisitions of vacant lots, typically with multiple bidders for the sites, and also reflecting post-recession lot prices. In addition, home sales have opened on most of these new-home communities, with strong buyer interest, good sales activity, and price increases with additional phase releases. This surge in new home construction is reflected nationally with new home starts at a seasonally adjusted rate of 1,021,000 for March 2013 which is approximately 31% higher from March 2012, and the highest level seen since June 2008 according to the U.S. Department of Housing and Urban Development and the Census Bureau. While new home starts were slightly lower in April 2013 than the month prior, it was still 13.1% higher than April 2012. In addition, the number of building permits issued in April 2013 were 14.3% higher than the month prior and 35.8% higher than April 2012. In summary, the residential market has seen significant improvement both on a national scale and at the local level within Los Angeles County and the Santa Clarita Valley.

HIGHEST AND BEST USE The term highest and best use is defined as the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. Furthermore, the highest and best use of land or a site as though vacant is defined as among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination.

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HIGHEST AND BEST USE, Continuing In terms of legal permissibility, the existing and planned residential development of the subject product types is permitted by the zoning as well as by the entitlements represented by the recorded tract map and the approved tentative tract map for the 6 lots. In terms of physical possibility, existing and planned residential development is possible due to the graded lots with all or most infrastructure of streets, utilities and drainage facilities completed. In terms of the financial feasibility and maximum productivity, it is noted that there was good sales activity in the recent builder sell-out of the Milan product type, in which the 43 home sales closed from November 2011 through October 2012. In addition, there has been strong buyer interest and good recent sales activity in the first releases of the Highgate, Belmont and Monument product types with price increases projected for future phases. The feasibility is also indicated by the Market Absorption Study dated May 28, 2013 that was completed by Empire Economics, Inc., which projects that during 2013 the housing market has moved into a recovery phase, with the return of employment growth, although at a moderate level. In addition, normal market conditions are anticipated during 2014-2015+ with employment increasing at a moderate rate, enabling the housing market to return to its “historical” rate of price appreciation. Lastly, the Santa Clarita Valley is regarded as being a relatively strong local economy in California, based upon its low unemployment rate which positions it for a housing recovery. Reflecting these market conditions, the absorption study projects total closed builder sales for the Highgate, Belmont and Monument homes of 54 in 2013, 108 in 2014 and sell-out of 92 in 2015. Thus, the study by Empire Economics indicates a fairly good demand for these subject product types in the near-term future. Lastly, it is noted that there has been strong builder interest in the limited amount of residential land/bulk lots that have come onto the market in the Santa Clarita area. This has resulted in multiple bidders and fairly aggressive prices paid for the land. In summary, I have concluded that the highest and best use for the subject properties is as improved for the completed homes, and as proposed for the homes under construction and the vacant lots.

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MILAN (KB HOME) PROPERTY DATA

Location This product type is located along both sides of Iron Village Dr. southeasterly of West Hills Dr. and extending to and along both sides of the Bellows Court cul-de-sac. Record Owner/Ownership History As of the May 15, 2013 date of value, individual homeowners owned all 43 of the homes. The sales of the 43 completed homes from KB Home Coastal Inc. to the homeowners closed from November 2011 through October 2012 at indicated prices (per Assessor) ranging from $538,500 to $778,000. Thus far there have been no subsequent resales. Legal Description The 43 lots comprising this product type are described as Lots 207 to 249 of Tract No. 52455-03.

Assessor Data-2012/13 This product type comprises Assessor Parcel Nos. 2810-131-010 to 036, 041 to 046, 051 to 061 & 074 to 077 (it is noted that five of the lots comprise two assessor parcels). The current assessed values range from $5,000 to $639,505 or an average of $328,755. It is noted that the low assessed values reflect the small second parcels comprising one lot, and the low average assessed value reflects many parcels for which the assessed values do not yet include the completed home construction. The tax rate areas are 15-507, 15-508 and 15-509 with indicated tax rates of 1.182733% and 1.205156%, but the total or effective tax rate, including special taxes for this CFD, is approximately 2.0%. No. of Lots/Lot Sizes/Views This product type comprises a total of 43 single-family residential lots, typically considered as ±5,000 s.f. minimum size. The actual lot sizes range from 5,150 s.f. to 8,866 s.f., or an average of 6,082 s.f., including some side and/or rear slope areas. In terms of views, most of the lots back to open space with no significant views, and only a few of the most southwesterly lots on the southeasterly side of Iron Village Dr. have good views to the south/southwest.

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PROPERTY DATA, Continuing Existing Development These 43 lots have been developed by KB Home with a product type of homes called Milan. Construction of the homes began in mid 2011 and was completed by Fall 2012. Thus as of the May 15, 2013 date of value, there were 43 completed homes all of which had been sold by the builder with the last sale closing in October 2012. The three floor plans comprising the Milan product type are as follows:

Plan 1: 2,941-3,175 s.f., two-story, with 3 bedrooms, 2½ baths, game room, den, great room and flex area with a covered front porch and 3-car tandem garage; options include bedrooms 4 & 5, baths 3, 4 & 5, guest room, and super laundry/craft room. Plan 2: 3,413-3,600 s.f., two-story, with 4 bedrooms, 2½ baths, loft, den, family room, dining room, flex area and a 3-car tandem garage; options include bedrooms 4, 5 & 6, baths 3 & 4, guest room, great room and princess suite. Plan 3: 3,655-4,037 s.f., two-story, with 4 bedrooms, 3½ baths, loft, den, living room, great room and a 3-car tandem garage; options include bedrooms 5, 6 & 7, bath 4, junior suite, sun room, super laundry/craft room and garage workshop.

Per building permit data, the 43 completed homes range in size from 2,941 s.f. to 4,037 s.f. or an average of 3,546 s.f.

VALUATION

Method of Analysis The analysis of the completed-sold homes is of the aggregate value and on a mass appraisal basis by means of the Sales Comparison Approach. Primary consideration is given to the recent builder sales and to any recent resale activity of the subject homes, and secondary consideration is given to recent home sales in other reasonably similar neighborhoods in nearby areas. Analysis of 43 Completed Homes

The builder sales of these 43 homes closed from November 18, 2011 through October 1, 2012 at prices (per Assessor) ranging from $538,500 to $778,000 or an average of ±$630,000, for the average home size of 3,546 s.f. It is uncertain whether there were builder incentives or concessions reflected in these sale prices, but at that point in time they likely would have been fairly minimal. Considering only the 25 sales that closed in 2012, the average sale price is somewhat higher at ±$649,000, but also for a slightly larger average home size of 3,585 s.f. Alternatively, considering only the most recent 12 sales that closed from July 2012

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VALUATION, Continuing and forward, the average sale price is fairly similar at ±$648,000 and for a similar average home size of 3,584 s.f. Reflecting the significant upward value trend that has been occurring over the past year and more, the indication at $630,000 supports a far lower limit at current date as an average for all 43 homes. In addition, the indications at $648,000 and $649,000 are concluded to support closer but still firm lower limit indications as an average at current date, due to the upward time adjustment being more than offsetting to the slightly larger average home sizes of these samples of sales than the average of all 43 homes. As previously indicated, there have been no closed resales of the subject Milan homes, and there have been no past listings or current listings of homes for sale. As discussed next and later in this report, the base pricing of the Highgate homes indicates an average of ±$629,000 for an average home size of 2,815 s.f., the base pricing of the Belmont homes indicates an average of ±$670,000 for an average home size of 3,387 s.f., and the base pricing of the Monument homes indicates an average of ±$731,000 for an average home size of 3,783 s.f. The indication from the Highgate homes would tend to support a far lower limit at $629,000 as an average for the Milan homes due to the much smaller average size and similar lot sizes. However, the average for the Belmont homes would tend to support a close indication to close upper limit at $670,000 for the Milan homes due to the slightly smaller average size but the larger lot sizes. Lastly, the indication from the Monument homes at $731,000 supports a far upper limit due to the much larger homes and on much larger lots. Next, the recent builder sales by KB Home of the Milan product in the River Village community have been considered, which are located about four miles to the southeast of West Hills. It is noted that there are only 9 of these Milan homes in River Village, and only comprising the Plan 2 and 3 homes from the West Hills product. It is also noted that while the base pricing had been $625,990 to $640,990, actual sale prices were much higher due to significant options and lot premiums. The first 5 closed sales that took place in May 2013 indicated prices from $658,500 to $776,500 or an average of $713,000, but for an average home size of 3,912 s.f. Thus, considering the much larger average home size as well as the much larger lot sizes in River Village, the indication at $713,000 supports a far upper limit as an average for the subject 43 Milan homes.

Lastly, recent resales of homes from other reasonably similar neighborhoods in the nearby area have been considered, and only standard sales were included in the research. First, sales from the nearby Tesoro del Valle community have been considered, with the pertinent data shown on the following page:

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VALUATION, Continuing

Rec. Home Year Lot No. Address Date Price Size Built Size Remarks

1 29306 Las Brisas Rd. 5/16/13 $725,000 3,708 2004 6,115 Huntington Collection; upgraded/good

condition; view

2 23937 Rustico Ct. Pending ±$650,000 3,066 2004 8,675 The Ranch; upgraded/good condition

3 29308 Hacienda Ranch Pending $825,000 4,005 2003 8,572 Encanto; highly upgraded/good condition; pool; outdoor kitchen; view ±$733,000 3,593

It is evident that the average size of 3,593 s.f. is only slightly larger than the average of 3,546 s.f. for all 43 Milan homes. However, these sales are superior on average in terms of the view to two of the homes, the upgraded to highly upgraded condition, and the larger lot sizes. These superior factors are far more than offsetting to the age of the homes which are about 8 years older than the subject homes. Thus, the indication at $733,000 supports a far upper limit as an average for the 43 Milan homes. In addition, Data No. 2 supports a firm lower limit at $650,000 due to the much smaller size and only partially offset by the much larger lot size. Next, resales from the Heirloom product type within the gated westerly part of the River Village community have been considered, and these are shown as follows:

Rec. Home Year Lot

No. Address Date Price Size Built Size Remarks

1 26514 Craftsmen Ct. 2/26/13 $640,000 3,512 2008 6,033 Upgraded/good condition; view

2 26559 Millhouse Dr. 3/27/13 $660,000 3,396 2007 5,798 Good condition; outdoor kitchen; view

3 26526 Craftsmen Ct. 4/18/13 $640,000 3,396 2008 5,900 Upgraded/good condition; view

4 26542 Craftsmen Ct. 4/30/13 $675,000 3,396 2007 10,276 Good condition; pool/spa; outdoor kitchen ±$654,000 3,425

It is evident that the average size of 3,425 s.f. is smaller than the average of 3,546 s.f. for all 43 Milan homes. The lot sizes tend to be fairly similar to the subject homes, the views of these homes are relatively minor, and the condition appears to be fairly similar to the typical or assumed condition of the subject homes. Thus, the indication at $654,000 supports a close lower limit as an average for the subject 43 homes. Conclusion of Value In summary, the indications of average value for the 43 subject homes are far lower limits at $629,000 and $630,000, closer but still firm lower limits from $648,000 to $650,000, a close lower limit at $654,000, a close indication to close upper limit at $670,000, and far upper limits from $713,000 to $733,000. The conclusion is an

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VALUATION, Continuing average value of $660,000 for the 43 completed subject homes, which results in the following:

43 completed homes @ $660,000 = $28,380,000 Thus, as the result of this analysis, I have arrived at the following conclusion of aggregate market value for the subject Milan at West Hills product type, subject to the Assumptions and Limiting Conditions, and as of May 15, 2013:

$28,380,000

(TWENTY-EIGHT MILLION THREE HUNDRED EIGHTY THOUSAND DOLLARS)

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HIGHGATE (D.R. HORTON) PROPERTY DATA

Location This product type is located along both sides of Iron Village Dr., extending southerly from near Bellows Court.; along both sides of Shadow Ridgecourt and Stonegate Court cul-de-sacs; and on both sides of Farrier Dr. extending a short distance southwest from Iron Village Dr. Record Owner/Ownership History As of the May 15, 2013 date of value, all 79 lots were owned by D.R. Horton Los Angeles Holding Company, Inc. They acquired these 79 lots from The Newhall Land and Farming Company in April 2012 as part of the 283-lot bulk purchase that includes the Belmont and Monument product types at an indicated price of $19,500,000. Legal Description The 79 lots comprising this product type are described as Lots 177 to 206, 250 to 271 & 285 to 311 of Tract No. 52455-03. Assessor Data-2012/13 The 79 lots comprising this product type include the following Assessor Parcel Nos.:

2810-129-012, 013 & 027 to 049 2810-130-001 to 049 2810-131-001 to 009 & 062 to 071

It is noted that several of the subject lots comprise two assessor parcels. The current assessed values range from $1,027 to $87,043 or an average of $71,870. It is noted that the very low assessed values are from small parcels that comprise part of a lot, and also that the assessed values do not yet reflect the status of home construction. The tax rate areas are 15508 and 15509 with indicated tax rates of 1.182733% and 1.205156%, but the total or effective tax rate, including special taxes for this CFD, is projected by the builder to be approximately 2.0%. No. of Lots/Lot Sizes/Views This product type comprises a total of 79 single-family residential lots, typically considered as ±5,000 s.f. minimum size. The actual lot sizes range from 5,367 s.f. to 14,345 s.f., or an average of 7,010 s.f., including side and/or rear slopes. In terms of views, there are a limited number of the lots that back to a southerly exposure with a grade differential above adjacent lots that have good views to the south.

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PROPERTY DATA, Continuing Planned Development/Status of Construction These lots are being developed by D.R. Horton with a product type of homes called Highgate at West Hills. As of the May 15, 2013 date of value, there were 3 completed-unsold homes (the models), 18 homes under construction, and 58 vacant lots ranging from graded blue-top to near finished condition. Of the 18 homes under construction, 9 were estimated to be ±60-70% completed and 9 were estimated to be ±30-40% completed. (Note: The Developed Property comprises the 3 completed-unsold homes and the 18 homes under construction which are Lots 198 to 206, 250 to 258 and 261 to 263 or Assessor Parcel Nos. 2810-130-022 to 026 & 029 to 031 and 2810-131-001 to 009 & 062 to 071. The Undeveloped Property comprises the 58 vacant lots which are Lots 177 to 197, 259, 260, 264 to 271 & 285 to 311 or Assessor Parcel Nos. 2810-129-012, 013 & 027 to 049, 2810-130-001 to 021, 027, 028 & 032 to 049.) There are three floor plans of homes which are described as follows:

Plan 1: 2,638 s.f., two-story, with 3 bedrooms, 3½ baths, bonus room, study, great room, dining room and a 2-car garage; optional bedroom 4 & 5. Plan 2: 2,763 s.f., two-story, with 4 bedrooms, 3½ baths, loft, great room, formal dining room, nook and a 2-car garage with bonus space; optional bedroom 5. Plan 3: 2,994 s.f., two-story, with 3 bedrooms, 3½ baths, bonus room, study, craft room, formal dining room, great room, nook and a 2-car garage with bonus storage; optional bedrooms 4 & 5 and loft.

Per building permit data, the 3 completed homes are sizes of 2,631 s.f., 2,763 s.f. and 2,994 s.f., or an average of 2,796 s.f.

VALUATION

Method of Analysis The analysis of the completed-unsold homes (models) is of the aggregate value by means of the Sales Comparison Approach. Primary consideration is given to the current pricing and pending builder sales activity on these Highgate homes, and secondary consideration is given to other new-home sales activity in the West Hills community and in the River Village community as previously discussed. For the homes under construction, a simplified Cost Approach is used in which the value is based on an estimate of construction costs expended plus the estimated value of the vacant lot as if in finished condition. The analysis of the vacant lots is based on the Sales Comparison Approach, considering recent sales of residential land or bulk lots from the general area in comparison to the subject property. The value of finished lot condition is first estimated, then a deduction is made for the estimated remaining

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VALUATION, Continuing costs to complete or costs to get the lots to a fully finished condition, resulting in a value indication of the as is condition. Analysis of 3 Completed-Unsold Homes (Models) These are the 3 completed model homes that include one of each floor plan. It is first noted that the base pricing for these homes was $608,000, $622,000 and $651,000 or an average of $627,000. However, as of the May 15, 2013 date of value, the more specific pricing that included options/upgrades and lot premiums was $640,795 for Plan 1, $622,625 for Plan 2 and $704,835 for Plan 3, or an average of ±$656,000. There has been strong buyer interest in these homes, and as of early June there had been 4 sales of homes under construction. Due to the good sales activity, and the indication that price increases were anticipated for future phases, these prices are concluded to be reasonably supportable as market value. The base pricing for the Belmont homes as discussed next ranges from about $651,000 to $694,000 or an average of ±$670,000, with actual pricing including options/upgrades and premiums averaging ±$687,000. Due to the significantly larger home sizes which average just under 3,400 s.f., these indications support far upper limits for the subject Highgate homes. Next, the pricing for other new-home products are considered and discussed in the following paragraphs:

Mosaic at West Hills: This is a product by Lennar Homes on 5,000 s.f. minimum lots with four floor plans that range in size from 2,809 s.f. to 3,376 s.f. or an average of 3,131 s.f. The builder pricing for the three larger plans ranges from $667,000 to $685,625, or an average of ±$679,000 for an average size of 3,239 s.f. ($209.63 per s.f.). Considering the much larger average home size represented by this pricing, the indication at $679,000 supports a far upper limit for the Highgate homes. Or, since the larger size typically results in a lower price per s.f., the indication at $209.63 per s.f. supports a far lower limit for the Highgate homes as follows: 2,796 s.f. @ $209.63/s.f. = $586,000 (average) Lavello at West Creek: This is a product by Lennar Homes on 4,700 s.f. minimum lots with four floor plans that range in size from 2,540 s.f. to 2,910 s.f. or an average of 2,764 s.f. The builder pricing for the three larger plans ranges from $513,500 to $586,900, or an average of ±$551,000 for an average size of 2,838 s.f. While this is a similar average size to the Highgate homes, the lots are smaller and narrower, and the location and product are less desirable. Thus, the indication at $551,000 supports a far lower limit for the Highgate homes. Lexington at River Village: This is a product by Lennar Homes on 6,050 s.f. minimum lots with five floor plans that range in size from 2,986 s.f. to 3,820 s.f. or an average of 3,406 s.f. The builder pricing for the four larger plans ranges from $641,144 to $734,313, or an average of ±$688,000 for an average size of 3,511 s.f. ($195.96 per s.f.). Considering the much larger average home size represented by this pricing and the lack of special taxes due to

29

VALUATION, Continuing being prepaid, but also the inferior amenities and not being in a gated neighborhood, the indication at $688,000 supports a far upper limit for the Highgate homes, and the indication at $195.96 per s.f. supports a far lower limit as follows: 2,796 s.f. @ $195.96/s.f. = $548,000 (average) It is also noted that the three most recent builder sales of the two smaller floor plans that closed in February and April 2013 were at prices of $611,500, $614,000 and $627,500 or an average of ±$618,000 for an average size of 3,038 s.f. Considering the larger average size, but the inferior location and date of sale negotiations which would warrant an upward time adjustment, the indication at $618,000 supports a firm lower limit for the Highgate homes.

In summary, as an average for the 3 completed-unsold Highgate homes (models), the data supports far lower limits from $548,000 to $586,000, a firm lower limit at $618,000, close indications at $627,000 and $656,000, and far upper limits from $679,000 to $688,000. The initial conclusion is an average of $630,000. Then, a discount could be considered for holding/sales costs plus profit due to the bulk ownership by the builder, but this is considered to be offset by the options/upgrades to these model homes. Thus, the conclusion is an average value of $630,000 for these 3 homes. Analysis of 18 Homes Under Construction For the 9 homes that were estimated to be ±60-70% completed, I have considered a cost amount of 65% of ±$50.00 per s.f. estimated direct construction costs per the builder, or $32.50 per s.f. on the average home size of 2,836 s.f. for these 9 homes, or an amount rounded to $90,000. This is added to the estimated value of $240,000 for the vacant lot in finished condition, resulting in a total of $330,000 as an average for these 9 homes. For the 9 homes that were estimated to be ±30-40% completed, the cost amount is 35% of $50.00 per s.f. or $17.50 per s.f. on the average home size of 2,836 s.f. for these 9 homes, or an amount rounded to $50,000. This is added to the estimated value of $240,000 for the vacant lot in finished condition, resulting in a total of $290,000 as an average for these 9 homes. Analysis of 58 Vacant Lots A search was made for recent bulk single-family residential lot sales which have taken place in the Santa Clarita area. The pertinent unit of comparison from the sales to the subject property is the price per finished lot. Then, a deduction is made for the remaining costs to complete to get the subject lots from as is semi-finished condition to finished lot condition. There are 6 items of data that have been considered in this valuation, all of which are closed sales that recorded from April 2011 through May 2013. The pertinent sales data is discussed in the following paragraphs:

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VALUATION, Continuing Data No. 1: Subject Highgate, Belmont & Monument: As previously indicated, this was a bulk sale of 283 lots, 5,000 s.f. to 6,000 s.f. minimum size, from The Newhall Land and Farming Company to D.R. Horton. The sale recorded on April 24, 2012 at an indicated price of $19,500,000 or $68,905 per lot, with finished lots estimated at approximately $220,000 to $230,000 per lot. At time of sale, all but 6 of the lots had a recorded tract map and were in partially rough graded condition. The majority of the lots are 5,500 and 6,000 s.f. minimum, with some of the lots having good views. Initially, it is noted that this sale took place a little over a year ago, and due to the superior current market conditions an upward time adjustment would be supportable. In addition, this sale represented land in only partially graded condition with significant remaining land development costs, and it represented a bulk sale of 283 lots. In contrast, the subject 58 lots at current date is a much smaller bulk size, with a superior current condition ranging from graded blue-top to near finished condition. However, it is also noted that the 58 lots are of the smaller 5,000 s.f. minimum size. Considering these factors, the indication at ±$220,000 to $230,000 per finished lot supports a firm lower limit for the subject 58 lots at current date. Data No. 2: Subject Milan: This was the sale of the 43 lots, 5,000 s.f. minimum size, from The Newhall Land and Farming Company to KB Home for the Milan product type as previously discussed. The sale was negotiated in early 2011 and recorded on April 20, 2011 at an indicated price of $7,012,500 or $163,081 per lot for the semi-finished condition with finished lots estimated in the range of $230,000 to $240,000. The buyer had projected an average home price of ±$600,000 indicating a finished lot ratio in the range of .38 to .40. In comparison to the subject, the location, minimum lot size, bulk size and physical condition of the lots are similar, but an upward time adjustment is supportable due to the sale date that was over two years ago. Thus, the indication at $230,000 to $240,000 per finished lot supports a firm lower limit for the subject. A closer indication is indicated on the basis of a finished lot ratio as follows: $630,000 x .38 to .40 = $239,400 to $252,000/finished lot Data No. 3: Both Sides Santa Clarita Pkwy., south of Newhall Ranch Rd., Santa Clarita: River Village community; 54 lots with recorded tract map; 9 lots are 6,050 s.f. minimum 45 lots are 6,600 s.f. minimum; all were in semi-finished condition; existing CFD; the sale closed on September 5, 2012 from The Newhall Land and Farming Company to KB Home at an indicated price of $9,827,000 or $181,981 per lot, with finished lots estimated at ±$250,000 to $260,000 per lot; the buyer is building two product types (Milan and Charleston) which range in size from 3,413 s.f. to 4,506 s.f. with recent and current pricing from ±$660,000 to $730,000. This indicates a finished lot ratio of ±.36 to .37. In comparison to the subject, the location, bulk size, physical condition of the lots and existing CFD are fairly similar, but the lots are larger in size resulting in the potential for larger and higher priced homes. In addition, there could be a minor upward time adjustment since this sale took place 8 to 9 months ago. Overall, the indication at $250,000 to $260,000 per finished lot supports a firm upper limit for the subject. A closer indication is indicated on the basis of a finished lot ratio as follows: $630,000 x .36 to .37 = $226,800 to $233,100/finished lot Data No. 4: N/S Soledad Canyon Rd. at Gladding Way, Santa Clarita: To be Villa Metro with 315 dwelling units on this 33.18-acre site or 9.5 dwelling units per acre; will be 293 detached homes on small lots plus 22 attached live/work units; homes from ±1,100 s.f. to

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VALUATION, Continuing 2,000 s.f. and live/work units from 2,010 s.f. to 4,568 s.f., with average pricing from ±$300,000 to $400,000 or an overall average of ±$340,000; land sold from The Newhall Land and Farming Company to The New Home Company by deed recorded October 31, 2012 at an indicated price of $11,500,000 or $36,508 per lot with finished lots estimated at approximately $120,000 per lot, indicating a finished lot ratio of ±.35. The land was in superpad condition but needed to be re-entitled for the planned development. In comparison to the subject, the location is inferior, the bulk size is much larger, the physical condition of the lots is inferior, the lot sizes are far smaller, and the existing CFD is similar. Considering also an upward time adjustment since the sale was negotiated in the Fall of 2011, the indication at ±$120,000 per finished lot supports a far lower limit for the subject, and the indication at a finished lot ratio of .35 supports a closer but still firm lower limit as follows: $630,000 x .35 = $220,500/finished lot Data No. 5: SW/O Soledad Canyon Rd., ±½ mile W/O Whites Canyon Rd., Santa Clarita: To be Soledad Circle Estates with 137 detached homes on 38 @ 4,000 s.f. minimum lots and 99 @ cluster/small lots; projected home pricing had been mid $300,000’s to low $400,000’s; land sold from Soledad Canyon Ari LLC to Williams Homes, Inc. by deed recorded May 6, 2013 at an indicated price of $7,240,000 or $52,847 per lot with finished lots estimated at approximately $180,000 per lot, indicating a finished lot ratio of ±.46. The land was in unimproved condition with entitlements, but the buyer completed re-entitling for the planned development. In comparison to the subject, the location is inferior, the bulk size is much larger, the physical condition of the lots is far inferior, the lot sizes are far smaller, and the lack of a CFD will mean greater land development costs to the buyer but a lower effective tax rate to future homebuyers. Overall, the indication at $180,000 per finished lot supports a far lower limit for the subject, and the indication at a finished lot ratio of .46, due to being much higher than indicated by other data, supports a firm upper limit as follows: $630,000 x .46 = $289,800/finished lot Data No. 6: N’ly Side Sierra Hwy. at Piazzo Di Sarro, Santa Clarita: To be Valle Di Oro with 79 detached homes on small lots with home pricing to be from the high $300,000’s; land sold from Trimark Pacific to Williams Homes, Inc. by deed recorded July 31, 2012 at an indicated price of $3,000,000 or $37,975 per lot with finished lots estimated at $142,000 per lot, indicating a finished lot ratio of ±.35 to .36. The lots had been in semi-finished condition as part of a gated townhome project that was only partly built, and the buyer re-entitled the remaining 88 townhome lots for 79 single-family lots. In comparison to the subject, the location is inferior, the bulk size is similar, the physical condition of the lots was similar though needing re-entitling, the lot sizes are far smaller, and the lack of a CFD will mean greater land development costs to the buyer but a lower effective tax rate to future homebuyers. Overall, the indication at $142,000 per finished lot supports a far lower limit for the subject, and the indication at a finished lot ratio of .35 to .36 supports a close but firm lower limit indication as follows: $630,000 x .35 to .36 = $220,500 to $226,800/finished lot

In summary, on a finished lot basis, the analysis of the land sales data supports far lower limits from $120,000 to $180,000, closer but still firm lower limits from

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VALUATION, Continuing $220,000 to $240,000, close indications from $227,000 to $252,000, and firm upper limits from $250,000 to $290,000. The conclusion on a finished lot basis is $240,000 per lot. Lastly, a deduction is made for the remaining costs to complete to get the vacant lots from as is condition to fully finished condition or “finished lots”. Per information provided by the builder, the total costs to complete are $28,639,000, including fees, for the 223 vacant lots comprising the Highgate, Belmont and Monument product types. Since an allocation to each product type was not available, the costs are allocated on a per lot basis, or $128,426 per lot. Thus, the resulting value indication for the 58 vacant lots in as is condition is calculated as follows:

58 lots, if in finished condition, @ $240,000/lot = $13,920,000 Less remaining costs to complete: 58 lots @ $128,426/lot = - 7,450,000 (Rounded) Value indication, as is condition: $ 6,470,000

Conclusion of Value Based on the foregoing, the total value indication for the Highgate product type in the as is condition is calculated as follows: 3 completed-unsold homes @ $630,000 = $ 1,890,000 9 homes under construction @ $330,000 = $ 2,970,000 9 homes under construction @ $290,000 = $ 2,610,000 58 vacant lots = $ 6,470,000

Value Indication, As Is Condition: $13,940,000 Thus, as the result of this analysis, I have arrived at the following overall conclusion of market value for the as is condition of the subject Highgate product type, subject to the Assumptions and Limiting Conditions, and as of May 15, 2013:

$13,940,000

(THIRTEEN MILLION NINE HUNDRED FORTY THOUSAND DOLLARS)

Then, the overall value conclusion is allocated to the Developed Property (completed-unsold homes and homes under construction) and Undeveloped Property (vacant lots) as follows:

Ownership Developed Undeveloped Total Builder Ownership: $7,470,000 $6,470,000 $13,940,000

33

34

BELMONT (D.R. HORTON) PROPERTY DATA

Location This product type is located along both sides of Farrier Dr. extending northerly from Blacksmith Dr.; along both sides of Hearth Court and Carbon Ln.; and along both sides of the southerly portion of the Iron Village Dr. cul-de-sac. Record Owner/Ownership History As of the May 15, 2013 date of value, all 91 lots were owned by D.R. Horton Los Angeles Holding Company, Inc. They acquired these 91 lots from The Newhall Land and Farming Company in April 2012 as part of the 283-lot bulk purchase that includes the Highgate and Monument product types at an indicated price of $19,500,000. Legal Description The 91 lots comprising this product type are described as Lots 108 to 176, 272 to 284, & 312 to 320 of Tract No. 52455-03. Assessor Data-2012/13 The 91 lots comprising this product type include the following Assessor Parcel Nos.:

2810-128-001 to 063 2810-129-001 to 011, 014 to 026, 050 to 058

It is noted that several of the subject lots comprise two assessor parcels. The current assessed values range from $9,043 to $87,043 or an average of $79,247. It is noted that the very low assessed values are from small parcels that comprise part of a lot, and also the assessed values do not yet reflect the status of home construction. The tax rate areas are 12459, 15508 and 15509 with indicated tax rates of 1.182733% and 1.205156%, but the total or effective tax rate, including special taxes for this CFD, is projected by the builder to be approximately 2.0%. No. of Lots/Lot Sizes This product type comprises a total of 91 single-family residential lots, typically considered as ±5,500 s.f. minimum size. The actual lot sizes range from 5,768 s.f. to 12,634 s.f., or an average of 7,478 s.f., including side and/or rear slope areas. In terms of views, there are a limited number of lots that back to a southerly exposure with a grade differential above adjacent lots that have good views to the south.

35

PROPERTY DATA, Continuing Planned Development/Status of Construction These lots are being developed by D.R. Horton with a product type of homes called Belmont at West Hills. As of the May 15, 2013 date of value, there were 3 completed-unsold homes (the models), 16 homes under construction, and 72 vacant lots ranging from graded blue-top to near finished condition. Of the 16 homes under construction, 8 were estimated to be ±60-70% completed and 8 were estimated to be ±30-40% completed. (Note: The Developed Property comprises the 3 completed-unsold model homes and the 16 homes under construction which are Lots 108 to 110 and 150 to 165 or Assessor Parcel Nos. 2810-128-001 to 003 & 048 to 063. The Undeveloped Property comprises the 72 vacant lots which are Lots 111 to 149, 166 to 176, 272 to 284 and 312 to 320 or Assessor Parcel Nos. 2810-128-004 to 047 and 2810-129-001 to 011, 014 to 026 & 050 to 058.) There are three floor plans which are described as follows:

Plan 1: 2,892 s.f., two-story, with 3 bedrooms, 2½ baths, loft, living room, dining room, great room, nook and a 3-car tandem garage; optional bedrooms 4 & 5 and bath 3. Plan 2: 3,370 s.f., two-story, with 3 bedrooms, 2½ baths, loft, formal living room, formal dining room, family room, nook, attached casita with full bath and a 3-car tandem garage; options of bedrooms 4 & 5 and bath 3. Plan 3: 3,705 s.f., two-story, with 4 bedrooms, 3½ baths, bonus room, den, parlor, formal dining room, family room, nook and a 2-car garage with storage; optional bedrooms 5 & 6.

Per building permit data, the 3 completed homes are sizes of 3,074 s.f., 3,372 s.f. and 3,705 s.f., or an average of 3,384 s.f.

VALUATION

Method of Analysis This is similar to the previous analysis of the Highgate product type.

Analysis of 3 Completed-Unsold Homes (Models) These are the 3 completed model homes that include one of each floor plan. It is first noted that the base pricing for these homes was from $651,150, $669,000 and $694,000 or an average of ±$671,000. However, as of the May 15, 2013 date of value, the more specific pricing that included options/upgrades and lot premiums was $651,150 for Plan 1, $710,885 for Plan 2 and $699,990 for Plan 3, or an average of ±$687,000. There has been strong buyer interest in these homes, and as of early June there had been 3 sales of homes under construction. Due to the good sales

36

VALUATION, Continuing activity, and the indication that price increases were anticipated for future phases, these prices are concluded to be reasonably supportable as market value. As previously discussed, the base pricing for the Highgate homes ranges from $608,000 to $651,000 or an average of ±$627,000, with actual pricing including options/upgrades and premiums averaging ±$656,000. Due to the significantly smaller home sizes which average just under 2,800 s.f., these indications support far lower limits for the subject Belmont homes. As discussed next for the Monument homes, the pricing ranges from $690,000 to $720,825 or an average of ±$706,000, and this supports a firm upper limit for the Belmont homes due to the larger average size of 3,714 s.f. and being on slightly larger lots. Next, the pricing for other new-home products are considered and discussed in the following paragraphs:

Mosaic at West Hills: As previously discussed for the Highgate homes, the Mosaic homes indicate an average price of ±$679,000 ($209.63/s.f.) for an average home size of 3,131 s.f. on ±5,000 s.f. minimum lots. Considering the larger size of the Belmont homes at an average of 3,384 s.f. and the slightly larger lot sizes, the indication at $679,000 would tend to support a close lower limit for the Belmont homes. Or, due to the larger average size, the indication at $209.63 per s.f. supports a firm upper limit as follows: 3,384 s.f. @ $209.63/s.f. = $709,000 (average) Lexington at River Village: As previously discussed for the Highgate homes, the Lexington homes indicate an average price of ±$688,000 ($195.96/s.f.) for an average home size of 3,511 s.f. on 6,050 s.f. minimum lots. Considering the smaller size of the Belmont homes and the slightly smaller lot sizes, the inferior amenities of the Lexington homes though also the lack of special taxes, the indication at $688,000 supports a close upper limit for the Belmont homes. In addition, the indication at $195.96 per s.f. supports a close lower limit as follows: 3,384 s.f. @ $195.96/s.f. = $663,000 (average) Milan at River Village: As previously discussed for the subject Milan homes, the first 5 closed sales that took place in Milan at River Village in May 2013 indicated prices from $658,500 to $776,500 or an average of $713,000 for an average home size of 3,912 s.f. Considering the significantly larger home size as more than offsetting to the inferior amenities, the indication at $713,000 supports a far upper limit for the Belmont homes. Charleston at River Village: This is a product by KB Home on 6,600 s.f. minimum lots with three floor plans that range in size from 3,777 s.f. to 4,506 s.f. or an average of 4,117 s.f. The builder pricing is from $687,990 to $728,990, or an average of ±$707,000 for an average size of 4,117 s.f. Due primarily to the much larger size, the indication at $707,000 supports a far upper limit for the Belmont homes.

In summary, as an average for the 3 completed-unsold model homes, the data supports far lower limits at $627,000 and $656,000, closer lower limits at $663,000 and $679,000, close indications at $671,000 and $687,000, a close upper limit at

37

VALUATION, Continuing $688,000, and firm to far upper limits from $706,000 to $713,000. Similar to the discussion for the previous Highgate homes, a discount could be considered for holding/sales costs plus profit due to the bulk ownership by the builder, but this is considered to be offset by the options/upgrades to these model homes. Thus, the conclusion is an average value of $680,000 for these 3 homes. Analysis of 16 Homes Under Construction For the 8 homes that were estimated to be ±60-70% completed, I have considered a cost amount of 65% of ±$47.00 per s.f. estimated direct construction costs per the builder, or $30.55 per s.f. on the average home size of 3,301 s.f. for these 8 homes, or an amount rounded to $100,000. This is added to the estimated value of $250,000 for the vacant lot in finished condition, resulting in a total of $350,000 as an average for these 8 homes. For the 8 homes that were estimated to be ±30-40% completed, the cost amount is 35% of $47.00 per s.f. or $16.45 per s.f. on the average home size of 3,464 s.f. for these 8 homes, or an amount rounded to $55,000. This is added to the estimated value of $250,000 for the vacant lot in finished condition, resulting in a total of $305,000 as an average for these 8 homes. Analysis of 72 Vacant Lots This is similar to the previous analysis of the vacant lots for the Highgate product type, except that these lots are slightly larger and are being developed with a larger and much higher-priced product. Thus, the land sales data and the analysis of the vacant lots for the Highgate product type support a firm lower limit for these subject lots at $240,000 per finished lot and a closer indication at $250,000 to $260,000 per finished lot. Based on a finished lot ratio of .37 to .39, the following indication results:

$680,000 x .37 to .39 = $251,600 to $265,200/finished lot The conclusion on a finished lot basis is $250,000 per lot. Lastly, a deduction is made for the remaining costs to complete to get the vacant lots from as is condition to fully finished condition or “finished lots”. As previously discussed for the Highgate product type, the deduction is based on $128,426 per lot, resulting in the following value indication for the 72 vacant lots in as is condition:

72 lots, if in finished condition, @ $250,000/lot = $18,000,000 Less remaining costs to complete: 72 lots @ $128,426/lot = - 9,250,000 (Rounded) Value indication, as is condition: $ 8,750,000

38

VALUATION, Continuing

Conclusion of Value Based on the foregoing, the total value indication for the Belmont product type in the as is condition is calculated as follows: 3 completed-unsold homes @ $680,000 = $ 2,040,000 8 homes under construction @ $350,000 = $ 2,800,000 8 homes under construction @ $305,000 = $ 2,440,000 72 vacant lots = $ 8,750,000

Value Indication, As Is Condition: $16,030,000 Thus, as the result of this analysis, I have arrived at the following overall conclusion of market value for the as is condition of the subject Belmont product type, subject to the Assumptions and Limiting Conditions, and as of May 15, 2013:

$16,030,000

(SIXTEEN MILLION THIRTY THOUSAND DOLLARS)



39

40

MONUMENT (D.R. HORTON) PROPERTY DATA

Location This product type is located along the easterly side of Blacksmith Dr. southerly from Farrier Dr.; along both sides of Farrier Dr. easterly of Blacksmith Dr.; on both sides of Anvil Court, Chiselcourt and Steel Ln.; and along both sides of future Forge Court which will extend northwest from Blacksmith Dr. Record Owner/Ownership History As of the May 15, 2013 date of value, 107 of the 113 lots were owned by D.R. Horton Los Angeles Holding Company, Inc. They acquired these 90 lots from The Newhall Land and Farming Company in April 2012 as part of the 283-lot bulk purchase that includes the Highgate and Belmont product types at an indicated price of $19,500,000. It is noted that the remaining 6 lots (which were part of the 283-lot purchase) are still under record ownership of The Newhall Land and Farming Company, but will be transferred to D.R. Horton upon recordation of the tract map for the 6 lots. However, for appraisal purposes, all 113 lots have been considered as part of the D.R. Horton ownership. Legal Description The 113 lots comprising this product type are described as Lots 1 to 107 of Tract No. 52455-03 and Lots 1 to 6 of Tentative Tract Map No. 52455-14. Assessor Data-2012/13 The 113 lots comprising this product type include the following Assessor Parcel Nos.:

2810-001-088 & 090 (to be the remaining 6 lots) 2810-124-001 to 017 2810-125-001 to 021 2810-126-001 to 048 2810-127-001 to 021

The current assessed values range from $1,027 to $87,043, with the two parcels comprising the future 6 lots being at $1,027 each and the other 107 parcels being at $87,043 (land only), not yet reflecting the current status of home construction. The tax rate areas are 02628, 12459 & 15508 with indicated tax rates of 1.205156% and 1.182733%, but the total or effective tax rate, including special taxes for this CFD, is projected by the builder to be approximately 2.0%.

41

PROPERTY DATA, Continuing No. of Lots/Lot Sizes This product type comprises a total of 113 single-family residential lots. The 107 lots that are part of Tract No. 52455-03 are typically considered as ±6,000 s.f. minimum size with the actual lot sizes ranging from 6,120 s.f. to 15,593 s.f., or an average of 7,994 s.f., including side and/or rear slope areas. The six lots that are part of Tentative Tract Map No. 52455-14 range in size from 25,178 s.f. to 52,683 s.f., or an average of 41,482 s.f. including much slope area, with net usable areas ranging from 8,248 s.f. to 14,020 s.f. or an average of 10,692 s.f. Planned Development/Status of Construction These lots are being developed by D.R. Horton with a product type of homes called Monument at West Hills. As of the May 15, 2013 date of value, there were 4 completed-unsold homes (the models), 16 homes under construction, and 93 vacant lots ranging from graded blue-top to near finished condition. Of the 16 homes under construction, 9 were estimated to be ±60-70% completed and 7 were estimated to be ±30-40% completed. (Note: The Developed Property comprises the 3 completed-unsold model homes and the 16 homes under construction which are Lots 1 to 16, 101 to 103 & 105 of Tract No. 52455-03 or Assessor Parcel Nos. 2810-124-001 to 016 and 2810-126-042 to 044 & 046. The Undeveloped Property comprises the 93 vacant lots which are Lots 17 to 100, 104, 106 & 107 of Tract No. 52455-03 and Lots 1 to 6 of Tentative Tract Map No. 52455-14 or Assessor Parcel Nos. 2810-001-088 & 090, 2810-124-017, 2810-125-001 to 021, 2810-126-001 to 041, 045, 047 & 048 and 2810-127-001 to 021.) There are four floor plans which are described as follows:

Plan 1: 3,553 s.f., two-story, with 5 bedrooms, 3½ baths, bonus room, parlor, formal dining room, family room, nook and a 3-car tandem garage. Plan 2: 3,821 s.f., two-story, with 5 bedrooms, 4½ baths, loft, parlor, formal dining room, family room, nook and a 3-car tandem garage; optional bedroom 6. Plan 3: 3,949 s.f., two-story, with 4 bedrooms, 4½ baths, master sitting room, bonus room, study, parlor, formal dining room, family room, nook and a 3-car split garage; optional bedrooms 5 & 6, exercise room and game room. Plan 4: 3,519 s.f., two-story, with 5 bedrooms, 4½ baths, loft, formal dining room, family room, nook, downstairs suite including living room, kitchen, bedroom and full bath, and a 3-car tandem garage.

Per building permit data, the 4 completed homes are sizes of 3,548 s.f., 3,822 s.f., 3,968 s.f. and 3,519 s.f., or an average of 3,714 s.f.

42

VALUATION

Method of Analysis This is similar to the previous analyses of Highgate and Belmont. Analysis of 4 Completed-Unsold Homes (Models) These are the 4 completed model homes that include one of each floor plan. It is first noted that as of the May 15, 2013 date of value, the specific pricing which included options/upgrades and lot premiums was $690,000 for Plan 1, $710,000 for Plan 2, $720,825 for Plan 3 and $701,375 for Plan 4, or an average of ±$706,000. There has been strong buyer interest in these homes, and as of early June there had been 11 sales of homes under construction. Due to the good sales activity, and the indication that price increases were anticipated for future phases, these prices are concluded to be reasonably supportable as market value. As previously discussed, the base pricing for the Highgate homes ranges from $608,000 to $651,000 or an average of ±$627,000, with actual pricing including options/upgrades and premiums averaging ±$656,000. Due to the significantly smaller home sizes which average just under 2,800 s.f., these indications support far lower limits for the subject Monument homes. Also as previously discussed for the Belmont homes, the overall pricing ranges from about $651,000 to $711,000 or base and actual averages of $671,000 and $687,000, and these indications support firm lower limits for the Monument homes due to the smaller average size of near 3,400 s.f. and being on slightly smaller lots. Also as previously discussed for the Belmont product type, the pricing for other new-home products indicates the following for the Monument homes:

Mosaic at West Hills: The pricing indicates an average of ±$679,000 ($209.63/s.f.) for an average home size of 3,131 s.f. on ±5,000 s.f. minimum lots. Considering the much larger size of the Monument homes at an average of 3,714 s.f. and the larger lot sizes, the indication at $679,000 supports a far lower limit for the Monument homes. Or, due to the much larger average size, the indication at $209.63 per s.f. supports a far upper limit as follows: 3,714 s.f. @ $209.63/s.f. = $779,000 (average) Lexington at River Village: The pricing indicates an average of ±$688,000 ($195.96/s.f.) for an average home size of 3,511 s.f. on 6,050 s.f. minimum lots. Considering the larger size of the Monument homes and the similar lot sizes, the inferior amenities of the Lexington homes though also the lack of special taxes, the indication at $688,000 supports a firm lower limit for the Belmont homes. In addition, the indication at $195.96 per s.f. supports a firm upper limit as follows: 3,714 s.f. @ $195.96/s.f. = $728,000 (average) Milan at River Village: The pricing from the first 5 closed sales indicated an average of $713,000 for an average home size of 3,912 s.f. Considering the slightly larger home size as

43

VALUATION, Continuing approximately offsetting to the inferior amenities, the indication at $713,000 supports a close indication for the Monument homes. Charleston at River Village: The pricing is from $687,990 to $728,990, or an average of ±$707,000 for an average size of 4,117 s.f. Due primarily to the larger size, but also considering the inferior amenities. the indication at $707,000 tends to support a close indication to close upper limit for the Monument homes.

In summary, as an average for the 4 completed-unsold model homes, the data supports far lower limits from $627,000 to $679,000, closer but firm lower limits from $671,000 to $688,000, close indications at $706,000 and $713,000, a close indication to close upper limit at $707,000, a firm upper limit at $728,000 and a far upper limit at $779,000. Similar to the discussion for the previous Highgate and Belmont homes, a discount could be considered for holding/sales costs plus profit due to the bulk ownership by the builder, but this is considered to be offset by the options/upgrades to these model homes. Thus, the conclusion is an average value of $710,000 for these 4 homes. Analysis of 16 Homes Under Construction For the 9 homes that were estimated to be ±60-70% completed, I have considered a cost amount of 65% of ±$57.00 per s.f. estimated direct construction costs per the builder, or $37.05 per s.f. on the average home size of 3,789 s.f. for these 9 homes, or an amount rounded to $140,000. This is added to the estimated value of $260,000 for the vacant lot in finished condition, resulting in a total of $400,000 as an average for these 9 homes. For the 7 homes that were estimated to be ±30-40% completed, the cost amount is 35% of $57.00 per s.f. or $19.95 per s.f. on the average home size of 3,742 s.f. for these 7 homes, or an amount rounded to $75,000. This is added to the estimated value of $260,000 for the vacant lot in finished condition, resulting in a total of $335,000 as an average for these 7 homes. Analysis of 93 Vacant Lots This is similar to the previous analyses of the vacant lots for the Highgate and Belmont product types, except that these lots are slightly larger and are being developed with a larger and higher-priced product. Thus, the land sales data and the analyses of the vacant lots for the Highgate and Belmont product types support a firm lower limit for these subject lots at $240,000 and $250,000 per finished lot. Based on a slightly lower finished lot ratio of .36 to .38 due to the higher-priced product type, the following indication results:

$710,000 x .36 to .38 = $255,600 to $269,800/finished lot The conclusion on a finished lot basis is $260,000 per lot.

44

VALUATION, Continuing Lastly, a deduction is made for the remaining costs to complete to get the vacant lots from as is condition to fully finished condition or “finished lots”. As previously discussed for the Highgate and Belmont product types, the deduction is based on $128,426 per lot, resulting in the following value indication for the 93 vacant lots in as is condition:

93 lots, if in finished condition, @ $260,000/lot = $24,180,000 Less remaining costs to complete: 93 lots @ $128,426/lot = - 11,945,000 (Rounded) Value indication, as is condition: $12,235,000

Conclusion of Value Based on the foregoing, the total value indication for the Monument product type in the as is condition is calculated as follows: 4 completed-unsold homes @ $710,000 = $ 2,840,000 9 homes under construction @ $400,000 = $ 3,600,000 7 homes under construction @ $335,000 = $ 2,345,000 72 vacant lots = $12,235,000

Value Indication, As Is Condition: $21,020,000 Thus, as the result of this analysis, I have arrived at the following overall conclusion of market value for the as is condition of the subject Monument product type, subject to the Assumptions and Limiting Conditions, and as of May 15, 2013:

$21,020,000

(TWENTY-ONE MILLION TWENTY THOUSAND DOLLARS)



45

ADDENDA

45

QUALIFICATIONS OF

STEPHEN G. WHITE, MAI PROFESSIONAL EXPERIENCE

Real Estate Appraiser since 1976.

1983 through current date: Self-employed; office located at 1370 N. Brea Blvd., Suite 255, Fullerton, CA 92835 (Phone: 714-738-1595)

1976-1982: Employed by Cedric A. White, Jr., MAI, independent appraiser located in Anaheim.

Real estate appraisals have been completed on most types of properties for purposes of fair market value, leased fee value, leasehold value, easement value, partial acquisitions and severance damages.

PROFESSIONAL ORGANIZATIONS

Member, Appraisal Institute; MAI designation obtained 1985

Affiliate Member, Pacific West Association of Realtors LICENSES

Licensed by the State of California as a Certified General Real Estate Appraiser; OREA ID No. AG013311; valid through September 22, 2014.

EDUCATION

B.A. Economics & Business, Westmont College, Santa Barbara (1976)

Appraisal Institute Courses: Basic Appraisal Principles, Methods and Techniques Capitalization Theory and Techniques Urban Properties Litigation Valuation Standards of Professional Appraisal Practice

Numerous seminars and continuing education on various appraisal subjects, including valuation of easements and leased fee interests, litigation, the money market and its impact on real estate, and standards of professional appraisal practice.

COURT/TESTIMONY EXPERIENCE

Qualified as an expert witness in the Superior Courts of Orange, Los Angeles, Riverside and San Bernardino Counties; also for the Assessment Appeals Board of Orange and Los Angeles Counties.

TYPES OF PROPERTY APPRAISED

Residential: vacant lots, acreage and subdivisions; single family residences, condominiums, townhomes and apartment complexes.

Commercial: vacant lots/acreage; office buildings, retail/shopping centers, restaurants, hotels/motels.

Industrial: vacant lots and acreage; warehouses, manufacturing buildings, R&D buildings, industrial parks, mini-warehouses.

Special Purpose: mobilehome parks, churches, automobile agencies, medical buildings, convalescent hospitals, easements, leased fee and leasehold interests.

46

QUALIFICATIONS, Page 2

CLIENT LIST

Corporations:

Aera Energy MCP Foods British Pacific Properties Merrill Lynch Relocation BSI Consultants Orangeland RV Park Crown Central Petroleum Pacific Scientific Eastman Kodak Company Penhall International Firestone Building Materials Pic 'N Save Stores Foodmaker Realty Corp. Sargent-Fletcher Co. Greyhound Lines Shell-Western E&P Holiday Rambler Corp. Southern Distributors Corp. International Baking Co. Southern California Edison Johnson Controls The Home Depot Kampgrounds of America Tooley and Company La Habra Products, Inc. Wastewater Disposal Co.

Developers:

Brighton Homes Mark Taylor, Inc. Brookfield Mission Viejo Co. Citation Builders Premier Homes Davison-Ferguson Investment Devel. Presley Homes D.T. Smith Homes Rockefeller & Associates Irvine Company Taylor Woodrow Homes Kathryn Thompson Developers Unocal Land & Development

Law Firms:

Baldikoski, Klotz & Dragonette Oliver, Barr & Vose Best, Best & Krieger LLP Ollestad, Freedman & Taylor Bowie, Arneson, Wiles & Giannone Palmieri, Tyler, Wiener, Wilhelm & Bradshaw, John Waldron LLP Bye, Hatcher & Piggott Paul, Hastings, Jonofsky & Callahan, McCune & Willis Walker LLP Cooksey, Coleman & Howard Piggott, George B.

Hamilton & Samuels Pothier, Rose Horgan, Rosen, Beckham & Coren Rosenthal & Zimmerman Kent, John Rutan & Tucker, LLP Kirkland & Ellis Sikora & Price, Inc. Latham & Watkins LLP Smith & Politiski McKee, Charles C. Williams, Gerold G. Mosich, Nicholas J. Woodruff, Spradlin & Smart, P.C. Long, David M. Yates, Sealy M. Nossaman, Guthner, Knox & Elliott, LLP

Financial Institutions:

Ahmanson Trust Company Pacific Western Bank Barclays Bank San Clemente Savings & Loan Chino Valley Bank Security Pacific Bank

Continental Bank Sunwest Bank First Interstate Mortgage United Calif. Savings Bank

First Wisconsin Bank Washington Square Capital National Credit Union Admin.

47

QUALIFICATIONS, Page 3

Cities:

Anaheim La Habra San Clemente Baldwin Park Laguna Beach Santa Ana Buena Park Long Beach Santa Fe Springs

Cypress Mission Viejo Stanton Dana Point Orange Temecula

Duarte Placentia Tustin Fontana Riverside Yorba Linda Fullerton Seal Beach

Counties:

County of Orange County of Riverside Other Governmental:

Agua Mansa Industrial Growth Association Metropolitan Water District El Toro Water District Orange County Water District Federal Deposit Insurance Corporation (FDIC) Trabuco Canyon Water District Kern County Employees Retirement Association U.S. Postal Service Lee Lake Water Dist.

School Districts:

Alvord Unified School Dist. Newport-Mesa Unified School Dist. Anaheim Union High School Dist. Orange Unified School Dist.

Anaheim City School Dist. Palm Springs Unified School Dist. Banning Unified School Dist. Placentia-Yorba Linda Unified Dist. Capistrano Unified School Dist. Poway Unified School Dist. Castaic Union School Dist. Rialto Unified School Dist. Cypress School Dist. Romoland School Dist.

Etiwanda School Dist. Saddleback Valley Unif. School Dist. Fullerton College San Jacinto Unified School Dist. Fullerton Joint Union High School Dist. Santa Ana Unified School Dist. Fullerton School Dist. Saugus Union School Dist. Garden Grove Unified School Dist. So. Orange Cnty. Comm. College Dist. Irvine Unified School Dist. Westside Union School Dist. Lake Elsinore Unified School Dist. William S. Hart Union High Schl. Dist.

Moreno Valley Unified School Dist. Victor Elementary School Dist. Newhall School Dist.

Churches/Church Organizations:

Calvary Church, Santa Ana Lutheran Church, Missouri Synod Central Baptist Church, Pomona Presbytery of Los Rancho Christian & Missionary Alliance Church, Santa Ana St. Mark’s Lutheran Church, Hac. Hts. Christian Church Foundation Vineyard Christian Fellowship Congregational Church, Fullerton Yorba Linda United Methodist Church First Church of the Nazarene

Other:

Biola University Garden Grove Boys' Club Cedars-Sinai Medical Center The Sheepfold


D-1

APPENDIX D

MARKET ABSORPTION STUDY

i

MARKET ABSORPTION STUDY

COMMUNITY FACILITIES DISTRICT NO. 2006-1C2013 SPECIAL TAX BONDS

(WEST HILLS)

PREPARED FOR SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

LOS ANGELES COUNTY, CALIFORNIA

Model Home – D.R. Horton Project

BY EMPIRE ECONOMICS, INC.

May 28, 2013 (REVISED JUNE 12, 2013)

THE USE OF THIS MARKET ABSORPTION STUDY IS AUTHORIZED ONLY FOR THE CFD NO. 2006-1 IC BOND ISSUE

ii

7-2

CERTIFICATION OF INDEPENDENCE

EMPIRE ECONOMICS PROVIDES CONSULTING SERVICES ONLY FOR PUBLIC ENTITIES

The Securities & Exchange Commission has taken action against firms that have utilized their research analysts to promote companies with whom they conduct business, citing this as a potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its clients, including the Saugus-Castaic School Facilities Financing Authority, are not placed in a situation that could cause such conflicts of interest, provides a Certification of Independence. This Certificate states that Empire performs consulting services only for public entities such as the Saugus-Castaic School Facilities Financing Authority, in order to avoid potential conflicts of interest that could occur if it also provided consulting services for developers/builders. For example, if a research firm for a specific Community Facilities District were to provide consulting services to both the public entity as well as the property owner/developer/builder, then a potential conflict of interest could be created, given the different objectives of the public entity versus the property owner/developer. Accordingly, Empire Economics certifies that the Market Absorption Study for the CFD No. 2006-1C (West Hills) of the Saugus-Castaic School Facilities Financing Authority was performed in an independent professional manner, as represented by the following statements:

Empire was retained to perform the Market Absorption Study by the Saugus-Castaic School Facilities Financing Authority, not the District’s Master Developer (Newhall Land and Farming Company), or the Builders (D.R. Horton Los Angeles Holding Company, Inc. and KB Home).

Empire has not performed any consulting services for the District’s property owner or the

developer/builders during the past twenty+ years.

Empire will not perform any consulting services for the District’s property owner or the developer/builders during at least the next five years.

Empire’s compensation for performing the Market Absorption Study for the District is not

contingent upon the issuance of Bonds; Empire’s fees are paid on a non-contingency basis. Therefore, based upon the statements set-forth above, Empire hereby certifies that the Market Absorption Study for CFD No. 2006-1C (West Hills) of the Saugus-Castaic School Facilities Financing Authority was performed in an independent professional manner. ________________________ Empire Economics, Inc. Joseph T. Janczyk, President

iii

TABLE OF CONTENTS

INTRODUCTION

A. Overview of the Bond Financing Program…………………………………………………………………………….1 Location Maps: Southern California Market Region and Market Area B. Roles of the Market Study for the Bond Financing…..……………………………………………………………….4 C. Methodology Underlying the Market Absorption Study……………………………………………………………..5

SECTION I: EXPECTED PRODUCT MIX CHARACTERISTICS

A. Characteristics of the Expected Product Mix for CFD No. 2006-1C (West Hills)…………..…………………......6

SECTION II: MACROECONOMIC ANALYSIS DESIGNATED ECONOMIC AND REAL-ESTATE

FORECASTING SCENARIO A. Overview of the Housing Market During 2007-2013+ for Santa Clarita Valley…………………….….….…….10 B. Critical Components of the Economic Forecasting Model………………..……...….…………….……………….11 C. Economic – Real Estate Conditions in Santa Clarita Valley………………………………………………….…..15 D. Conclusions on Recent/Future Housing Market Conditions…………………………………………….….…….16

SECTION III: MICROECONOMIC ANALYSIS A. Methodology Underlying the Microeconomic Analysis of the Residential Products in the CFD…..….………...17 B. Development Tends/Patterns in the CFD No. 2006-1C Market Area ………………………………………..…….18 C. Socioeconomic Characteristics: Crime Levels and Quality of Schools……………………………….….…….…..20 D. Competitive Market Analysis of the Projects in CFD No. 2006-1C…………...….…………….………………….22

SECTION IV: ESTIMATED ABSORPTION

A. Estimated Absorption Schedules for CFD No. 2006-1C (West Hills)…………………………..….….…………..33 B. Potential Risk Factors……………………………………………………………………………………………......34 SECTION V: MORTGAGE ANALYSIS A. Mortgage Loan Characteristics for the Households in CFD No. 2006-1C ………………………..….………....36

SECTION VI: ASSUMPTIONS AND LIMITING CONDITIONS Assumptions and Limiting Conditions…………………..…………………………………….…………………….........38 Appendix A: Credentials/Qualifications of Empire Economics: Resume: Joseph T. Janczyk, Ph.D……………….41

1

INTRODUCTION

A. OVERVIEW OF THE BOND FINANCING PROGRAM

The Saugus-Castaic School Facilities Financing Authority was previously petitioned by The Newhall Land and Farming Company to form a Community Facilities District (CFD) No. 2006-1C for a portion of the properties in the Planned Community of West Hills to provide financing for the infrastructure that is required to support the development of its residential projects. CFD No. 2006-1C is located some thirty miles to the north of the Los Angeles Urban Core, in Valencia, a premier community within the Santa Clarita Valley, northerly of the intersection of Newhall Ranch Road and Copper Hill Drive. CFD No. 2006-1C has four residential projects that are expected to have 326 homes upon build-out, and these are anticipated to be single-family detached housing products with various prices and sizes of living area; accordingly, their characteristics are as follows:

Closed-Out Project: The Milan project by KB Home with 43 homes has already had its homes

constructed and marketed; all of these are occupied by homeowners.

Currently Active Projects: There are another three currently active projects by D.R. Horton which just entered the marketplace with a total of 283 homes:

o The projects have living areas that range from 2,627 to 3,968 sq.ft.

o The projects have base prices that range from $608,000 to $740,000.

The Saugus-Castaic School Facilities Financing Authority has retained Empire Economics, Inc., an economic and real estate consulting firm, to perform a Market Absorption Study for the projects in CFD No. 2006-1C (West Hills). The purpose of the Market Absorption Study for CFD No. 2006-1C is to conduct a comprehensive analysis of the product mix characteristics, macroeconomic factors, and microeconomic factors as well as the potential risk factors that are expected to influence the absorption of the homes in the CFD, in order to arrive at conclusions regarding the following:

For each of the three currently active projects by D.R. Horton, the estimated absorption

schedules for their homes, from market-entry to build-out on an annualized basis.

Discussion of potential economic and real estate risk factors that may adversely impact their marketability of the remaining homes to be absorbed.

For the existing homeowners in the closed-out project by KB Home, their mortgage loan characteristics and estimated current equity levels. .

2

SOUTHERN CALIFORNIA MARKET REGION LOCATION OF CFD NO. 2006-1C AND THE SANTA CLARITA VALLEY

3

CFD NO. 2006-1C “STAR”

APPROXIMATE BOUNDARIES OF HOUSING MARKET AREA

.

4

B. ROLES OF THE MARKET STUDY FOR THE BOND FINANCING

The Market Absorption Study for CFD No. 2006-1C (West Hills) has a multiplicity of roles with regards to the Bond Financing; accordingly, these are set-forth below:

Marketing Prospects for the Residential Projects

Estimated Absorption Schedules: Escrow Closings of Homes to Homeowners,

From Market-Entry to Build-Out Each of the Three Currently Active Projects

Potential Risk Factors that may Adversely Impact

the Marketability of the Homes

Relationship of the Market Study to the Special Tax Payments

Special Taxes for the Residential Projects/Products

Aggregate Levels of

Special Tax Revenues for Bond Sizing

Share of Payments: Developer/Builder vs. Final-Users/Homeowners

Relationship of the Market Study to the Appraisal/Valuation

Appraisal of Property Discounted Cash Flow – Present Value

(The Longer the Absorption Time, the Lower the Present Value)

The Issuing Agency, the Saugus-Castaic School Facilities Financing Authority, along with the Finance Team, can utilize the information found in the Market Absorption Study and the Appraisal as well as the Special Tax Revenues to structure the 2013 Special Tax Bonds for CFD No. 2006-1C.

5

C. METHODOLOGY UNDERLYING THE MARKET ABSORPTION STUDY The Market Absorption Study performs a comprehensive analysis of the product mix characteristics, macroeconomic factors, and microeconomic factors as well as the potential risk factors that are expected to influence the absorption of the homes in CFD No. 2006-1C (West Hills).

I. Expected Product Mix Characteristics

Characteristics of the Expected Product Mix for CFD No. 2006-1C

II. Macroeconomic Analysis Designated Economic Real Estate Forecasting Scenario

Overview of the Housing Market during 2007-2015+

Critical Components of the Economic Forecasting Model

Economic – Real Estate Conditions in Santa Clarita Market Area

Conclusions on Recent/Future Housing Market Conditions

III. Microeconomic Analysis

Methodology Underlying the Microeconomic Analysis of the Residential Projects in CFD No. 2006-1C

Development Trends/Patterns in the CFD Market Area

Socioeconomic Characteristics: Crime Levels and School Quality

Identification of the Currently Active Residential Projects in the Santa Clarita Valley and Selection of the Comparable Projects

Recent Housing Sale Trends and Price Patterns for Housing in the

Competitive Market Area

Competitive Market Analysis of the Projects in the CFD Statistical Analysis of the Prices, Living Area and Special Taxes

IV. Estimated Absorption Schedules

Estimated Absorption Schedules for CFD No. 2006-1C

Potential Risk Factors

V. Mortgage Loan Characteristics of Current Homeowners

VI. Assumptions and Limiting Conditions

6

SECTION I: PRODUCT MIX CHARACTERISTICS

A. CHARACTERISTICS OF THE EXPECTED PROJECT MIX

FOR CFD NO. 2006-IC (WEST HILLS)

CFD No. 2006-1C in West Hills is expected to have four residential projects including three by D.R. Horton and one by KB Home that are anticipated to have some 326 single-family homes upon build-out; accordingly, their characteristics are now discussed.

Milan is a project by KB Home that entered the marketplace in Summer 2011 and has constructed/closed escrow on all of its 43 single-family homes, with the project close-out occurring in Summer 2012. The base prices for the homes in the final phase amounted to some $572,000 for some 3,327 of living area, for a value ratio (price/living area) of $172, on the average. Highgate is a project by D.R. Horton that is expected to have 79 single-family detached homes; the project just entered the marketplace in April 2013 with a model complex, and the first phase of homes is under construction. Base Prices amount to about $629,000/avg., and range from $608,000 to $651,000. Living areas amount to about 2,803/avg., and range from 2,627 to 2,969 sq.ft. The total tax burden, ad valorem and Special Taxes currently amounts to about 1.82%.

Belmont by D.R. Horton is expected to have 91 single-family detached homes; the project just entered the marketplace in April 2013 with a model complex, and the first phase of homes is under construction. Base Prices amount to about $670,000/avg., and range from $651,000 to $694,000. Living areas amount to about 3,380/avg., and range from 2,892 to 3,705 sq.ft. The total tax burden, ad valorem and Special Taxes currently amounts to about 1.83%.

Monument is the third project by D.R. Horton that is expected to have 113 single-family detached homes; the project just entered the marketplace in April 2013 with a model complex, and the first phase of homes is also under construction. Base Prices amount to about $729,000/avg., and range from $720,000 to $740,000. Living areas amount to about 3,746/avg., and range from 3,553 to 3,968 sq.ft. The total tax burden, ad valorem and Special Taxes currently amounts to about 1.85%.

Monument has 113 lots; of these, 107 are currently owned by D.R. Horton, and the remaining 6 are expected to be transferred to D.R. Horton upon recordation of their map.

Although the projects just opened, and so there have not yet been any escrow closings, sales/reservations have been going well. For more information on these projects, please refer to the following table and also the graphs.

7

EXPECTED PRODUCT MIX CHARACTERISTICSCFD NO. 2006-1C

OverallProjects > Milan Highgate Belmont Monument Totals Averages

Status of Models Completed Open - Active Open - Active Open - ActiveClosed-Out

Expected Product Types Detached Detached Detached Detached

Housing UnitsTotals 43 79 91 113 326Share 13.2% 24.2% 27.9% 34.7% 100.0%

Marketing Status: Occupied; May 2013 43 0 0 0 43 Future Occupancies;June 2013+ 0 79 91 113 283

Number of Homes Plan # 1 15 22 22 29 Plan # 2 14 27 26 32 Plan # 3 14 30 26 33 Plan # 4 17 19 Totals 43 79 91 113 326 Living Areas Plan # 1 2,941 2,627 2,892 3,553 Plan # 2 3,413 2,761 3,370 3,822 Plan # 3 3,655 2,969 3,705 3,968 Plan # 4 3,529 3,529 Averages 3,327 2,803 3,380 3,746 3,360

Estimated Prices - Closed-Out: Summer 2012- - Currently Active - - Currently Active - - Currently Active - Plan # 1 $547,990 $608,000 $651,150 $720,000 Plan # 2 $575,990 $622,000 $669,000 $730,000 Plan # 3 $592,990 $651,000 $694,000 $740,000 Plan # 4 $658,489 $720,000 Averages $571,757 $629,114 $669,864 $728,673 $667,433

Builder/Lender's Incentives $10,000 $10,000 $10,000

Value Ratios $172 $224 $198 $195 $200

8

Milan Highgate Belmont Monument AverageLiving Area 3,327 2,803 3,380 3,746 3,360

3,327

2,803

3,380

3,746

3,360

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

CFD NO.2006-1C (WEST HILLS)AVERAGE LIVING AREAS FOR THE PROJECTS

Highgate Belmont Monument AverageCurrent/Estimated Prices $629,114 $669,864 $728,673 $667,433

$629,114$669,864

$728,673

$667,433

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

CFD NO.2006-1C (WEST HILLS)AVERAGE BASE PRICES FOR THE PROJECTS

9

SECTION II: MACROECONOMIC ANALYSIS DESIGNATED ECONOMIC AND REAL-ESTATE

FORECASTING SCENARIO

This section describes the Economic and Real Estate Model underlying the forecasts for the absorption of the forthcoming residential products in CFD No. 2006-1C during the foreseeable future; accordingly, this involves a systematic analysis of the following: A. Overview of the Housing Market during 2007-2011 and Projections for 2013-2015+

for the Santa Clarita Valley B. Critical Components of the Economic Forecasting Model: Critical Drivers:

Employment as the Primary Economic Driver Mortgage Rates as a Secondary Economic Driver

Other Related Drivers: High Levels of Mortgage Defaults Cause Price Decreases

New Development Activity is Driven by Price Increases C. Economic and Real Estate Conditions in the Santa Clarita Valley Current Unemployment Rates; California, Los Angeles County and Santa Clarita Valley D. Conclusions on Recent/Future Housing Market Conditions for Santa Clarita Valley

10

A. OVERVIEW OF THE RECENT/EXPECTED HOUSING MARKET CONDITIONS FOR THE SANTA CLARITA VALLEY

RECENT/EXPECTED REAL ESTATE MARKET TRENDS/PATTERNS IN THE SANTA CLARITA VALLEY

PHASE 3: HOUSING MARKET RECOVERY 2013‐2015+

EMPLOYMENT GROWTH DRIVES HOUSING DEMAND/PRICES INCREASES BUT UNIQUE CHALLENGES ARE THE FEDERAL DEFICIT AND FEDERAL RESERVE RE‐BALANCING ITS ACCOUNTS

FOR NEW DEVELOPMENT IN THE SANTA CLARITA VALLEY, THE MARKET IS SUFFICIENTLY STRONG TO SUPPORT THE MARKET‐ENTRY

OF NEW PLANNED COMMUNITIES AND ALSO BUSINESS PARKS, DUE TO STRONG EMPLOYMENT GROWTH

STRONGER THAN ANTICIPATED EMPLOYMENT

GROWTH ACCELERATES THE

REAL ESTATE RECOVERY

EMPLOYMENT CHANGES, WHICH DEPEND UPON THE OVERALL ECONOMY, MAY SHIFT THIS PARADIGM

LOWER THAN ANTICIPATED EMPLOYMENT

GROWTH ELONGATES THE REAL ESTATE

RECOVERY

LOWER THAN ANTICIPATED

MORTGAGE RATES ACCELERATE THE REAL ESTATE RECOVERY

THE LEVEL OF MORTGAGE RATES, WHICH DEPEND

UPON THE RATE OF INFLATION, MAY

SHIFT THIS PARADIGM

HIGHER THAN ANTICIPATED

MORTGAGE RATES ELONGATE THE REAL ESTATE RECOVERY

PHASE 1: PRICE DECLINES 2007 TO 2009HOUSING PRICES ADJUST FROM PEAK LEVELS BACK TO EQUILIBRIUM,

BASED UPON HOUSEHOLD INCOMES AND CONVENTIONAL FINANCING TECHNIQUES

PRICES DECLINE SIGNIFICANTLYDUE INITIALLY TO MORTGAGE RESETS

AND THEN PRICE DECLINES CONTINUE DUE TO NEGATIVE EQUITY FOR HOMEOWNERS

PHASE 2: PRICES STABILIZE 2010 TO 2012

FORECLOSURE AND SHORT‐SALES DOMINATE THE MARKET

FORECLOSURE/SHORT SALES ARE A SIGNIFICANT COMPONENT OF THE MARKET MARKET SALES OF EXISTING HOMES ARE MODERATE

SALES OF NEW HOMES ARE MINIMAL – DISPLACED BY FORECLOSURE SALES

MOST OF THE HOMES THAT HAVE SIGNIFICANT LEVELS OF NEGATIVE EQUITY

ARE CLEARED IN THE MARKETPLACE

IMPACT OF EMPLOYMENT

IMPACT OF MORTGAGE

RATES

11

B. CRITICAL COMPONENTS OF THE ECONOMIC FORECASTING MODEL

EMPLOYMENT IS THE PRIMARY ECONOMIC DRIVER EMPLOYMENT GROWTH / LOSSES DRIVE PRICE INCREASES / DECREASES

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

400,000

500,000

1988.1

1989.1

1990.1

1991.1

1992.1

1993.1

1994.1

1995.1

1996.1

1997.1

1998.1

1999.1

2000.1

2001.1

2002.1

2003.1

2004.1

2005.1

2006.1

2007.1

2008.1

2009.1

2010.1

2011.1

2012.1

2013.1

2014.1

2015

HO

USN

G P

RIC

E C

HAN

GES

-AN

NU

ALL

Y

EMPL

OYM

ENT

CH

ANG

ES -

ANN

UA

LLY

LOS ANGELES COUNTY: EMPLOYMENT - PRIMARY FORCE FOR PRICE CHANGES

Price Ch. EMP: Losses EMP: Recovering Emp: New High

Empire Economics

Strong Emp. GrowthStrong Appreciation

Despite High Rates, 10%

Initial Emp.Losses and Price DeclinesOnce Emp. Strong, then Prices Rise

Housing Prices Rise,Despite Slow Emp. Growth

Price Bubble

Emp.Lossesand

Price Declines

Low Rates and Tax Incentives;Short‐RunImpact Only

Need Emp. Growth for Prices toRecover

12

MORTGAGE RATES AS A SECONDARY ECONOMIC DRIVER

HIGH/LOW MORTGAGE RATES HAVE A MODERATE INFLUENCE ON PRICE DECREASES/ INCREASES ALSO, LOOSE LENDING CRITERIA (2002-2006) VS. TIGHT LENDING CRITERIA (2010-2012)

0%

2%

4%

6%

8%

10%

12%

14%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1988.1

1989.1

1990.1

1991.1

1992.1

1993.1

1994.1

1995.1

1996.1

1997.1

1998.1

1999.1

2000.1

2001.1

2002.1

2003.1

2004.1

2005.1

2006.1

2007.1

2008.1

2009.1

2010.1

2011.1

2012.1

2013.1

2014.1

2015

FIXE

D 3

0 YE

AR M

OR

TGAG

E R

ATE

HO

USI

NG

PR

ICE

CH

ANG

ES -

ANN

UA

LLY

LOS ANGELES COUNTY: HOUSING PRICE CHANGES AND MORTGAGE RATES

Price Ch. MR: Lower MR: Avg. MR: Upper Fixed: 30-Yr

Empire Economics

Prior Real Estate Cycle Price Bubble Correction Stabilize ‐ Recovery

Mortgage rates are expected to remain at their lowest levels in the last few decades based on a loose monetarypolicy intended to stimulate the economy. Consequently, home affordability will remain high.

13

HIGH LEVELS OF MORTGAGE DEFAULTS CAUSE PRICE DECREASES

DUE TO EXCESS SUPPLY/PRICE DISCOUNTS

-56,000

-48,000

-40,000

-32,000

-24,000

-16,000

-8,000

0

8,000

16,000

24,000

32,000

40,000

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1988.1

1989.1

1990.1

1991.1

1992.1

1993.1

1994.1

1995.1

1996.1

1997.1

1998.1

1999.1

2000.1

2001.1

2002.1

2003.1

2004.1

2005.1

2006.1

2007.1

2008.1

2009.1

2010.1

2011.1

2012.1

2013.1

2014.1

NO

TIC

ES O

F M

OR

TGAG

E D

EFAU

LTS

HO

USI

NG

PR

ICE

CH

ANG

ES -

ANN

UA

LLY

LOS ANGELES COUNTY: HOUSING PRICE CHANGES & MORTGAGE DEFAULTS

Price Ch. NODS

Empire Economics


As prices increase, homeowners' negative equity will fall, leading to less mortgage defaults. Additionally, mortage payments will be more readily paid as the unemployment rate decreases.

14

NEW DEVELOPMENT ACTIVITY IS DRIVEN BY PRICE INCREASES,

WHICH REQUIRES EMPLOYMENT GROWTH AND LOW LEVELS OF DEFAULTS

(20,000)

(15,000)

(10,000)

(5,000)

-

5,000

10,000

15,000

-40%

-20%

0%

20%

40%

60%

80%

100%

1988.1

1989.1

1990.1

1991.1

1992.1

1993.1

1994.1

1995.1

1996.1

1997.1

1998.1

1999.1

2000.1

2001.1

2002.1

2003.1

2004.1

2005.1

2006.1

2007.1

2008.1

2009.1

2010.1

2011.1

2012.1

2013.1

2014.1

NU

MB

ER O

F N

EW H

OM

ES

PRIC

E C

HAN

GES

-AN

NU

ALLY

LOS ANGELES COUNTY: HOUSING PRICE CHANGES AND BUILDING PERMITS

Price Ch. SFU MFU

Empire Economics


Building permits remain well below their 1988‐2010 average.They are expected to increase as the number of distressed mortgage

sales decline to a normal level and prices rise

15

C. ECONOMIC- REAL ESTATE CONDITIONS IN THE CFD NO. 2006-1C MARKET AREA (SANTA CLARITA VALLEY)

Although it may require several years for Los Angeles County, as a whole, to recover from the recent economic recession, the rates of recovery will vary substantially among local areas, such as the CFD No. 2006-1C Market Area, the Santa Clarita Valley. Specifically, the local areas that will lead the recovery are those which have strong economic bases which generate employment growth. This, in turn, bolsters the housing market, in terms of the level of demand and also housing price stability/appreciation.

Accordingly, the purpose of this section is to discuss the employment and real estate conditions for the CFD No. 2006-1C Market Area, the Santa Clarita Valley, in particular. A meaningful metric of the relative performance of a local economy is its unemployment rate, the proportion of households that reside in the local area that are not employed. Specifically, local areas with relatively low unemployment rates have the following desirable attributes: The high proportion of the population that is employed supports a strong demand for housing. A relatively high proportion of the households have positive equity levels. The value of developable property tends to be positive which supports new development.

Santa Clarita Valley has a relatively low unemployment rate, lower than Los Angeles County, as a whole, and also lower than surrounding cities, such as San Fernando and Palmdale.

9.4%9.9%

6.1%

10.2%

12.3%

0%

2%

4%

6%

8%

10%

12%

14%

California LosAngelesCounty

SantaClaritaValley

SanFernando

Palmdale

RECENT UNEMPLOYMENT RATES:CALFORNIA, LOS ANGELES COUNTY AND SANTA CLARITA VALLEY

SANTA CLARITA VALLEY HAS A RELATIVELYLOW UNEMPLOYMENT RATE

16

D. CONCLUSIONS ON RECENT/ FUTURE HOUSING MARKET CONDITIONS

Empire’s housing market forecast for the Santa Clarita Valley is based upon its Designated Economic and Real Estate Scenario, which is as follows:

Market Correction 2007-2009: During this time period the housing market experienced a MAJOR correction, due initially to mortgage resets for creative financing structures and then due to the negative equity for many homeowners. Additionally, this was exacerbated by more stringent mortgage loan qualification criteria. During this time there were high levels of mortgage loan defaults, low levels of housing sales and minimal amounts of new residential development activity.

Housing Market Stabilized During 2010-2012: During this time period the housing market moved towards a balance of demand-supply, and so prices “stabilized”. Since employment growth, the fundamental factor underlying housing price appreciation, was not significant, the level of mortgage rates, which were at historically low levels, were critical factor supporting the market, especially since the federal tax credits for purchasers expired in April 2010. Additionally, although the adverse impact of properties under duress diminished, they still continued to create competition for new housing projects.

Foundation for a Market Recovery During 2013: The housing market moved into a recovery phase, with the return of employment growth, although at a moderate level. However, as the economy gains strength, financial rates, including mortgage rates, are likely to move upwards, and this will somewhat offset the favorable impacts of employment growth.

Normal Market Conditions During 2014-2015+: Employment, the traditional driver of housing price appreciation, is expected to increase at a moderate rate, and this will enable the housing market to return to its “historical” rate of price appreciation. However, unlike other recoveries, this recovery is not expected to surpass the long-term trendline due to the following macroeconomic conditions: * Reducing the Federal Deficit through higher tax rates, reduced deductions and lower spending. * Federal Reserve Board re-balancing its accounts by selling recently purchased securities. Economic Strength of the CFD No. 2006-1C Market Area - Santa Clarita Valley: The CFD No. 2006-1C Market Area, the Santa Clarita Valley, is regarded as being a relatively strong local economy in California, based upon its low unemployment rate. Due to its strong economic base, the Santa Clarita Valley’s housing market is poised for a housing recovery, since further employment gains will generate a demand for new homes, thereby providing support for the forthcoming products in CFD No. 2006-1C.

17

SECTION III: MICROECONOMIC ANALYSIS

A. METHODOLOGY UNDERLYING THE MICROECONOMIC ANALYSIS

OF THE RESIDENTIAL PROJECTS IN CFD NO. 2006-1C The microeconomic analysis focuses upon the competitiveness of the residential projects in CFD No. 2006-1C with regards to the regional geographic development patterns within Los Angeles County and also the currently active comparable projects within the Market Area.

Competitiveness from a Geographical Regional Perspective

* Location of CFD No. 2006-1C (West Hills) Relative to Competing Planned Communities,

Retail Centers and Business Parks

* Socioeconomic Characteristics: Crime Rates and School Quality

The existing/active/forthcoming Planned Communities, Retail Centers and Business Parks, in conjunction with the transportation system, determines the locations of the employment centers and residential areas along with retail centers; accordingly, these patterns can then be utilized to gauge the marketing potential of CFD No. 2006-1C from a geographic regional perspective.

Competitive Market Analysis of the Projects in CFD No. 2006-1C

Identification of the Currently Active Residential Projects in the Santa

Clarita Market Area and Selection of the Comparable Projects

Recent Housing Sale Trends and Price Patterns for Housing in the Competitive Market Area

Competitive Market Analysis of the Projects in the CFD

Statistical Analysis of the Prices, Living Areas and Special Taxes The Competitive Market Analysis evaluates the competitiveness of the residential projects in CFD No. 2006-1C relative to the currently active comparable projects, with regards to their prices, Special Taxes, and sizes of living areas.

18

B. DEVELOPMENT TRENDS/PATTERNS IN THE CFD NO. 2006-1C MARKET AREA

From a regional perspective, the competitiveness of CFD No. 2006-1C Market Area, the Santa Clarita Valley, is influenced by the geographic development patterns for employment and housing within Los Angeles County, primarily the Los Angeles Urban Core as well as the San Fernando Valley. Specifically, Business Parks generate industrial-office development while Planned Communities generate residential development which, in turn, generates a demand for Retail Centers; additionally, the flow of traffic between them is facilitated by the freeways and transportation corridors. Expansion of Employment Centers and Business Parks

The currently established major employment centers are Los Angeles, Orange, and San Diego (LA/OC/SD) urban cores as well as the western portions of Riverside and San Bernardino counties. There has also been moderate/strong growth for the various Business Parks located in the CFD No. 2006-1C Market Area. Specifically, these Business Parks are situated primarily along Interstate 5, a major north-south freeway that links the cities/communities in the CFD No. 2006-1C Market Area with the Los Angeles Urban Core.

Commuting Patterns: Employment Centers to Residential Areas

The CFD No. 2006-1C Market Area has an emerging economic base, and this, in turn, generates a substantial demand for housing in the Market Area. Additionally, some of the households employed in the Los Angeles Urban Core and San Fernando Valley employment centers reside in the CFD No. 2006-1C Market Area, since it offers various housing opportunities, including moderately priced single-family detached homes, that are not available in the Los Angeles Urban Core or the San Fernando Valley. These commuting patterns are based upon the Interstate 5 freeway that links the Los Angeles Urban Core as well as the San Fernando Valley employment centers to the CFD No. 2006-1C Market Area.

Therefore, the CFD No. 2006-1C Market Area, the Santa Clarita Valley, is strategically situated in close proximity to the Los Angeles Urban Core and also the San Fernando Valley, and, as such, has an emerging economic base. Additionally, it also offers moderately priced housing opportunities to both households employed in the Los Angeles Urban Core as well as the San Fernando Valley. For additional information on the regional development patterns, please refer to the following exhibit.

19

ECONOMIC BASES SUPPORTING DEVELOPMENT FOR CFD NO. 2006-1C

20

C. SOCIOECONOMIC CHARACTERISTICS: CRIME LEVELS AND THE QUALITY OF SCHOOLS

When households consider the purchase of a home, the primary factors are the location of the residence relative to their place of employment and also the prices that they can afford; furthermore, secondary socioeconomic factors that are significant include the safety as well as the educational quality of the schools in the Market Area; accordingly, these are now discussed.

1. Crime Levels and Safety in the Market Area To gauge the safety of the CFD No. 2006-1C Market Area, information on crime levels was obtained utilizing the most recent data available from the Federal Bureau of Investigation (FBI) Index, with a focus on “Violent Crimes”.

CFD Market Area/Santa Clarita Valley: The violent crime rate is approximately 0.92 per 1,000

people per year.

Palmdale – Northerly of the CFD: The violent crime rate is significantly higher, about 2.56 per 1,000 people per year.

Los Angeles City – Southerly of the CFD: The violent crime rate is also significantly higher, about 2.59 per 1,000 people per year.

0.92

2.562.59

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Santa Clarita Valley Palmdale Los Angeles

CR

IMES

RAT

E PE

R 1

,000

PEO

PLE

SOCIOECONOMIC CHARACTERISTICS: CRIME LEVELS(FBI: VIOLENT CRIME RATES BY CITIES/AREAS)

CFD No. 2006-1C has a relatively low crime rate, as compared to nearby cities/areas, and so this is beneficial to the demand for homes in the Market Area.

21

2. Quality of Schools and Education To gauge the quality of schools in the CFD No. 2006-1C Market Area and its vicinity, information was compiled on educational achievement, utilizing the Academic Performance Index Scores (API), published by the California Department of Education in a report dated 2012.

788

890

753 744

0

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400

600

800

1000

California Saugus Palmdale Los Angeles

API S

CO

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SOCIOECONOMIC CHARACTERISTICS: EDUCATIONAL QUALITYRECENT API SCORES FOR CALIFORNIA AND SELECT DISTRICTS

Accordingly, the Saugus School Facilities Financing Authority has an API of 890, much higher than that of California, and also significantly higher than Los Angeles or Palmdale.

Conclusions

From a socioeconomic perspective, the CFD No. 2006-1C Market Area has a significantly lower crime rate and the school district has a significantly higher educational achievement level than for California and other nearby cities in Los Angeles County; accordingly, these positive socioeconomic factors support the demand for homes in CFD No. 2006-1C.

22

D. COMPETITIVE MARKET ANALYSIS OF THE PROJECTS IN CFD NO. 2006-1C

A Competitive Market Analysis of the projects in CFD No. 2006-1C is now performed, by comparing their characteristics with the currently active comparable projects in the Competitive Housing Market Area.

1. Selection of the Currently Active Comparable Projects Empire Economics, based upon its market surveys, identified the currently active residential projects in the Santa Clarita Valley, and then selected those that are regarded as being the most comparable to the projects in CFD No. 2006-1C; accordingly, these are as follows:

The Villages of Valencia

West Hills: Highgate (CFD No. 2006-IC) Belmont (CFD No. 2006-IC) Monument (CFD No. 2006-IC) Mosaic

West Creek Aria II Lavello II Toscana II

River Village Charleston Lexington

Villa Metro a new community by The New Home Company is expected to come on the market in Summer 2013, with three projects that are expected to have single-family detached homes and a live-work townhome complex.

Nearby Planned Communities/Projects:

Plum Canyon Ranch Echo Pointe Ridgeview at Echo Ridge Sage Heatherton

Fair Oaks Ranch Living Smart Oak Crest - Crestview

23

So, based upon a consideration of the number of currently active projects and also their location, Empire regards the Villages of Valencia as being the most comparable to the active projects in CFD No. 2006-IC.

SANTA CLARITA VALLEY:APPROXIMATE LOCATIONS OF NEW PLANNED COMMUNITIES

WEST HILLS

FAIR OAKSRANCH

WEST CREEK

RIVER VILLAGE

PLUM CANYON RANCH

24

2. Recent Housing Sales Trends and Price Patterns in the Competitive Housing Market Area

To provide an overview of the recent conditions in the CFD No. 2006-1C Competitive Housing Market Area (CMA), the recent sales trends and price patterns are now analyzed.

(Note: The CMA encompasses West Hills, West Creek and River Village) Empire identified 993 new homes that were marketed in the CMA during the 2007- March 2013 time period, and then, for each of these, compiled information on their sales dates, sales prices and sizes of living area. Housing Sales Trends: For the 2007 to 1st-2013 time period, new housing sales were initially stable on a year by year basis but they then increased dramatically starting in 2012. During the 2007 to 2011, sales were in the range of about 100 to 165 homes per year.

For 2012, sales increased dramatically, to a level of 271 homes.

For the 1st-2013, sales amounted to 61 homes; if extrapolated, the level of home sales for 2013 would

be “similar” to the level for 2012.

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013: 1st-Qtr

SALES TRENDS FOR NEW HOMES IN THE CFD NO. 2006‐1 CMAPARTITIONED BY SUB‐AREAS & MARKET SEGMENTS

River Village: Detached Move-Up

West Hills: Detached Move-Up

West Creek Detached Entry

West Creek Attached

25

The sales statistics presented above are now partitioned into various market segments, as follows:

Entry-Level Buyers: West Creek Attached West Creek Detached

Move-Up Purchasers, similar to CFD No. 2006-1C West Hills River Village The composition of housing sales among the various market segments during the 2007 to 2012 time period experienced some significant shifts. During 2007-2010, the entry-level and move-up product had similar market shares.

Starting in 2011, and continuing thereafter, the entry-level market segment dramatically increased its

market share to 60% in 2011 and then 70% in 2012. o (Note: The market shares for 1st-2013 do not provide a sufficient sample size.)

The recent decline in the market share for move-up buyers can be attributed to an absence of the supply of such products, rather than a lack of market demand. So, the market-entry of the D.R. Horton projects in CFD No. 2006-1C will provide this market segment with move-up homes.

0%

20%

40%

60%

80%

100%

120%

2007 2008 2009 2010 2011 2012 2013: 1st-Qtr

SALES TRENDS FOR NEW HOMES IN THE CFD NO. 2006‐1 CMAPARTITIONED BY SUB‐AREAS & MARKET SEGMENTS

River Village: Detached Move-Up West Hills: Detached Move-Up

West Creek Detached Entry West Creek Attached

26

Housing Price Patterns: For the 2007 to 2012 time period, prices for new homes, as a whole, were relatively stable: For 2007, prices amounted to $457,000, on the average.

During 2008 to 2012, prices ranged from a low of $429,463 to a high of $513,739.

For 2012, prices amounted to $448,066, on the average, and this is within 2% of their 2007 levels.

With respect to the price patterns for homes in the various market segments, they have been as follows: Entry-Level Buyers: West Creek Attached: Prices have declined from $411,790 in 2007 to $325,145 in 2012 West Creek Detached: Prices declined from $792,257 in 2008 to $429,097 in 2012.

Move-Up Purchasers, similar to CFD No. 2006-1C: West Hills: Prices increased from $540,953 in 2007 to $713,077 in 2012 River Village: Prices decreased from $655,591 in 2007 to $531,288 in 2012

$456,694

$513,739$498,467

$429,463

$470,184$448,066

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2007 2008 2009 2010 2011 2012

PRICE PATTERNS FOR HOMES IN THE CFD NO. 2006‐1C CMAPARTITIONED BY SUB‐AREAS AND PRODUCT TYPES

Overall West Creek Attached West Creek Detached

West Hills: Detached River Village: Detached

Although Empire made adjustments to the prices due to variations in the sizes of the homes, there may still be some potential aberrations due to the types of products that are being offered on the marketplace.

27

3. Competitive Market Analysisof the Projects in CFD No. 2006-1C A Competitive Market Analysis of the projects in CFD No. 2006-1C is now performed, by comparing their characteristics with the currently active comparable projects in the Competitive Housing Market Area. The six currently active comparable projects as well as the four projects in CFD No. 2006-1C together have a total of 701 housing units; of these, 190 have had their escrows closed and so there are another 511 remaining for future occupancies. West Hills CFD No. 2006-1C: 1 prior closed-out project and 3 new active projects that just entered

the marketplace in April 2013, total of 326 homes; 43 homes in the closed-out project are occupied by homeowners while the other three projects with 283 homes just commenced sales.

West Creek: 3 active projects with 217 homes; 115 of these are occupied.

West Hills-Other: 1 active project with 56 homes; none are occupied yet.

River Village: 2 active projects with 102 homes; 32 are occupied.

West Hills CFD2006-1C West Creek West Hills - Other River Village

Escrows Closed 43 115 0 32Future Units 283 102 56 70

0

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300

CFD NO. 2006-1CMARKETING STATUS OF THE PROJECTS

28

For the comparable projects as well as the projects in CFD No. 2006-1C, their prices amount to some $596,875, on the average, while their living areas are some 3,059 sq.ft., on the average. CFD No. 2006-1C: Base prices of $649,852 for some 3,314 sq.ft. of living area. West Creek: Base prices of $470,783 for some 2,419 sq.ft. of living area.

West Hills-Other: Base prices of $643,500 for some 3,093 sq.ft. of living area.

River Village: Base prices of $656,745 for some 3,490 sq.ft. of living area.

Additionally, the currently active projects are offering incentive to purchasers that amount to some $6,111, on the average, with a range of $0 to $10,000. Most of these incentives appear to be related to the purchaser using the builder’s lender for their mortgage loan.

West Hills CFD 2006-1C West Creek West Hills - Other River Village Totals/Averages

LEFT: Price $649,852 $470,783 $643,500 $656,745 $596,875RIGHT: Living Area 3,314 2,419 3,093 3,490 3,059

0

500

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4,000

$0

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$700,000

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CFD NO. 2006-1CPRICES AND LIVING AREAS FOR THE PROJECTS

29

To compare the prices of the comparable projects as well as the projects in CFD No. 2006-1C their value ratios are utilized, the price per sq. ft. of living area, since this effectively makes adjustments for differences in their sizes of living areas. Accordingly, the value ratios amount to $196 per sq. ft. of living area and their Special Taxes/Assessments amount to some $3,992/yr. (0.68% as a ratio to the housing prices): CFD No. 2006-1C: Value Ratio of $197 and Special Taxes of $4,401/yr. (0.68%). West Creek: Value Ratio of $195 and Special Taxes of $3,530/yr. (0.75%).

West Hills-Other: Value Ratio of $208 and Special Taxes of $4,175/yr. (0.65%).

River Village: Value Ratio of $188 and Special Taxes of $3,777/yr. (0.58%).

The value ratios for the projects in CFD No. 2006-1C are SIMILAR to the market comparables, and their Special Tax percentages are SIMILAR to the market comparables.

West Hills CFD2006-1C West Creek West Hills - Other River Village Totals/Averages

LEFT: Value Ratio $197 $195 $208 $188 $196RIGHT: Special

Assmt/Tax $4,401 $3,530 $4,175 $3,777 $3,992

$197 $195$208

$188$196

$0

$500

$1,000

$1,500

$2,000

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$3,000

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CFD NO. 2006-1CVALUE RATIOS AND SPECIAL TAXES FOR THE PROJECTS

30

The six comparable active projects have an estimated sales rate of some 208 homes per year, for an average of some 35 homes per project per year; additionally, they have a future supply of 228 homes which, at recent sales rates, could take some 1.1 years to close-out.

(Note: Time to close-out of projects is extrapolated using current sales rates.)

West Creek: 3 projects with sales of 122 homes annually, some 41/project, and 102 remaining homes (0.8 year to close-out).

West Hills-Other: 1 project with sales of 45 homes annually, and 56 remaining homes (1.2 years to close-out).

River Village: 2 projects with sales of 41 homes annually, some 21/project, and 70 remaining homes (1.7 year to close-out).

115

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CFD NO. 2006-1CSALES RATES AND FUTURE SUPPLY FOR THE PROJECTS

Escrows Closed Future Supply Sales-Year

31

The culmination of the Competitive Market Analysis involves a statistical analysis of the active projects in CFD No. 2006-1C and the currently active comparable projects, based upon their total housing prices (base price plus Special Tax liens) and their sizes of living area:

The green line in the graph represents the best fit or correlation for the currently active comparable projects between total housing prices and size of living area, 91% is regarded as bring a very strong correlation.

The Competitive Market Analysis reveals that the currently active projects in CFD No. 2006-1C have

total prices (base prices and Special Tax Liens) that are similar to the currently active comparable projects.

R² = 0.9112

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400 3,600 3,800 4,000

TOTA

L H

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RIC

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SIZE OF LIVING AREA

CFD NO. 2006-1CCOMPETITIVE ANALYSIS OF THE PROJECTS

(TOTAL PRICE = BASE PRICE + SPECIAL TAX LIEN )

CFD NO. 2006-1C COMPARABLE PROJECTS

32

CHARACTERISTICS OF THE *COMPARABLE* ACTIVE PROJECTS IN THE COMPETITIVE HOUSING MARKET AREA BY PLANNED COMMUNITIES

Special Taxes

Project Project Builder Product Project Size and Sales Housing Prices Incentives Size of Living Area Value (Base Rate = 1.16%)

Locations Type Total Escrows Future Sales Lower Average Upper Lower Average Upper Ratio Amount/ Ratio/

Closed Rate/Yr. Year Price

West Hills CFD 2006-1C Milan KB Home Detached 43 43 0 N/A $547,990 $571,757 $592,990 N/A 2,941 3,327 3,655 $172 $4,364 0.76%

West Hills CFD 2006-1C Highgate D.R. Horton Detached 80 0 80 N/A $608,000 $629,114 $651,000 $10,000 2,627 2,803 2,969 $224 $4,000 0.64%

West Hills CFD 2006-1C Belmont D.R. Horton Detached 90 0 90 N/A $651,150 $669,864 $694,000 $10,000 2,892 3,380 3,705 $198 $4,364 0.65%

West Hills CFD 2006-1C Monument D.R. Horton Detached 113 0 113 N/A $720,000 $728,673 $740,000 $10,000 3,553 3,746 3,968 $195 $4,875 0.67%

West Creek Aria II Lennar Homes Detached 74 74 0 37 $385,500 $423,000 $460,500 $5,000 1,782 2,063 2,343 $205 $3,179 0.75%

West Creek Lavello II Lennar Homes Detached 63 41 22 40 $467,400 $509,350 $551,300 $5,000 2,540 2,722 2,903 $187 $4,014 0.79%

West Creek Toscana II Lennar Homes Detached 80 0 80 45 $449,000 $480,000 $511,000 $5,000 2,167 2,474 2,781 $194 $3,397 0.71%

West Hills - Other Mosiac Lennar Homes Detached 56 0 56 45 $585,000 $643,500 $702,000 $5,000 2,809 3,093 3,376 $208 $4,175 0.65%

River Village Charleston KB Home Detached 9 0 9 9 $629,990 $634,990 $639,990 $0 3,413 3,534 3,655 $180 $3,777 0.59%

River Village Lexington Lennar Homes Detached 93 32 61 32 $641,500 $678,500 $715,500 $5,000 3,073 3,447 3,820 $197 $3,777 0.56%

Statistical Summary

Sales / Year Projects

West Hills CFD 2006-1C N/A 4 326 43 283 N/A $631,785 $649,852 $669,498 $10,000 3,003 3,314 3,574 $197 $4,401 0.68%

West Creek 41 3 217 115 102 122 $433,967 $470,783 $507,600 $5,000 2,163 2,419 2,676 $195 $3,530 0.75%

West Hills - Other 45 1 56 0 56 45 $585,000 $643,500 $702,000 $5,000 2,809 3,093 3,376 $208 $4,175 0.65%

River Village 21 2 102 32 70 41 $635,745 $656,745 $677,745 $2,500 3,243 3,490 3,738 $188 $3,777 0.58%

Totals/Averages 35 10 701 190 511 208 $568,553 $596,875 $625,828 $6,111 2,780 3,059 3,318 $196 $3,992 0.68%

33

SECTION IV: ESTIMATED ABSORPTION SCHEDULES

A. ESTIMATED ABSORPTION SCHEDULES FOR THE PROJECTS IN

CFD NO. 2006-1C (WEST HILLS) The purpose of this section is to estimate the absorption schedules for the forthcoming homes in the three currently active projects in CFD No. 2006-1C (West Hills), based upon a comprehensive analysis of the following factors: The anticipated development schedule for the three currently active projects, based upon

information provided by D.R. Horton: 2013: 60 escrow closings 2104: 144 escrow closings 2015: 79 escrow closings

(Note: Empire regards these as being a measure of supply, with respect to when homes will be available for-sale; Empire arrives at its own independent absorption schedules.)

The market demand for homes in the CFD Market Area is based upon recent/expected

economic and real estate factors, according to the Most Probable Economic Scenario. As the economy continues to gain momentum, it will provide further support to the housing market, including the market segment for move-up homes. Furthermore, Santa Clarita Valley has a very low unemployment rate which provides its housing market with a strong foundation.

The competitive market analysis revealed that the currently active projects in CFD No. 2006-1C have Base Prices and Special Taxes that are regarded as being competitive with other active projects in the in the Competitive Housing Market Area.

Accordingly, Empire’s estimated absorption schedules for the residential projects in CFD No. 2006-1C are as follows: Closed-out Project (Prior - 2013): The 43 homes in the prior project by KB Home were

marketed during Fall 2011 to Spring 2012, so these are all closed-out. Currently Active Projects:

2013: The three projects, Highgate, Belmont and Monument, entered the marketplace in April 2013, and they are expected to have 54 escrow closings.

2014: The three projects are expected to have 108 escrow closings.

2015: The three projects are expected to have 92 escrow closings, with Highgate and Belmont closing out.

2016: The final project, Monument, is expected to close its remaining 29 homes. The estimated absorption schedules for the residential projects in CFD No. 2006-1C are subject to change due to potential shifts in economic/real estate market conditions and/or the development strategy by the builder, D. R. Horton.

34

Occupied 2013 2014 2015 2016Monument 0 16 32 36 29Belmont 0 18 36 37 0Highgate 0 20 40 19 0Milan 43 0 0 0 0

0

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YCFD NO.2006-1C (WEST HILLS)

ESTIMATED ABSORPTION SCHEDULE

B. POTENTIAL RISK FACTORS CFD No. 2006-1C has three projects by D. R. Horton that are offering single-family homes oriented towards the move-up market. However, as a share of the sales of new homes as a whole in the Competitive Market Area, the move-up segment has recently decreased from 50% of sales in 2010 to only 30% of sales in 2012. Although the economic and real estate conditions for the currently active move-up projects are expected to be favorable, there are some potential risk factors: During the next several years, there are potential factors which may result in higher mortgage

rates, as the Federal Reserve re-sells the mortgage securities and also the treasury bonds that it has purchased in recent years.

Also, during the next several years, as the federal government moves toward reducing its deficits, there may be attempts to curtail the use of mortgage deductions, and this may adversely impact the move-up housing market segment.

Finally, the estimated absorption schedules, which represent escrow closings to homeowners, are subject to the Assumptions and Qualifications set-forth in Section VI.

35

ESTIMATED ABSORPTION SCHEDULESCFD NO. 2006-1C

OverallProjects > Milan Highgate Belmont Monument Totals Averages

Status of Models Completed Open - Active Open - Active Open - ActiveClosed-Out

Expected Product Types Detached Detached Detached Detached

Housing UnitsTotals 43 79 91 113 326Share 13.2% 24.2% 27.9% 34.7% 100.0%

Marketing Status: Occupied; May 2013 43 0 0 0 43 Future Occupancies;June 2013+ 0 79 91 113 283

Number of Homes Plan # 1 15 22 22 29 Plan # 2 14 27 26 32 Plan # 3 14 30 26 33 Plan # 4 17 19 Totals 43 79 91 113 326 Living Areas Plan # 1 2,941 2,627 2,892 3,553 Plan # 2 3,413 2,761 3,370 3,822 Plan # 3 3,655 2,969 3,705 3,968 Plan # 4 3,529 3,529 Averages 3,327 2,803 3,380 3,746 3,360

Estimated Prices - Closed-Out: Summer 2012- - Currently Active - - Currently Active - - Currently Active - Plan # 1 $547,990 $608,000 $651,150 $720,000 Plan # 2 $575,990 $622,000 $669,000 $730,000 Plan # 3 $592,990 $651,000 $694,000 $740,000 Plan # 4 $658,489 $720,000 Averages $571,757 $629,114 $669,864 $728,673 $667,433

Builder/Lender's Incentives $10,000 $10,000 $10,000

Value Ratios $172 $224 $198 $195 $200

Planning Areas - Projects Milan Highgate Belmont Monument Annually Cumulative

Developer Absorption Schedules Prior - 2013 43 0 0 0 43 43

2013 0 20 20 20 60 1032014 0 48 48 48 144 2472015 0 12 22 45 79 326

Empire's Absorption SchedulesPrior -2013 43 0 0 0 43 43

2013 0 20 18 16 54 972014 0 40 36 32 108 2052015 0 19 37 36 92 2972016 0 0 0 29 29 3262017 0 0 0 0 0 326

Totals 43 79 91 113 326

Monument has 113 lots; of these, 107 are currently owned by D.R. Horton, and the remaining 6

are expected to be transferred to D.R. Horton upon recordation of their map.

36

SECTION V: MORTGAGE ANALYSIS

A. MORTGAGE LOAN CHARACTERISTICS FOR THE

HOUSEHOLDS IN CFD NO. 2006-1C

The purpose of this section is to perform an analysis of the characteristics of the sales price trends and mortgage Loan to Value Ratio patterns for the current homeowners in CFD No. 2006-1C, to estimate their current levels of homeowner equity. Although CFD No. 2006-1C has four projects, only one of these projects, Milan, has current homeowners; the remaining three by D.R. Horton just entered the marketplace. To perform the homeowner equity analysis, information was compiled on the sales prices and mortgage loans for the current homeowners in Milan; of the 43 homeowners, there was sufficient information available on 36 of them, a satisfactory sample size of 84%. The homes commenced escrow closings during Fall 2011 and the project was closed-out around Summer 2012. During this time period, the sales prices for the homes amounted to some $636,000, on the average. Furthermore, a statistical analysis revealed that housing sales prices were “stable” during this time period, there was no significant trend, either upwards or downwards.

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

7/26/2011 9/14/2011 11/3/2011 12/23/2011 2/11/2012 4/1/2012 5/21/2012 7/10/2012 8/29/2012 10/18/2012

CFD NO. 2006‐1C: CURRENT HOMEOWNERS(PROJECT: MILAN BY KB HOME ‐ CLOSED‐OUT)

RECENT HOUSING SALES PRICE TRENDS

37

The Loan to Value ratios (LTV) were calculated for each of the existing homeowners in CFD No. 2006-1C using the following formula:

First and Second Loans

------------------------------- Sales Price

For the existing homeowners in CFD No. 2006-1C, their overall LTV amounts to approximately 73%, so the homeowners have protective equity of about 27%.

Sales prices amount to $636,014/avg.

Mortgage Loans amount to $467,741/avg. (73%)

Homeowner Equity amounts to $168,272/avg. (27%) With regards to LTV trends, the LTV was about 60% initially when sales commenced and then over time rose to about 82% based upon the most recent sales.

0%

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100%

7/26/2011 9/14/2011 11/3/2011 12/23/2011 2/11/2012 4/1/2012 5/21/2012 7/10/2012 8/29/2012 10/18/2012

CFD NO. 2006‐1C: MILAN BY KB HOMEMORTGAGE LOAN TO HOUSING VALUE PATTERNS

Therefore, the current homeowners in CFD No. 2006-1C started with protective equity of +27% and since housing sales prices have remained stable during Fall 2011 to Summer 2012 time period, they still have a significant level of protective equity.

38

SECTION VI: ASSUMPTIONS AND LIMITING CONDITIONS

The Market Absorption Study is based upon various assumptions and limiting conditions; accordingly, these are as follows:

Property Boundaries

No survey or engineering analysis of CFD No. 2006-1C property has been made by the market analyst; the District Engineer's report utilized for the Bond is deemed to be reliable. The market analyst assumes the existing boundaries to be correct, that no encroachments exist and assumes no responsibility for any condition not readily observable from customary investigation and inspection of the premises, which might affect the valuation, excepting those items which were specifically mentioned in the report.

Maps and Exhibits Maps and exhibits included in this report are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as surveys, or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from the report.

Title to Property No opinion as to title is rendered. Data related to ownership and legal description, obtained from governmental records related to the formation of the District that forms the basis for identifying the boundaries of CFD No. 2006-1C are considered reliable. Title is assumed to be marketable and free and clear of all liens, encumbrances, easements and restrictions except those specifically discussed in the report. The property is evaluated assuming to be under responsible ownership and competent management and available for development to highest and best use.

Earthquakes and Seismic Hazards

The property which is the subject of this market analysis is within a geographic area prone to earthquakes and seismic disturbances. Except as specifically indicated in the report, no seismic or geologic studies have been provided to the market analyst concerning the geologic and/or seismic condition of the subject property. The market analyst assumes no responsibility for the possible effect on the subject property of seismic activity and/or earthquakes.

Soil and Geological Studies No detailed soil studies or geological studies or reports were made available to the market analyst. Assumptions employed in this report regarding soils and geologic qualities of the subject property have been provided to the client. However, such assumptions are not conclusive and the market analyst assumes no responsibility for soils or geologic conditions discovered to be different from the conditions assumed unless otherwise stated in this report.

Hidden or Unapparent Conditions

The market analyst assumes no responsibility for hidden or unapparent conditions of the property, subsoil, groundwater or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions.

Presence and Impact of Hazardous Material Unless otherwise stated in the report, the market analyst did not become aware of the presence of any hazardous material or substance during the market analyst's general inspection of the subject property. However, the market analyst is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the evaluation of the subject property. The market analyst assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material.

39

Structural Deficiencies of Improvements The market analyst has not performed a thorough inspection of the subject property, and except as noted in this report has not found obvious evidence of structural deficiencies in any improvements located on the subject property. Consequently, the market analyst assumes no responsibility for hidden defects or nonconformity with specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes, unless inspections by qualified independent professions or governmental agencies were provided to the market analyst. Further, the market analyst is not a licensed engineer or architect and assumes no responsibility for structural deficiencies not apparent to the market analyst at the time of their inspection.

Presence of Asbestos The market analyst is not aware of the existence of asbestos in any existing improvements on the subject property. However, the market analyst is not trained to discover the presence of asbestos and assumes no responsibility should asbestos be found in or at the subject property. For the purposes of this report, the market analyst assumes the subject property is free of asbestos and the subject property meets all federal, state and local laws regarding asbestos abatement.

Environmental and Other Regulations

The property is evaluated assuming it to be in full compliance with all applicable federal, state and local environmental regulations and laws, unless otherwise stated, and that there are no lawsuits that may adversely impact the rate of development.

Required Permits and Other Governmental Authority

Unless otherwise stated, the property evaluated is assumed to have all required licenses, permits, certificates, consents or other legislative and/or administrative authority from any local, state or national government or private entity or organization that have been or can be obtained or renewed for any use on which the evaluation analysis contained in this report is based upon.

Designated Economic Scenario The Market Absorption Study focuses upon the expected absorption schedule for the products in CFD No. 2006-1C according to the designated economic scenario. Specifically, this scenario represents the economic and real estate conditions for the Market Region and also the Market Area during the foreseeable future according to the most probable conditions, and this is regarded as being appropriate for the Bond Financing. However, the economic and market conditions which actually materialize on a year by year basis may differ from those presented according to the designated economic scenario, as a result of exogenous factors which are difficult to forecast/quantify. Accordingly, the designated scenario should be utilized as an economic framework for evaluating the marketing prospects of the properties within CFD No. 2006-1C rather than a "literal" representation of what is expected to occur on a year/year basis during the foreseeable future.

Provision of the Infrastructure The Market Absorption Study assumes that the governmental agencies that supply public facilities and services, including water, provide these in a timely manner so that the proposed products/projects in CFD No. 2006-1C can respond to the expected market demand for their products. Otherwise, if the required infrastructure is not available in a timely manner, then the absorption of the products/projects could be adversely impacted.

Developer/Builders Responsiveness to Market Conditions

The Market Absorption Study assumes that the developer/builders in CFD No. 2006-1C respond to the market conditions with products that are competitively priced and have the features/amenities that are desired by the purchasers. Specifically, most of the homes in CFD No. 2006-1C have not yet entered the marketplace, and so the specific characteristics of their product types cannot be identified until they actually offer products on the marketplace. Consequently, to the extent that future products/projects have prices/features that differ from the competitive market standards, then their absorption schedule would need to be modified from those presented according to the designated economic scenario.

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Financial Strength of the Projects’ Developer/Builders The Market Absorption Study assumes that the developer/builders in CFD No. 2006-1C (and also their lenders) have sufficient financial strength to adequately fund their projects, including paying their Special Taxes/Assessments, and that they have sufficient financial reserves which could be utilized to supplement their cash flow positions, in the event that adverse economic or market conditions occur.

Accuracy of Information from Others

In preparing this report, the market analyst was required to rely on information furnished by other individuals or found in previously existing records and/or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either expressed or implied, is given by the market analyst for the accuracy of such information and the market analyst assumes no responsibility for information relied upon and later found to have been inaccurate. The market analyst reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available.

Liability of Market Analyst

The liability of Empire Economics, the market analyst responsible for this report, is limited to the client only and to the fee actually received by the market analyst. Further, there is no accountability, obligation or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussion. The market analyst is in no way to be responsible for any costs incurred to discover or correct any deficiencies or any type present in the property--physical, financial, and/or legal.

Testimony or Court Attendance Testimony or attendance in court or at any other hearing is not required by reason of rendering this market analysis, unless such arrangements are made a reasonable time in advance of said hearing. Separate arrangements would need to be made concerning compensation for the market analyst's time to prepare for and attend any such hearing.

Right of Publication of Report Possession of this report, or a copy of it, does not carry with it the right of publication except for the party to whom it is addressed. Without the written consent of the market analyst, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with properly written qualification and only in its entirety for its stated purpose.

Timeliness of the Market Absorption Study

The Market Absorption Study performs a comprehensive analysis of the relevant land-use, economic and residential market conditions that are expected to influence the marketing success of the products/projects in CFD No. 2006-1C. Nevertheless, the Study should be dated within six-months of the Bond Sale, or even sooner, should these land-use and/or economic market as well as real estate conditions change significantly.

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APPENDIX A

CREDENTIALS/QUALIFICATIONS OF EMPIRE ECONOMICS RESUME: JOSEPH T. JANCZYK, Ph.D.

Education: University of California, Riverside, Ph.D. in Economics, Completed in 1976 Specializations in Urban Economics, Mathematical Modeling and Econometric Analysis State University of New York at Buffalo, Bachelors, Completed in 1970 Dual Majors: Economics and Psychology Prior Employment: California State University, Tenured Economics Professor: 1976-1985 Courses Taught: Microeconomics, Macroeconomics, Urban Economics, Computer Modeling, Econometrics, among others

Empire Economics: Chairman and President: 1986-Present

Perform Independent Real Estate Consulting Services Primarily for Land Secured Financings Work for Public Entities including Counties, Cities, School Districts and Water Districts Long-term Relationships with Many Clients, Including Orange and Riverside Counties, 25+

years Well Established Relationships with Numerous Professionals in the Municipal Finance Industry Performed 450+ Studies on behalf of Public Entities for $14B+ in municipal financing o Land Secured Financings for Planned Communities, Business Parks and Retail Centers

for 350+ CFDs/ADs for $7.5B bonds Price Point Studies – Establish Special Taxes that conform to public entities’ policies Market Absorption Studies: Provide timelines for phasing infrastructure Homeowner Equity Studies: Current Equity levels for homeowners

o Economic Forecasting Studies: Forecast Employment and Housing Demand

Socioeconomic Studies Orange County Transportation Corridors: 2 studies $2.75B bonds o Designated as Municipal Bond Issue of the Year for 1999 o Rating Agency and Bond Insurer Presentations – Trips to New York City

Mortgage Revenue Bond Issues: Lower Mortgage Rates 50+ studies for $1.7B bonds Other Municipal Bond Issues: 35+ studies $2B+ bonds; Certificates of Participation, others Forthcoming Bond Issues: 30+ studies for $500M+ future bond sales

Industry Contributions – Regular Speaker/Panelist at Following Events:

UCLA Municipal Bond Financing Seminars (10+ times, as Featured Speaker) Bond Buyer Conference League of Cities Municipal Bond Industry Association Best Practices for Continuing Disclosure Appraisal Standards for Land Secured Financing by CDIAC Meetings with Municipal Bond Funds

Dedicated to Public Sector: Certifications Provided in each Study:

Empire has not performed any consulting services for the CFD/AD property owners nor the developers/builders, during at least the past twenty years.

Empire will not perform any consulting services for the CFD/AD property owners nor the developers/builders, during at least the next five years.


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APPENDIX E

SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF THE SAUGUS-CASTAIC SCHOOL FINANCING AUTHORITY

SERIES 2013 SPECIAL TAX BONDS The following is a brief summary of certain provisions of the Fiscal Agent Agreement relating to the above-referenced Series 2013 Special Tax Bonds. This summary is not intended to be definitive and is qualified in its entirety by reference to such Fiscal Agent Agreement for the complete terms of the Fiscal Agent Agreement. Copies of the Fiscal Agent Agreement are available upon request from the Saugus Union School District. DEFINITIONS The following are summaries of definitions of certain terms used in this Summary. All capitalized terms not defined in the Fiscal Agent Agreement or elsewhere in the Official Statement have the meaning(s) set forth in the Fiscal Agent Agreement.

“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311, et seq., of the Government Code of the State and any successor provisions thereto. “Administrative Expense Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Administrative Expense Requirement” means the amount of $30,000 as further set forth in, and subject to the provisions and limitations of the Fiscal Agent Agreement. “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes and any other costs related to the Bonds, including the fees and expenses of the Fiscal Agent and any persons, parties, consultants or attorneys employed pursuant to Covenants 2, 3 or 12 of the Fiscal Agent Agreement, costs and legal expenses of foreclosure actions undertaken pursuant to the terms thereof to the extent not recovered pursuant to statutory authorization, costs otherwise incurred by the District in order to carry out the authorized purposes of the Bonds, including statutory disclosure and reporting requirements for the District, overseeing the Developer’s continuing disclosure obligations and reporting requirements, rebate compliance and “Administrative Expenses” as defined in the Rate and Method. “Annual Debt Service” means, with respect to the Outstanding Bonds, for each Bond Year, the sum of (a) the interest payable on such Bonds in such Bond Year, assuming the Bonds are retired as scheduled, and (b) the principal amount of the Outstanding Bonds scheduled to be paid in such Bond Year.

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“Authority” means the Saugus–Castaic School Facilities Financing Authority formed by the School District and the Castaic District pursuant to California Government Code 6500 et seq. and a Joint Exercise of Powers Agreement dated August 9, 2007. “Authorized Investments” means, subject to the Fiscal Agent Agreement, any of the following investments, if and to the extent the same are at the time legal for investment of the School District’s funds (with the Fiscal Agent entitled to rely upon the investment direction of the District as a determination that such investment is a legal investment): (a) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest, and which have a maximum term to maturity not to exceed three years. (b) Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, and which have a maximum term to maturity not to exceed three years, including:

‒‒ Export-Import Bank ‒‒ Farm Credit System Financial Assistance Corporation

‒‒ Rural Economic Community Development Administration (formerly the Farmers Home Administration)

‒‒ General Services Administration ‒‒ U.S. Maritime Administration ‒‒ Small Business Administration ‒‒ Government National Mortgage Association (GNMA) ‒‒ U.S. Department of Housing & Urban Development (PHA’s) ‒‒ Federal Housing Administration ‒‒ Federal Financing Bank. (c) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America, and which have a maximum term to maturity not to exceed three years:

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‒‒ Senior debt obligations rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC)

‒‒ Obligations of the Resolution Funding Corporation (REFCORP) ‒‒ Senior debt obligations of the Federal Home Loan Bank System. (d) Registered state warrants or treasury notes or bonds of the State, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short-term or long-term rating categories by Moody’s or Standard & Poor’s. (e) Registered bonds, notes, warrants or other evidences of indebtedness of any local agency of the State, including bonds payable solely out of revenues from a revenue-producing property owned, controlled, or operated by the local agency, where the interest on such local agency obligation is exempt from Federal and State income taxes and which are rated in one of the two highest short-term or long-term rating categories by Moody’s or Standard & Poor’s. (f) Deposit accounts, time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, which may include the Fiscal Agent or its affiliates, or a state or federal savings and loan association; provided, that the certificates of deposit shall be one or more of the following:

(1) Continuously and fully insured by the Federal Deposit Insurance Corporation.

(2) Continuously and fully secured by securities described in clause (a) or (b) above which shall have a market value, as determined on a marked-to-market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates of deposit. (g) Commercial paper of “prime” quality of the highest ranking or of the highest letter and numerical rating as provided by Moody’s and Standard & Poor’s at the time of purchase, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of $500,000,000 and that have an “A” or higher rating for the issuer’s debentures, other than commercial paper, by Moody’s and Standard & Poor’s, provided that purchases of eligible commercial paper may not exceed 180 days’ maturity nor represent more than 10% of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20% of the net proceeds of the Bonds. (h) A repurchase agreement with a state or nationally chartered bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York the long term debt

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of which is rated at least “AA” by Standard & Poor’s or “Aa1” by Moody’s, provided that all of the following conditions are satisfied:

(1) the agreement is secured by any one or more of the securities described in clause (a) above of this definition of Authorized Investments (“Underlying Securities”);

(2) the Underlying Securities are required by the repurchase agreement

to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least $100,000,000 and which is independent of the issuer of the repurchase agreement (“Holder of Collateral”) and the Underlying Securities have been transferred to the Holder of Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor’s books);

(3) the Underlying Securities are maintained at a market value, as

determined on a marked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested and at such levels and additional conditions not otherwise in conflict with the terms above as would be acceptable to Standard & Poor’s and Moody’s so as to maintain, respectively, an “AA” or “Aa1” rating in an “AA” or “Aa1” rated structured financing (with a market value approach); and

(4) the agreement provides that if during its term the provider’s rating by Moody’s and Standard & Poor’s is withdrawn or suspended or falls below “A-” by Standard & Poor’s or “A3” by Moody’s, as appropriate, the provider must within 10 days of receipt of direction from the Fiscal Agent, repurchase all collateral and terminate the agreement, with no penalty or premium to the District or Fiscal Agent. (i) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long-term debt of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated at least “AA” by S&P and “Aa” by Moody’s; provided that, by the terms of the investment agreement:

(1) Interest payments are to be made to the Fiscal Agent at times and in amounts as necessary to pay debt service on the Bonds.

(2) The invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the District and the Fiscal Agent hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid.

(3) The investment agreement shall state that it is the unconditional

and general obligation of, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors.

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(4) The District and the Fiscal Agent receives the opinion of domestic

counsel (which opinion shall be addressed to the District) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable).

(5) The investment agreement shall provide that if during its term

(A) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3,” respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the District, the Fiscal Agent or a third party acting solely as agent therefore (“Holder of the Collateral”) collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (ii) repay the principal of and accrued but unpaid interest on the investment; and

(B) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3,” respectively, the provider must, at the direction of the District or the Fiscal Agent, within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the District or Fiscal Agent.

(6) The investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession).

(7) The investment agreement must provide that if during its term

(A) the provider shall default in its payment obligations, the

provider’s obligations under the investment agreement shall, at the direction of the District or the Fiscal Agent, be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Fiscal Agent, as appropriate; and

(B) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the District or Fiscal Agent, as appropriate. (j) A taxable or tax exempt government money market portfolio mutual fund restricted to obligations with either maturities of one year or less or a dollar weighted average

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maturity of 120 days or less, and either issued, guaranteed or collateralized as to payment of principal and interest by the full faith and credit of the United States of America or rated in one of the three highest categories by Moody’s or Standard & Poor’s. Such money market funds may include funds for which the Fiscal Agent, its affiliates or subsidiaries provide investment advisory or other management services. (k) The Local Agency Investment Fund referred to in Section 16429.1 of the Government Code of the State to the extent the Fiscal Agent may deposit and withdraw funds directly. (l) The Los Angeles County Investment Pool to the extent the Fiscal Agent may deposit and withdraw funds directly. “Authorized Representative(s)” or “District Representative(s)” means an officer of the School District authorized to provide written directives on behalf of the District, which shall include the School District’s Superintendent, Assistant Superintendent, Business Services and such other persons as shall be designated in writing by the Superintendent or the Assistant Superintendent, Business Services. “Board” or “Board of Directors” means the Board of Trustees of the Saugus Union School District acting as the Board of Directors of the Saugus-Castaic School Facilities Financing Authority.

“Bond Counsel” means a firm of nationally recognized bond attorneys, initially Bowie, Arneson, Wiles & Giannone. “Bond Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Bond Register” means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. “Bond Year” means each twelve month period extending from September 2 in one calendar year to September 1 of the succeeding calendar year, except in the case of the initial Bond Year which shall be the period from the Delivery Date to September 1, 2013, both dates inclusive. “Bondowner(s)” or “Owner(s)” means the person or persons in whose name or names any Bond is registered. “Bonds” means the $18,030,000 Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority Series 2013 Special Tax Bonds issued pursuant to the terms of the Fiscal Agent Agreement.

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“Business Day” means a day which is not a Saturday or a Sunday or a day on which banks in Los Angeles, California, and New York, New York, are not required or permitted to be closed. “Cash Deposit(s)” means a cash deposit(s) provided pursuant to the Fiscal Agent Agreement. “Castaic District” means the Castaic Union School District. “CFD Funding Agreement” means, that certain “Agreement for Formation of, and Funding by, Mello-Roos Community Facilities District and for Conveyance of School Site” entered into by and between the School District and the Original Developer, dated May 2, 2006, as amended by the First, Second, Third, and Fourth Amendments thereto, and as may be further amended. “Code” means the Internal Revenue Code of 1986, as amended, and any successor provisions thereto. “Completion Date” means the date on which the Project, or portion thereof, is completed and all Project Costs have been paid as evidenced by a certificate to that effect delivered to the Fiscal Agent by the District. “Construction Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the District or School District and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, cost of reproducing and binding documents, closing costs, appraisal costs, filing and recording fees, fees and expenses of counsel to the District, Authority, or School District, initial fees and expenses of the Fiscal Agent, including its first annual administration fee and fees of its counsel, expenses incurred by the District, the Authority and the School District in connection with the issuance of the Bonds and the establishment of the District, legal fees and charges, including Bond Counsel and Disclosure Counsel, special tax consultant’s fees, appraiser’s fees, market absorption consultant’s fees, financial consultants’ fees, charges for execution, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing, including any funds advanced by the Original Developer for the foregoing items of expense. “Costs of Issuance Account” means the account of that name within the Construction Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Dated Date” or “Delivery Date” means the date the Bonds are delivered. “Depository(ies)” means initially DTC and, in accordance with then-current guidelines of the Securities and Exchange Commission, such other securities depositories as the District may designate in a certificate delivered to the Fiscal Agent.

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“Developed Property” shall have the same meaning set forth in the Rate and Method. “Developer” means D.R. Horton Los Angeles Holding Company, Inc. a California corporation, and its successors to the Undeveloped Property or the Developed Property, or otherwise, and its assigns, excluding individual homeowners of residential assessor parcels within the District with record title. “Dissemination Agent” means Willdan Financial Services or any successor dissemination agent appointed by the District pursuant to the District Continuing Disclosure Certificate. “District” means Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority. “District Continuing Disclosure Certificate” shall mean that certain Community Facilities District Continuing Disclosure Certificate provided by the School District on behalf of the District, dated the Delivery Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof, with respect to the Bonds. “DTC” means The Depository Trust Company, 55 Water Street, 25th Floor, New York, New York, 10041-0099, Attn: Call Notification Department, Fax: (212) 855-5004. “Excess Investment Earnings” shall mean an amount equal to the sum of: (i) the excess of (A) the aggregate amount earned from the Delivery Date on all Nonpurpose Investments in which Gross Proceeds are invested (other than amounts attributable to an excess described in this subparagraph (i)), over (B) the amount that would have been earned if the yield on such Nonpurpose Investments (other than amounts attributable to an excess described in this subparagraph (i)) had been equal to the Yield on the Bonds, plus (ii) any income attributable to the excess described in subparagraph (i). In determining the amount of Excess Investment Earnings, there shall be excluded any amount earned on any fund or account which is used primarily to achieve a proper matching of revenues and annual debt service on the Bonds during each Bond Year and which is depleted at least once a year except for a reasonable carryover amount not in excess of the greater of one year’s earnings on such fund or account or one-twelfth (1/12) of Annual Debt Service on the Bonds, as well as amounts earned on said earnings. The District intends that the Bond Fund, including the Principal Account and the Interest Account established therein, the Special Tax

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Fund and the Redemption Fund will be the type of funds described in the preceding sentence. The Fiscal Agent shall have no responsibility to determine Excess Investment Earnings and may rely on the calculations provided by the District or any arbitrage consultant retained by the District. “Federal Securities” means any of the following which are non-callable and which at the time of investment are legal investments under the laws of the State for funds held by the Fiscal Agent: (i) direct general obligations of the United States of America (including State and Local Government Series and including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as “stripped” obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export-Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America. “Fiscal Agent” means U.S. Bank National Association, a national banking association, and its successors and assigns or any and other fiscal agent which may be appointed pursuant to the Fiscal Agent Agreement. “Fiscal Agent Agreement” means the Fiscal Agent Agreement, as amended or supplemented pursuant to the terms hereof. “Fiscal Year” means the period from July 1 to June 30 in any year. “Fitch” means Fitch Ratings and any successors. “Gross Proceeds” means any proceeds of the Bonds and any funds (other than proceeds of the Bonds) that are part of a reserve or replacement fund for the Bonds within the meaning of Section 1.148-1(b) of the Regulations. “Gross Taxes” means the amount of all Special Taxes collected within the District and proceeds from the sale of property collected pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes. “Hart Agreement” means that Joint Community Facilities Agreement dated January 15, 2008, by and among the Authority, the Original Developer and the Hart District to provide

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financing for the Hart Facilities from the proceeds of the Bonds, as it may be amended from time to time. “Hart District” means the William S. Hart Union High School District. “Hart Facilities” means school facilities of the Hart District authorized to be constructed, acquired and financed under the Formation Resolution, the Bond Authorization Resolution and the Hart Agreement. “Hart Facilities Account” means the account of that name within the Construction Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Independent Financial Consultant” means a consultant or firm of such consultants generally recognized to be qualified in the field of implementation and administration of community facilities districts, or the financial consulting field, appointed and paid by the District or the School District and who, or each of whom: (1) is independent of the District and the School District or any of the property owners within the District; (2) does not have any substantial interest, direct or indirect, with the District, the School District, or any of the property owners within the District; and (3) is not an officer or employee of the District or the School District, or an owner, officer or employee of any of the property owners within the District, but who may be regularly retained to make annual or other reports to the District or the School District. “Interest Account” means the account of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Interest Payment Date” means March 1 and September 1 of each year during which Bonds are Outstanding, commencing March 1, 2014. “Land Purchaser” is defined in the Fiscal Agent Agreement. “LC Developer” means the Developer, or a Land Purchaser. “Legislative Body” means the Board of Directors, acting as the Legislative Body of the District. “Letter(s) of Credit” means that certain irrevocable, standby letter(s) of credit issued or provided pursuant to the Fiscal Agent Agreement by a Letter of Credit Bank(s), or any reissuance or extension thereof, which Letter(s) of Credit shall be in the applicable Stated Amount and shall be for an initial term of no less than one year.

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“Letter of Credit Bank(s)” means the issuer from time to time of a Letter(s) of Credit and the respective successors and assigns of the issuer thereof and any surviving, resulting or transferee banking association or corporation with which, or into which, it may be consolidated or merged or to which it may transfer all of its banking business, provided that such entity shall have a minimum rating, at all times during the term of the Letter(s) of Credit, of one of the following: (1) Moody’s long-term rating of “A2” and short-term rating of “P-1”; or, (2) S&P long-term rating of “A” and short-term rating of “A-1”; or, (3) Fitch long-term rating of “A+” and short-term rating of “F1”; with any of the foregoing ratings to be evidenced by proof provided by the Letter of Credit Bank(s) to the District and the Fiscal Agent in writing. “Letter of Credit Fund” means the fund by that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Mandatory Redemption Account” means the account of that name within the Redemption Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Mandatory Sinking Payments” means the amounts to be applied to the redemption of the Bonds in accordance with the schedule set forth in the Fiscal Agent Agreement and any subsequent schedule set forth in any Supplement. “Maximum Annual Debt Service” means the maximum sum obtained for any remaining Bond Year prior to the final maturity on the Bonds by totaling the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year whether at maturity or by redemption together with a premium thereon, if any premium is payable; and (2) the interest payable on the aggregate principal amount of Bonds Outstanding in such Bond Year, assuming the Bonds are retired as scheduled. “Moody’s” means Moody’s Investors Services and its successors. “Net Taxes” means the amount of all Gross Taxes minus an amount equal to the Administrative Expense Requirement, as further set forth in the Fiscal Agent Agreement. “National Information Service” means the Electronic Municipal Market Access system of the Municipal Securities Rulemaking Board (MSRB), 1900 Duke Street, Suite 600, Alexandria, Virginia 22314, or such other electronic system designated by the MSRB or the Securities and Exchange Commission, or as may be designated by the District in a certificate delivered to the Fiscal Agent. “Nominee” means the nominee of DTC, which may be DTC, as determined from time to time pursuant to the Fiscal Agent Agreement.

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“Non-Homeowner Property” means property in the District that is owned by an LC Developer; property in District owned by individual homeowners of record shall not constitute Non-Homeowner Property. “Nonpurpose Investments” means any security, investment, obligation, annuity, investment-type property, specified private activity bond or any other type of investment property defined in Section 148 of the Code in which Gross Proceeds are invested (other than tax-exempt securities which are described in Section 103(a) of the Code) and which is not acquired to carry out the governmental purpose of the Bonds. “Optional Redemption Account” means the account of that name within the Redemption Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Ordinance” means Ordinance No. 2008-1 adopted by the Legislative Body on March 4, 2008. “Original Developer” means The Newhall Land and Farming Company (a California Limited Partnership). “Original Purchaser” or “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, as the first purchaser of the Bonds from the District. “Outstanding” means all Bonds theretofore issued by the District, except: (1) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (2) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Fiscal Agent pursuant to the terms hereof; and (3) Bonds paid and discharged pursuant to Article IX hereof. “Prepaid Special Taxes” means all Special Taxes prepaid to the District pursuant to the Rate and Method during the term hereof, less related Administrative Expenses. “Prepayment Account” means the account of that name within the Special Tax Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Principal Account” means the account of that name within the Bond Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Principal Corporate Trust Office” means the corporate trust office of the Fiscal Agent, which, at the date of execution of the Fiscal Agent Agreement, is located at 633 W. Fifth

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Street, 24th Floor, Los Angeles, California 90071, or such other office(s) as the Fiscal Agent may designate from time to time. “Project” means the “CFD Facilities,” or any portion thereof, as defined in the Formation Resolution and referred to in the Community Facilities District Report for the District dated February 19, 2008, which includes the School Facilities, the Hart Facilities and the Sanitation Fees. “Project Costs” means the costs of design, acquisition, construction and installation of the Project and all costs related thereto. Project Costs may include the payment, or prepayment, of lease payments or installment payments necessary for the acquisition of all or part of the Project. “Purchase Price” for the purpose of computation of the Yield of the Bonds, has the same meaning as the term “issue price” in Sections 1273(b) and 1274 of the Code, and, in general, means the initial offering price to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which price a substantial amount of the Bonds are sold or, if the Bonds are privately placed, the price paid by the underwriter or the acquisition cost of the underwriter. The term “Purchase Price,” for the purpose of computation of the Yield of Nonpurpose Investments, means the “fair market value” of the Nonpurpose Investments on the date of use of Gross Proceeds for acquisition thereof, or, if later, on the date that Investment Property (as defined in Section 148(b)(2) and (3) of the Code) constituting a Nonpurpose Investment becomes a Nonpurpose Investment of the Bonds, as the case may be. “Rate and Method” means the Rate and Method of Apportionment for CFD No. 2006-1C of the District, as set forth in the Ordinance as such may be amended or interpreted from time to time. “Rating Agencies” means S&P, Moody’s and Fitch. “Rebate Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Record Date” means the 15th day of the calendar month preceding an Interest Payment Date whether or not such day is a Business Day. “Redemption Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Regulations” means any temporary, proposed or final regulations of the United States Department of Treasury with respect to obligations issued pursuant to Section 103 and Sections 141 to 150 of the Code. “Reserve Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

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“Reserve Requirement” means with respect to the Bonds, an amount, as of any date of calculation, equal to the least of (i) 10% of the original principal amount of the Bonds, (ii) Maximum Annual Debt Service, or (iii) 125% of average Annual Debt Service on the Bonds. “Resolution of Issuance” means Resolution. 2013-14 # 01 of the Authority adopted by the Board of Directors, dated July 23, 2013, authorizing the issuance of the Bonds and approving the Fiscal Agent Agreement. “Responsible Officer” of the Fiscal Agent means and includes the president, every senior vice president, every vice president, every assistant vice president, every trust officer or any other Authorized Representative of the Fiscal Agent at its Principal Corporate Trust Office. “Sanitation District” means the Santa Clarita Valley Sanitation District. “Sanitation District Agreement” means that Joint Community Facilities Agreement dated May 16, 2006, as amended by the First Amendment dated December 11, 2007, by and among the Authority, the School District, the Original Developer, and the Sanitation District to provide financing for the Sanitation Fees from the proceeds of the Bonds, as it may be further amended from time to time. “Sanitation Fees” means the sanitation capital facilities fees of the Sanitation District being financed from the proceeds of the Bonds pursuant to the Formation Resolution, Bond Authorization Resolution and the Sanitation District Agreement. “Sanitation Fees Account” means the account of that name within the Construction Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “School District” means the Saugus Union School District. “School Facilities” means the facilities of the School District authorized to be constructed, acquired and financed under the Formation Resolution and Bond Authorization Resolution. “School Facilities Account” means the account of that name within the Construction Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Sinking Fund Redemption Account” means the account of that name within the Redemption Fund established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Special Tax Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.

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“Special Taxes” means the special taxes levied by the Legislative Body in accordance with the Rate and Method within the District pursuant to the Act, the Formation Resolution, the Election and the Ordinance. “Standard & Poor’s” or “S&P” means Standard & Poor’s Ratings Group and its successors. “State” means the State of California. “Stated Amount(s)” means, during the time that a Cash Deposit(s) or Letter(s) of Credit is required in accordance with the requirement set forth in the Fiscal Agent Agreement as to the Bonds, the estimated annual amount of Special Taxes to be levied on land in the District listed in Attachment 1 of the Fiscal Agent Agreement to this Agreement (inclusive of the Administrative Expense Requirement, but exclusive of the 10% coverage amount related to debt service coverage) owned by any LC Developer. The initial Stated Amount for the Developer is $1,124,565.37. “Supplement” means any supplemental agreement amending, restating, and/or supplementing the Fiscal Agent Agreement. “Surplus School Facilities Fund” means the fund of that name established under, and held by the Fiscal Agent pursuant to the Fiscal Agent Agreement. “Tax Certificate” means the certificate of that name to be executed by an Authorized Representative of the District on the Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. “Term Bonds” means the Bonds maturing on 2018, 2023, 2028, 2033 and 2043. “Underwriter” means Stifel, Nicolaus & Company, Incorporated. “Undeveloped Property” shall have the same meaning set forth in the Rate and Method. “Yield” means that yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the case of Nonpurpose Investments which require payments in a form not characterized as principal and interest) on a Nonpurpose Investment or on the Bonds produces an amount equal to the Purchase Price of such Nonpurpose Investment or the Bonds, as the case may be, all computed as prescribed in the applicable Regulations. ISSUANCE OF THE BONDS The Bonds are issued pursuant to the Act, the Resolution of Issuance and the Fiscal Agent Agreement in the amounts and maturities set forth in the Fiscal Agent Agreement. Under and pursuant to the Act, the Bonds are being issued for the purposes of funding the Project, funding the Reserve Requirement and paying Costs of Issuance. The terms of the Bonds, and a

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description of the Bonds, including registration and transfer matters, are set forth in the Fiscal Agent Agreement (See “INTRODUCTION,” “FACILITIES TO BE FINANCED WITH PROCEEDS OF THE BONDS” and “THE BONDS”). Limited Obligation The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and amounts in certain funds and accounts created pursuant to the Fiscal Agent Agreement as specified therein. The Net Taxes are pledged for the payment of the Bonds pursuant to the terms of the Fiscal Agent Agreement. The Bonds and interest thereon are not payable from the general fund of the District or the School District. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District, or the School District is pledged for the payment of the Bonds or interest thereon, and no Owner of the Bonds may compel the exercise of the taxing power by the District or the School District or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption of any thereof are not a debt of the District (except to the limited extent set forth in the Fiscal Agent Agreement) or the School District, the State nor any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon any property or income, receipts or revenues of the District or the School District, except the Net Taxes which are, under the terms of the Fiscal Agent Agreement, pledged for the payment of the Bonds and interest thereon. Neither the members of the Legislative Body or the Board nor any persons executing the Bonds are liable personally for the Bonds by reason of the issuance thereof. Pursuant to the Act and the Fiscal Agent Agreement, the Bonds shall be equally payable from the Net Taxes without priority for number, date of the Bonds, date of sale, 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 thereof shall be exclusively paid from the Net Taxes and amounts held in certain funds and accounts created under the Fiscal Agent Agreement as specified therein. All of the Net Taxes are pledged for the payment of the Bonds, and such Net Taxes and any interest earned on the Net Taxes shall constitute a trust fund for the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon are unpaid the Net Taxes and interest thereon shall not be used for any other purpose, except as permitted by the Fiscal Agent Agreement or any Supplement, and shall be held in trust for the benefit of the Bondowners and shall be applied pursuant to the Fiscal Agent Agreement, or any Supplement to the Fiscal Agent Agreement as modified pursuant to provisions therein. Notwithstanding any provision contained in the Fiscal Agent Agreement to the contrary, Net Taxes deposited in the Administrative Expense Fund, the Surplus School Facilities Fund and the Rebate Fund shall no longer be considered to be pledged to the Bonds, and the Administrative Expense Fund, the Construction Fund (and all accounts therein) and the Rebate Fund shall not be construed as trust funds held for the benefit of the Bondowners.

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In the event that the Fiscal Agent lacks sufficient amounts to make timely payment of principal of and interest and premium upon redemption, if any, on the Bonds when due, such principal of and interest and premium on the Bonds shall be paid from available amounts held by the Fiscal Agent in the Special Tax Fund, Bond Fund, and, including for a limited time, monies available for transfer to the Bond Fund from the Letter of Credit Fund (up to the Stated Amount(s)), Reserve Fund, or Redemption Fund under the terms of the Fiscal Agent Agreement (including all accounts of the foregoing funds) (but not including those amounts deposited in the Construction Fund (and its accounts), Administrative Expense Fund, the Rebate Fund and the Surplus School Facilities Fund (and any accounts of such funds)), including the default and remedies provisions of the Fiscal Agent Agreement, as may be applicable, in accordance with such terms without preference or priority of interest over principal or principal over interest, or of any installment of principal or interest over any other installment of principal or interest, ratably to the aggregate amount of such principal and interest. Nothing in the Fiscal Agent Agreement or any Supplement shall preclude the redemption of any Bonds subject to call and redemption prior to maturity, and payment of the Bonds from proceeds of refunding bonds issued under the Act as the same now exists or is hereafter amended, or under any other law of the State (See “SECURITY FOR THE BONDS”). Funds and Accounts The Fiscal Agent Agreement specifies funds and accounts to be maintained by the Fiscal Agent, as follows:

Special Tax Fund - The Special Taxes and other amounts constituting Gross Taxes collected by the District at any time (exclusive of (i) Prepaid Special Taxes received which shall be deposited into the Prepayment Account of the Special Tax Fund, and (ii) Special Taxes relating to property with respect to which a draw has been made on the corresponding Letter(s) of Credit, or Cash Deposit(s), which shall be deposited into the Letter of Credit Fund to be used to reimburse the Letter of Credit Bank(s) and/or the Developer, as the case may be) shall be transferred no later than 10 days after receipt thereof to the Fiscal Agent and shall be held in the Special Tax Fund (exclusive of the Administrative Expense Requirement) for the benefit of the Bondowners and shall, exclusive of the Prepaid Special Taxes held in the Prepayment Account, be transferred or applied to the funds and accounts set forth below, in the priority set forth below and at the times and in the amounts and in accordance with the Fiscal Agent Agreement:

(a) To the Administrative Expense Fund, an amount specified in writing by the District up to the Administrative Expense Requirement;

(b) to the Interest Account of the Bond Fund an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date;

(c) to the Principal Account of the Bond Fund, an amount up to the amount

needed to make the principal payment due on the Bonds during the current Bond Year;

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(d) to the Sinking Fund Redemption Account of the Redemption Fund an amount up to the amount needed to make the Mandatory Sinking Payments due on the Bonds during the current Bond Year;

(e) to the Reserve Fund, the amount, if any, necessary to replenish the

Reserve Fund to the Reserve Requirement; (f) provided all the amounts due in the current Bond Year are funded under

(b), (c), (d) and (e) above, to the extent there are additional Administrative Expenses to the Administrative Expense Fund in the amount specified in writing by the District required to bring the balance therein to the amount needed to pay such Administrative Expenses;

(g) any remaining Special Taxes and other amounts constituting Gross Taxes

shall remain in the Special Tax Fund subject to the provisions of (h), below; and (h) any remaining Special Taxes and other amounts constituting Gross Taxes,

if any, shall remain in the Special Tax Fund until the end of the Bond Year. Provided there are no Special Taxes levied or projected to be levied on Undeveloped Property at the end of the Bond Year, any remaining funds in the Special Tax Fund, which are not required to cure a delinquency in the payment of principal and interest on the Bonds (including payment of Mandatory Sinking Payments due during the current Bond Year), to restore the Reserve Fund to the Reserve Requirement, or to pay current or pending Administrative Expenses as provided for in the Fiscal Agent Agreement, shall be deposited in the Surplus School Facilities Fund and used as provided for in the Fiscal Agent Agreement and shall be free and clear of any lien or pledge thereon; provided, any funds required to cure any delinquency described above shall be retained in the Special Tax Fund and expended or transferred at the earliest possible date. At the date of the redemption, defeasance or maturity of the last Bond and after all principal and interest then due on any Bond has been paid or provided for, all other covenants are complied with and all fees and expenses of the Fiscal Agent have been paid, monies in the Special Tax Fund will be transferred to the District by the Fiscal Agent and may be used by the District for any lawful purpose under the District proceedings. (See “SECURITY FOR THE BONDS – Special Tax Fund”). Prepayment Account of the Special Tax Fund - Prepaid Special Taxes collected by the District (net of any costs of collection) shall be transferred, no later than 10 days after receipt thereof, to the Fiscal Agent and the District shall direct the Fiscal Agent to deposit the Prepaid Special Taxes in the Prepayment Account of the Special Tax Fund. The Prepaid Special Taxes shall be held in the Prepayment Account for the benefit of the Bondowners and shall be transferred by the Fiscal Agent to the Mandatory Redemption Account of the Redemption Fund to call Bonds on the next date for which notice can be given in accordance with the special mandatory redemption provisions as set forth in the Fiscal Agent Agreement. (See “SECURITY FOR THE BONDS – Prepayment Account of the Special Tax Fund”). Administrative Expense Fund - Upon receipt of Gross Taxes and the written direction of the District, the Fiscal Agent shall transfer from the Special Tax Fund to the Administrative

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Expense Fund the amount that the District has determined, and of which the District has notified the Fiscal Agent in writing prior to such transfer date, will be necessary to bring the balance in the Administrative Expense Fund to equal the amount specified by the District as necessary to meet Administrative Expenses until the collection of Special Taxes in the next Fiscal Year, subject to the maximum limit of the Administrative Expense Requirement. Additional Administrative Expenses may be funded from additional deposits to the Administrative Expense Fund in accordance with the Fiscal Agent Agreement. Monies in the Administrative Expense Fund shall not be construed as a trust fund for the benefit of the Bondowners and are not pledged for payment of the principal of, or interest or premium on, the Bonds, and are subject to any Bondowners’ lien. Bond Fund - The Bond Fund (in which there is established an Interest Account and a Principal Account) is used to disperse payments of principal and interest to the Bondowners on each respective Interest Payment Date. Monies in the Interest Account are allocated to the payment of interest due on each Interest Payment Date and monies in the Principal Account are allocated to the repayment of principal on the Bonds on the corresponding Interest Payment Date (See “SECURITY FOR THE BONDS – Bond Fund”). Reserve Fund - There shall be maintained in the Reserve Fund an amount equal to the Reserve Requirement. Notwithstanding the foregoing, in the event of a redemption or partial defeasance of the Bonds, the Reserve Requirement shall thereafter be re-determined by the District and communicated to the Fiscal Agent in writing and any funds in excess of such re-determined Reserve Requirement shall be utilized as set forth in the Fiscal Agent Agreement. If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed and the original principal of the Bonds, but not in excess of the amount of funds available as a result of the re-determination of the Reserve Requirement) will be applied to the redemption of the Bonds as provided in the Fiscal Agent Agreement. Monies in the Reserve Fund shall be used solely for the purpose of (i) making transfers to the Bond Fund or Redemption Fund to pay the principal of, including Mandatory Sinking Payments, and interest on Bonds when due to the extent that monies in the Interest Account and the Principal Account of the Bond Fund or monies in the Sinking Fund Redemption Account, including any funds drawn from the Letter of Credit Fund as provided in the Fiscal Agent Agreement, are insufficient therefor; (ii) making any required transfer to the Rebate Fund pursuant to the Fiscal Agent Agreement upon written direction from the District, (iii) making any transfers to the Bond Fund or Redemption Fund in connection with prepayments of the Special Taxes; (iv) paying the principal and interest due on Bonds in the final Bond Year, and (v) application to the defeasance of Bonds in accordance with the Fiscal Agent Agreement. If the amounts in the Interest Account or the Principal Account of the Bond Fund and the Sinking Fund Redemption Account of the Redemption Fund, including any funds drawn from the Letter of Credit Fund as provided in the Fiscal Agent Agreement, are insufficient to pay the principal of, including Mandatory Sinking Payments, or interest on the Bonds when due, the Fiscal Agent shall, one Business Day prior to an Interest Payment Date, withdraw from the Reserve Fund for deposit in the Interest Account and the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, monies necessary for such purpose. Following

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any transfer to the Interest Account or the Principal Account of the Bond Fund, or the Sinking Fund Redemption Account of the Redemption Fund, the Fiscal Agent shall notify the District of the amount needed to replenish the Reserve Fund to the Reserve Requirement and the District shall include such amount as is required at that time to correct such deficiency in the next Special Tax levy to the extent of the permitted maximum Special Tax rates. Monies in the Reserve Fund shall be invested in accordance with the Fiscal Agent Agreement. Notwithstanding any provision herein to the contrary, monies in the Reserve Fund in excess of the Reserve Requirement (exclusive of Excess Investment Earnings identified in writing by the District) shall be withdrawn on or prior to 15 days prior to each Interest Payment Date and applied as follows: (i) until such time as the School Facilities Account of the Construction Fund is closed, or other applicable Project Cost accounts therein are closed, in accordance with the provisions of the Fiscal Agent Agreement, all investment earnings on amounts in the Reserve Fund (exclusive of Excess Investment Earnings identified in writing by the District, and exclusive of funds needed to pay principal of or interest on the Bonds in the event of a shortfall in Net Taxes for payment thereof and funds to restore the Reserve Fund to the Reserve Requirement) shall be deposited first into the School Facilities Account, and thereafter as applicable the other Project Costs account(s), in the Construction Fund; or, (ii) after expiration of the transfer under (i) above, thereafter all investment earnings on amounts in the Reserve Fund since the previous Interest Payment Date (exclusive of Excess Investment Earnings identified in writing by the District) shall be transferred to the Interest Account of the Bond Fund, and any remaining excess shall be transferred to the Principal Account of the Bond Fund or to the Sinking Fund Redemption Account of the Redemption Fund to the extent required to make any principal payment on the next following September 1. The Fiscal Agent shall transfer Excess Investment Earnings from the Reserve Fund to the Rebate Fund upon written direction of the District pursuant to the Fiscal Agent Agreement. (See “SECURITY FOR THE BONDS – Reserve Fund”). Redemption Fund - The Redemption Fund includes an Optional Redemption Account, Sinking Fund Redemption Account and Mandatory Redemption Account. Each of the redemption accounts is used for the temporary retention of monies allocated to the redemption of Bonds corresponding to that account. Monies in each such account shall be applied for such redemption purpose (See “THE BONDS - Redemption”). Construction Fund - The Fiscal Agent Agreement establishes the Construction Fund, in which there is a School Facilities Account, Hart Facilities Account, Sanitation Fees Account, and Costs of Issuance Account.

A portion of the proceeds of the Bonds shall be deposited in the School Facilities Account, the Hart Facilities Account and the Sanitation Fees Account. Monies deposited in the School Facilities Account will be expended to pay or reimburse Project Costs for School Facilities, except as otherwise provided in the Fiscal Agent Agreement. Monies deposited in the Hart Facilities Account will be expended to pay or reimburse Project Costs for Hart Facilities, except as otherwise provided in the Fiscal Agent Agreement. Monies deposited in the Sanitation Fees Account will be expended to pay or reimburse Project Costs for Sanitation Fees, except as

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otherwise provided in the Fiscal Agent Agreement. Monies deposited in the Costs of Issuance Account will be disbursed from time to time to pay or reimburse Costs of Issuance. Rebate Fund - The Rebate Fund is established by the Fiscal Agent Agreement for the receipt and payment of arbitrage earnings to the United States government as required under the terms of the Fiscal Agent Agreement and the Tax Certificate. Letter of Credit Fund – The Letter of Credit und is established as a separate fund to be held by the Fiscal Agent (See “SECURITY FOR THE BONDS – Letter of Credit Fund”).

(a) Letter(s) of Credit; Cash Deposit(s); Purpose; Duration. As a condition precedent to issuance of the Bonds and prior to the Delivery Date thereof, the District shall cause the Developer to provide one or more Letter(s) of Credit or Cash Deposit(s), as applicable, in the corresponding Stated Amount, naming the Fiscal Agent as beneficiary. The Fiscal Agent shall establish a separate account for any Letter(s) of Credit or Cash Deposit(s) provided by the Developer. Any Letter(s) of Credit or Cash Deposit(s) provided by the Developer shall secure payment only of Special Taxes levied on the Non-Homeowner Property in the District secured by such Letter(s) of Credit or Cash Deposit(s), as determined by reference to Attachment 1 of the Fiscal Agent Agreement. The initial Letter(s) of Credit or Cash Deposit(s) provided by the Developer secures the Special Taxes levied on Non-Homeowner Property described in Attachment 1 to the Fiscal Agent Agreement. Attachment 1 of the Fiscal Agent Agreement shall be amended or supplemented by the District as set forth in the Fiscal Agent Agreement. Promptly following any such amendment or supplement to Attachment 1 of the Fiscal Agent Agreement, the District shall transmit the revised Attachment 1 of the Fiscal Agent Agreement to the Developer. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, the following two conditions precedent (“Cash Deposit(s) Conditions”) apply to all instances where a Cash Deposit(s) will be provided by a LC Developer, whether in partial or total satisfaction of the requirements under the Fiscal Agent Agreement, and whether for replacement of a prior Letter of Credit(s). The Cash Deposit(s) Conditions, which must both be satisfied before the Cash Deposit(s) will be deemed to be in compliance with the requirements of the Fiscal Agent Agreement, are: (i) the satisfaction of the requirements of the Fiscal Agent Agreement with a Cash Deposit(s) in lieu of a Letter(s) of Credit must receive the prior written approval of a District Representative, such approval to be at the sole discretion of the District; and (ii) the deposit of the Cash Deposit(s) with the Fiscal Agent by the applicable owner of the property liened by the Special Taxes secured by the Cash Deposit(s) for a period of not less than 91 days. The foregoing Cash Deposit(s) Conditions apply in every instance where a Cash Deposit(s) is being made by an LC Developer, whether such requirement is specifically stated in any of the references to “Cash Deposit(s)” in the Fiscal Agent Agreement, or not.

A Letter(s) of Credit or Cash Deposit(s) shall be in effect until individual homeowners are record owners of 80% or more of the residential assessor parcels (“Parcels”) within the District. On or before each March 1, commencing March 1, 2014 (or, on a date at least 30 but not more than 45 days prior to the expiration of any existing Letter(s) of Credit), the District shall determine the number of Parcels owned by individual homeowners in the District. If fewer than

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80% of the Parcels within the District are owned by individual homeowners, the District shall certify to the Fiscal Agent: (A) the number of such Parcels owned by individual homeowners within the District and the number of such Parcels owned by each LC Developer, and (B) the Stated Amount of the corresponding Letter(s) of Credit or Cash Deposit(s) required to be in effect for each LC Developer. In the event fewer than 80% of the Parcels within the District are owned by individual homeowners with record title as of such March 1 (or as of a date at least 30 but not more than 45 days prior to the expiration of any existing Letter(s) of Credit), then the LC Developer shall provide to the Fiscal Agent, no later than the following March 15 (or a date 15 days prior to the expiration date of any existing Letter(s) of Credit), (i) an irrevocable Letter(s) of Credit in the revised Stated Amount, (ii) an extension of any existing Letter(s) of Credit in an amount equal to the revised Stated Amount, (iii) a Cash Deposit(s) satisfying the Cash Deposit(s) Conditions in the amount of the revised Stated Amount, or (iv) some combination of a Cash Deposit(s) satisfying the Cash Deposit(s) Conditions and a Letter(s) of Credit equaling the revised Stated Amount (for each LC Developer, the “Revised Letter(s) of Credit/Cash Deposit(s)”). Upon confirmation that the Fiscal Agent has received the Revised Letter(s) of Credit/Cash Deposit(s), but not until the Cash Deposit Conditions are met, as applicable, Attachment 1 to the Fiscal Agent Agreement shall be modified by the District to reflect the Parcels secured by such Revised Letter(s) of Credit/Cash Deposit(s).

If a Letter of Credit is currently in place for an LC Developer, and if such LC Developer is required to post a Revised Letter(s) of Credit/Cash Deposit(s), and in the event the Fiscal Agent has not received the required Revised Letter(s) of Credit/Cash Deposit(s) that satisfies the Cash Deposit Conditions by the applicable LC Developer by said March 15 (or a date 15 days prior to the applicable expiration date of the Letter(s) of Credit), the Fiscal Agent shall immediately notify the District thereof, and upon the written direction of an Authorized Representative, immediately, with no further authorization or instruction, draw upon the Letter(s) of Credit that is not being replaced with the Revised Letter(s) of Credit/Cash Deposit(s) in the full Stated Amount. The Fiscal Agent shall deposit the proceeds of such draw into the corresponding account of the Letter of Credit Fund for use as described in the Fiscal Agent Agreement.

If a Cash Deposit is currently in place for an LC Developer, and if such LC Developer is required to post a Revised Letter(s) of Credit/Cash Deposit(s), and in the event the Fiscal Agent does not receive the required Revised Letter(s) of Credit/Cash Deposit(s) by the LC Developer by said March 15 (or a date 15 days prior to the applicable expiration date of the Letter(s) of Credit), the District shall not return any Cash Deposit(s) to the applicable LC Developer until the amount on deposit in the Letter of Credit Fund for such LC Developer is equal to the Revised Letter(s) of Credit/Cash Deposit(s) and in the case of a Cash Deposit(s), the Cash Deposit Conditions are satisfied.

If the recalculation of the Stated Amount for any Letter(s) of Credit or Cash Deposit(s)

determines that the recalculated Stated Amount is less than the amount theretofore in effect, and all other conditions have been satisfied as stated in the Fiscal Agent Agreement, then the District shall direct the Fiscal Agent to execute and deliver the appropriate annex to the applicable

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Letter(s) of Credit that will cause a reduction in the Stated Amount of such Letter(s) of Credit, and/or refund to the applicable LC Developer a portion of a Cash Deposit(s) so the Cash Deposit(s) equals the revised Stated Amount. When renewing or extending the Letter(s) of Credit, which shall be for a term no less than 12 months, the LC Developer shall request that the District calculate the amount of the Letter(s) of Credit for the proposed term of the renewed or extended Letter(s) of Credit, which calculation shall include amounts to cover applicable Special Tax projections for the applicable Fiscal Year(s). If the District determines at any time that 80% or more of the Parcels within the District are owned by individual homeowners, then it shall so certify in writing to the Fiscal Agent and direct the Fiscal Agent to release the Letter(s) of Credit or Cash Deposit(s) to the Letter of Credit Bank(s) or the applicable LC Developer, as the case may be. Upon the release of the Letter(s) of Credit or Cash Deposit(s) pursuant to the terms hereof and thereof, and upon the expenditure, pursuant to the terms hereof, of all funds from the corresponding account in the Letter of Credit Fund, the Fiscal Agent shall notify the District of such condition, and the Fiscal Agent shall close the respective account, and, as applicable, the Letter of Credit Fund. (b) Sale of Property to Merchant Builders. If at any time, the Developer (“Land Seller”) sells Parcels to another merchant builder (each a “Land Purchaser”), the Land Purchaser shall provide a Letter(s) of Credit or Cash Deposit(s) meeting the Cash Deposit Conditions, or a combination thereof, in the Stated Amount applicable to the Parcels purchased by the Land Purchaser. Upon the provision of the Cash Deposit(s) or the Letter(s) of Credit by the Land Purchaser, and provided the Cash Deposit(s) Conditions are met if applicable, the District shall (i) direct the Fiscal Agent to execute and deliver the appropriate annex to the existing Letter(s) of Credit that will cause a reduction in the Stated Amount of the Land Seller’s Letter(s) of Credit by the amount of the Land Purchaser’s Letter(s) of Credit or Cash Deposit(s) and/or refund to the Developer an amount of any Cash Deposit(s) equal to the amount of the Land Purchaser’s Letter(s) of Credit or Cash Deposit(s); and (ii) amend Attachment 1 of the Fiscal Agent Agreement to reflect the addition of Letter(s) of Credit or Cash Deposit(s) of the Land Purchaser securing the purchased Parcels and the elimination of the purchased Parcels from the security of the Land Seller’s Letter(s) of Credit or Cash Deposit(s). All Parcels sold to individual homeowners of record shall be removed from Attachment 1 of the Fiscal Agent Agreement and shall no longer be secured by any Letter of Credit or Cash Deposit. All of the terms set forth in the Fiscal Agent Agreement, except as set forth therein, shall apply to the Letter(s) of Credit and Cash Deposit(s) provided by a Land Purchaser. If, for any reason, the Land Purchaser does not post the appropriate Letter(s) of Credit or Cash Deposit(s) for the Parcels acquired as required, the Letter(s) of Credit or Cash Deposit(s) of the Land Seller securing the Parcels acquired shall continue to secure the Parcels acquired until such time as the Land Purchaser posts the appropriate Letter(s) of Credit or the Cash Deposit(s) satisfy the Cash Deposit(s) Conditions. Any Letter(s) of Credit or Cash Deposit(s) provided by a Land Purchaser shall secure payment only of Special Taxes levied on the Non-Homeowner Property in the District secured by such Letter(s) of Credit or Cash Deposit(s), as determined by reference to

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Attachment 1 of the Fiscal Agent Agreement. The provisions of this subsection (b) shall apply to any sale of Parcels from the Land Purchaser to another land purchaser that is not an individual homeowner. (c) Deposits into the Letter of Credit Fund; Transfers from the Letter of Credit Fund; Final Release. (i) Draws Prior to an Interest Payment Date. Five Business Days prior to each Interest Payment Date, the Fiscal Agent shall determine whether amounts on deposit in the Special Tax Fund, after deducting Administrative Expenses authorized to be transferred under the Fiscal Agent Agreement, and the Bond Fund on that Interest Payment Date, will be sufficient to pay principal of and interest on the Bonds that will be due and payable on such Interest Payment Date and shall notify the District of any deficiency. If amounts in the Special Tax Fund and the Bond Fund will be insufficient to pay principal of and interest on the Bonds, the Fiscal Agent shall immediately notify the District in writing of such deficiency, and if such insufficiency is attributable to a delinquency in the payment of Special Taxes for Non-Homeowner Property secured by an LC Developer’s Letter(s) of Credit or Cash Deposit(s), as determined by the District by reference to Attachment 1 of the Fiscal Agent Agreement, upon the written direction of an Authorized Representative (and prior to any withdrawals from the Reserve Fund permitted by the Fiscal Agent Agreement), the Fiscal Agent shall draw upon the applicable Letter(s) of Credit or Cash Deposit(s); provided, however, that only the Letter(s) of Credit or Cash Deposit(s) which secure the delinquent Non-Homeowner Property (as determined by reference to Attachment 1 of the Fiscal Agent Agreement) may be drawn upon, and the amount of such draw (as set forth in said written direction of the Authorized Representative) shall be no greater than the amount of the delinquent Special Taxes levied on the Non-Homeowner Property secured by the applicable LC Developer’s Letter(s) of Credit or Cash Deposit(s) as shown on Attachment 1 of the Fiscal Agent Agreement. The Letter(s) of Credit or Cash Deposit(s) may not be drawn upon for the delinquency of any Parcels owned by individual homeowners. The Fiscal Agent shall deposit the proceeds of any such draw upon a Letter(s) of Credit or Cash Deposit(s) into the corresponding account of the Letter of Credit Fund one Business Day prior to the Interest Payment Date, and prior to any transfers from the Reserve Fund, transfer such amounts from the account of the Letter of Credit Fund to the Bond Fund. The District shall have no obligation to reimburse the Letter of Credit Bank(s) for any such draw on any Letter(s) of Credit, or, as applicable, the LC Developer for any Cash Deposit(s), except from: (i) any proceeds of the draw on any Letter(s) of Credit and any interest earnings thereon not required to pay debt service on the Bonds on such Interest Payment Date, which proceeds of any Letter(s) of Credit provided by an LC Developer shall be paid only to such LC Developer; and (ii) delinquent Special Taxes subsequently received by the District (whether by payment or foreclosure) corresponding to the delinquent Non-Homeowner Property, which delinquent Special Taxes paid for such delinquent Non-Homeowner Property secured by an LC Developer’s Letter(s) of Credit or Cash Deposit(s) shall be paid to the applicable LC Developer’s Letter of Credit Bank (or its designee) or, in the case of a Cash Deposit that was drawn upon, deposited back into the applicable account of the Letter of Credit Fund. Draws upon

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any Letter(s) of Credit or Cash Deposit(s), as the case may be, shall not bar or otherwise preclude the District from taking any actions or enforcing any remedies, including but not limited to foreclosure actions, against the corresponding property within the District for satisfaction of unpaid Special Taxes. (ii) Draws Prior to Termination of the Letter(s) of Credit. In the event the Fiscal Agent draws upon a Letter(s) of Credit or Cash Deposit(s), as the case may be, as described in the Fiscal Agent Agreement, the Fiscal Agent shall immediately deposit the proceeds of such draw into the corresponding account of the Letter of Credit Fund and, pending any transfer to the Bond Fund for the purposes described in the Fiscal Agent Agreement, such proceeds shall be invested and reinvested by the Fiscal Agent in Authorized Investments at the written instruction of an Authorized Representative. At no time shall the proceeds of a draw on any Letter(s) of Credit or Cash Deposit(s), as the case may be, held in the accounts of the Letter of Credit Fund be invested by the Fiscal Agent at a yield exceeding the Yield on the Bonds. Investment earnings and profits from such investments shall be retained in the corresponding accounts of the Letter of Credit Fund. (iii) Interest Earnings on Cash Deposits. In the event that an LC Developer provides a Cash Deposit in lieu of a Letter(s) of Credit, such monies shall be deposited into the corresponding account of the Letter of Credit Fund and invested by the Fiscal Agent at the direction of the District in Authorized Investments at a rate not in excess of the Yield on the Bonds. On or after March 15 of each year, commencing March 15, 2014, any earnings on monies held in an account of the Letter of Credit Fund in excess of the corresponding Stated Amount shall, upon the written request of the applicable LC Developer approved in writing by the District, be mailed by the Fiscal Agent by check to such LC Developer provided that (i) such earnings are not required to pay principal or interest on the Bonds on the following Interest Payment Date as a result of delinquencies in the payment of Special Taxes on Non-Homeowner Property secured by the applicable LC Developer’s Letter(s) of Credit or Cash Deposit(s) and (ii) the District confirms that there are no delinquent Special Taxes on Non-Homeowner Property secured by the applicable LC Developer’s Letter(s) of Credit or Cash Deposit(s) then payable. (iv) Final Release of Monies from the Letter of Credit Fund. If at any time an Authorized Representative provides written certification to the Fiscal Agent that (i) 80% or more of the Parcels within the District are owned by individual homeowners with record title, (ii) such monies are not required to pay principal or interest on the Bonds on the following Interest Payment Date as a result of delinquencies in the payment of Special Taxes for the Non-Homeowner Property secured by a LC Developer’s Letter(s) of Credit or Cash Deposit(s), and (iii) all the Special Taxes then payable on the Non-Homeowner Property secured by the LC Developer’s Letter(s) of Credit or Cash Deposit(s) are not delinquent, then the District shall provide written direction to the Fiscal Agent, and the Fiscal Agent shall, immediately return all (or such portion of the) amounts on deposit in the Letter of Credit Fund to applicable LC Developer, or Letter of Credit Bank(s), as the case may be. The delinquency on Non-Homeowner Property secured by Letter(s) of Credit or Cash Deposit(s) of a LC Developer shall not prevent the release of amounts on deposit for Non-Homeowner Property secured by other LC Developer’s Letter(s) of Credit or Cash Deposit(s), provided that the delinquent Non-

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Homeowner Property is not owned by the LC Developer posting the other Letter(s) of Credit or Cash Deposit(s) securing such amounts to be otherwise released. (d) Enforcement Actions by the District. In the event any Letter of Credit Bank(s) wrongfully refuses to honor any drawing made on any Letter(s) of Credit, the District, on behalf of the Owners of the Bonds, shall immediately bring an action and pursue any remedy available at law or in equity for the purpose of compelling the corresponding Letter of Credit Bank(s) to honor such drawing and to enforce the provisions of the corresponding Letter(s) of Credit; provided, however, that the foregoing shall not be construed to require the District to expend any funds other than monies in the Administrative Expense Fund available for such purposes. (e) Developer Consent. In the event any party proposes to revise, amend, or otherwise change any term of the Fiscal Agent Agreement that could adversely affect the Developer’s obligations under the Fiscal Agent Agreement, the District shall obtain the Developer’s prior written consent prior to such change, which consent shall not be unreasonably withheld. Surplus School Facilities Fund - Pursuant to the Fiscal Agent Agreement, monies on deposit in the Surplus School Facilities Fund are not pledged for the payment of the principal of, or interest or premium on, the Bonds, and are not subject to any Bondholder’s lien. Monies on deposit in the Surplus School Facilities Fund may be used by the District, at its option, for acquisition and/or construction of the School Facilities; to make deposits to the Rebate Fund; for the optional redemption of any of the Bonds pursuant to the Fiscal Agent Agreement; or for payment of principal of, including Mandatory Sinking Payments, or interest on the Bonds. Investments - The Fiscal Agent shall maintain separate books and records regarding the investment of monies in any of the funds, accounts or subaccounts established pursuant to the Fiscal Agent Agreement. Authorized Investments shall be deemed at all times to be a part of such funds, accounts or subaccounts. Any loss resulting from such Authorized Investments shall be charged to such funds, accounts or subaccount. Subject to limitations set forth as to each of the funds or accounts set forth in the Fiscal Agent Agreement, the limitations as to maturities set forth in the Fiscal Agent Agreement and any additional limitations or requirements established by the District and consistent with the foregoing, the Fiscal Agent shall invest the amounts on deposit in all funds, accounts or subaccount in Authorized Investments as directed in writing by the District, subject to the restrictions set forth in the Fiscal Agent Agreement. (See “SECURITY FOR THE BONDS – Investment of Moneys in Funds”). Redemption of Bonds The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special mandatory redemption from Prepaid Special Taxes in accordance with the terms of the Fiscal Agent Agreement. (See “THE BONDS - Redemption”).

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Covenants So long as any of the Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Owners under the provisions of the Act and the Fiscal Agent Agreement and any Supplement (to be performed by the District or its proper officers, agents or employees), which covenants are necessary, convenient and desirable to secure the Bonds; provided, however, that said covenants do not require the District to expend any funds or monies other than the Net Taxes or any monies deposited in the funds and accounts created hereunder and legally available therefor. Covenant 1. Punctual Payment. The District will duly and punctually pay, or cause to be paid, the principal of and interest on every Bond issued hereunder, together with the premium thereon, if any be payable, on the date, at the place and in the manner mentioned in the Bonds and in accordance with the Fiscal Agent Agreement and any Supplement to the extent Net Taxes are available therefor, and that the payments into the Bond Fund and the Reserve Fund will be made, all in strict conformity with the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and any Supplement and of the Bonds issued hereunder, and that time of such payment and performance is of the essence of the District’s contract with the Bondowners. Covenant 2. Levy and Collection of Special Taxes. Subject to the maximum Special Tax rates, the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation, the enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 2014, the Fiscal Agent shall provide a written notice to the District stating the amounts then on deposit in the various funds and accounts established by the Fiscal Agent Agreement as well as Fiscal Agent fees coming due during the next Fiscal Year. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice, the District shall communicate with the Los Angeles County Treasurer and Tax Collector or other appropriate official of the County of Los Angeles (“County”) to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes for each Fiscal Year, commencing Fiscal Year 2013-14, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Los Angeles Treasurer and Tax Collector will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. The first such levy shall occur in Fiscal Year 2013-14. Upon the completion of the computation of the amounts of the levy, and approval by the Legislative Body, the District shall prepare or cause to be prepared, and shall transmit to the Los Angeles County Treasurer and Tax Collector, such data as the Los Angeles County Treasurer and Tax Collector requires to include the levy of the Special Taxes on the next secured tax roll.

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The District shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Fund for the Bonds, an amount equal to the Administrative Expense Requirement and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes. The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided that, the Legislative Body may provide for direct collection of the Special Taxes in certain circumstances. In order to determine if there are delinquencies with respect to the payment of the Special Taxes, no later than February 25 and June 25 in every year (each a “reconciliation date”) commencing February 25, 2014, the District shall reconcile or cause to be reconciled the amount of Special Taxes levied to the amount of Special Taxes theretofore reported by the County as paid and received. No later than 45 days after the reconciliation date, commencing on the first reconciliation date in 2014, the District shall send or cause to be sent a notice of delinquency to all property owners reported to be delinquent in the payment of the Special Taxes as of the reconciliation date. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amounts received, as well as the costs and expenses of the District (including a charge for District staff time) in conducting its duties hereunder, shall be an Administrative Expense hereunder. Covenant 3. Commence Foreclosure Proceedings. On or about August 1 of each Fiscal Year, the District will compare the amount of Special Taxes theretofore levied in the District to the amount of Special Taxes theretofore reported to the District as received by the County, and: (A) Individual Delinquencies. If the District determines that (i) any single parcel in the District is subject to a Special Tax delinquency in the aggregate amount of $5,000 or more or (ii) any owner owns one or more parcels subject to a Special Tax delinquency in an aggregate amount of $5,000 or more, then the District shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the District within 90 days of such determination to the extent permissible under applicable law.

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(B) Aggregate Delinquencies If the District determines that the total amount of delinquent Special Taxes for the prior Fiscal Year for the District (including the total of delinquencies under paragraph (A) above) exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the District shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of such determination, and (if the delinquency remains uncured) shall commence foreclosure proceedings within 90 days of such determination against each parcel of land within the District with a Special Tax delinquency to the extent permissible under applicable law. Covenant 4. Against Encumbrances. The District will not encumber, pledge or place any charge or lien upon any of the Net Taxes or other amounts pledged to the Bonds superior to, or on a parity with, the pledge and lien herein created for the benefit of the Bonds, except as permitted by the Fiscal Agent Agreement and as to bonds issued to refund the Bonds. Covenant 5. Modification of Maximum Authorized Special Tax. The District covenants that no modification of the maximum authorized Special Taxes in the District shall be approved by the District unless it is confirmed in writing, by an Independent Financial Consultant, that, immediately subsequent to such modifications the amount of the maximum Special Taxes on Developed Property , pursuant to the Act and the applicable resolutions and ordinances of the District is at least 1.10 times Maximum Annual Debt Service plus Administrative Expenses on all Outstanding Bonds. The District further covenants that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter the maximum authorized Special Taxes, it will, to the extent of available District funds therefore, commence and pursue legal action seeking to preserve its ability to comply with its covenant contained in the preceding paragraph. Covenant 6. Protection of Security and Rights of Owners. The District will preserve and protect the security of the District and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the District, the Bonds shall be incontestable by the District. Covenant 7. Compliance with Law, Completion of Project. The District will comply with all applicable provisions of the Act and law in completing the acquisition and construction of the Project; provided that the District shall have no obligation to advance any funds to complete the Project in excess of the amounts available therefore in the accounts of the Construction Fund. Covenant 8. Books and Accounts. The District will keep, or cause to be kept, proper books of records and accounts, separate from all other records and accounts of the Bonds, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund including the Prepayment Account. Such books of record and accounts shall at all times during business hours be subject

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to the inspection of the Fiscal Agent or of the Owners of not less than ten percent of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. Covenant 9. Tax Covenant. The District hereby covenants and represents that until the last Bonds shall have been fully paid or redeemed, the District will comply with all requirements of the Tax Certificate, the Code and all applicable Regulations, such that the interest on the Bonds will remain excluded from gross income for federal income tax purposes. Covenant 10. Additional Tax Covenants. The District hereby covenants, without limiting the generality of Covenant 9, that: (a) the District will make no use of the proceeds of the Bonds which at any time will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and applicable Regulations; (b) the District will ensure that the payment of principal and interest on the Bonds shall not be directly or indirectly guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof) and no portion of the monies contained in any of the funds or accounts created herein shall be (i) used in making loans guaranteed by the United States (or any agency or instrumentality thereof); (ii) invested directly or indirectly in deposits or accounts insured by the Federal Deposit Insurance Corporation, National Credit Union Administration or any other similar federally chartered corporation; or (iii) otherwise invested directly or indirectly in obligations guaranteed (in whole or in part) by the United States (or any agency or instrumentality thereof); except (a) investments during the initial temporary period following issuance of the Bonds until the Completion Date; (b) investment of amounts held in the Reserve Fund, or other reserve funds satisfying Section 148(d) of the Code; (c) investment of amounts held in the Special Tax Fund, Bond Fund and other bona fide debt service funds; (d) for investments in obligations issued by the United States Treasury; (e) for investments in obligations guaranteed by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation; or, (f) investments permitted under Regulations issued pursuant to Section 149(b)(3)(B) of the Code; (c) the District will ensure that no portion of the monies contained in any of the funds or accounts created herein shall be used so as to cause any of the Bonds to meet the “private activity bond” tests of Section 141 of the Code and any Regulations issued thereunder; (d) the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and the applicable Regulations and the Fiscal Agent Agreement and any further documents executed in connection with the Bonds. This covenant shall survive payment in full or defeasance of the Bonds. The District specifically covenants to pay or cause to be paid to the United States at the times and in the amounts determined above the amounts required to be so paid by the Fiscal Agent Agreement and further documents executed in connection with the Bonds, the Code and the Regulations;

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(e) the District (i) shall neither invest Gross Proceeds nor cause Gross Proceeds to be invested in Nonpurpose Investments if the Yield on such Nonpurpose Investments would be less than the Yield that would have resulted in an arm’s length transaction; (ii) shall not sell or otherwise dispose of or cause to be sold or otherwise disposed of Nonpurpose Investments if such sale or disposition would result in a smaller profit or larger loss than would have resulted from a sale at fair market value arrived at in an arm’s length transaction; and (iii) shall keep a detailed accounting of all transactions contemplated under the Fiscal Agent Agreement or in any way relating to the receipt or disbursement of any of the Gross Proceeds of the Bonds for a period of six years after the later of the date of payment of all Excess Investment Earnings to the United States or the date the District disburses the last of the Gross Proceeds of the Bonds; and (f) notwithstanding any provision of the Fiscal Agent Agreement, if the District shall provide to the Fiscal Agent an opinion of Bond Counsel that any specified action required under the Fiscal Agent Agreement is no longer required or that some further or different action is required to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds, the Fiscal Agent may conclusively rely on such opinion in complying with the requirements of the Fiscal Agent Agreement, and the covenants hereunder shall be deemed to be modified to that extent notwithstanding the provisions of Article VI hereof. Covenant 11. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the obligations and covenants under the Fiscal Agent Agreement and any Supplement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Fiscal Agent Agreement and in any Supplement. Covenant 12. Additional Opinion(s). The District will not make any change in requirements or procedures or take any action, as to which change or action the Fiscal Agent Agreement or related documents require an opinion of Bond Counsel, unless it obtains an opinion of Bond Counsel to the effect that (a) interest on the Bonds was excluded from gross income for federal income tax purposes from their date of issuance until the date of such change, assuming compliance with the covenants in the Fiscal Agent Agreement as they were in effect prior to the change (except that such opinion need not be given as to any interest for which a similar opinion has previously been given and remains in effect subsequent to such change), and (b) assuming continued compliance by the District with the covenants as changed, interest on the Bonds is excluded from gross income for purposes of federal income taxation. Covenant 13. Tender of Bonds. The District will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53344.2, 53356.1 and 53356.5 of the California Government Code in any manner which would be inconsistent with the interests of the Owners and, in particular, will not permit the tender of Bonds in full or partial payment of Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds remaining Outstanding following such tender.

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Covenant 14. Additional Bonds or Obligations for Refunding Purposes Only. The District shall not issue any additional bonds, notes or other similar evidences of indebtedness payable, in whole or in part, out of Net Taxes except: (i) bonds issued to fully or partially refund the Outstanding Bonds; or (ii) subordinate bonds, notes or other similar evidences of indebtedness.

Covenant 15. Annual Reports.

(a) Annual Reports to the California Debt and Investment Advisory

Commission. Not later than October 30 of each year, commencing October 30, 2013, and until the October 30 following the final maturity of the Bonds, the District shall supply to the California Debt and Investment Advisory Commission the information required to be provided thereto pursuant to Section 53359.5(b) of the Act. Such information shall be made available to any Owner upon written request to the District accompanied by a fee determined by the District to pay the costs of the District in connection therewith. The District shall in no event be liable to any Owner or any other person or entity in connection with any error in any such information.

(b) If at any time the Fiscal Agent fails to pay principal or interest due on any

scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal or interest on the Bonds, the Fiscal Agent shall notify the District in writing of such failure or withdrawal, and the District shall notify the California Debt and Investment Advisory Commission of such failure or withdrawal within 10 days of the failure to make such payment or the date of such withdrawal.

(c) The reporting requirements of this Covenant 15 shall be amended from

time to time, without action by the District or the Fiscal Agent to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act. The District shall provide the Fiscal Agent with a copy of any such amendment. Notwithstanding the foregoing, any such amendment shall not, in itself, affect the District’s obligations under any continuing disclosure documentation relating to the Bonds.

(d) None of the District, its officers, agents, employees or Authorized

Representatives, or the Fiscal Agent, shall be liable to any person or party for any inadvertent error in reporting the information contained in this Covenant 15. Continuing Disclosure Covenant. The District hereby covenants and agrees that it will comply with and carry out all of its obligations under the District Continuing Disclosure Certificate. Notwithstanding any other provision of the Fiscal Agent Agreement, failure of the District to comply with its obligations under the District Continuing Disclosure Certificate shall not be considered an event of default under the Fiscal Agent Agreement, and the sole remedy, in the event of any failure of the District to comply with the Continuing Disclosure Certificate, shall be an action to compel performance thereof. The Fiscal Agent, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds and upon being provided with indemnity reasonably satisfactory to the Fiscal Agent, shall, or any Bondowner or Beneficial Owner may, take such actions as may be necessary and appropriate,

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including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under the Continuing Disclosure Covenant. For purposes of the Continuing Disclosure Covenant, “Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the Owner of any Bonds for federal income tax purposes. (See “CONTINUING DISCLOSURE – The Community Facilities District; APPENDIX G – Form of Issuer Continuing Disclosure Certificate”). Amendment to Fiscal Agent Agreement The District may from time to time, and at any time, without notice to or consent of any of the Owners, adopt Supplements for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provision of the Fiscal Agent Agreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, or to make any other provision with respect to matters or questions arising under the Fiscal Agent Agreement, or in any Supplement, provided that such action shall not have a material adverse effect on the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in the Fiscal Agent Agreement which are not contrary to or inconsistent with the Fiscal Agent Agreement as theretofore in effect; and (c) to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners including, but not limited to, providing for the rating or insuring of the Bonds. Exclusive of amendments supplemental to the Fiscal Agent Agreement described above, the Owners of not less than 60% in aggregate principal amount of the Bonds then Outstanding shall have the right to consent to and approve the adoption by the District of such amendments or orders supplemental to the Fiscal Agent Agreement as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Fiscal Agent Agreement; provided, however, that nothing in the Fiscal Agent Agreement shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal of, or the payment date of interest on, any Bonds, (b) a reduction in the principal amount of, or redemption premium on, any Bonds or the rate of interest thereon, (c) a preference or priority of any Bonds over any other Bonds, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplement, without, in the case of (a) or (b), the consent of the affected Owner, or, in the case of (c) or (d), the consent of the Owners of all Bonds then Outstanding.

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Fiscal Agent The Fiscal Agent is appointed and takes authorized actions under the terms of the Fiscal Agent Agreement. The initial Fiscal Agent may be removed or replaced by the District upon 30 days’ prior written notice (except during the continuance of an event of default, as further discussed below) or may, upon 60 days’ prior written notice, resign in favor of a successor Fiscal Agent. The Fiscal Agent Agreement provides for certain minimum qualifications of the Fiscal Agent and provides for notice and procedures in the event a successor Fiscal Agent is required or appointed. The duties of the Fiscal Agent are specified within the Fiscal Agent Agreement and include mailing interest payments to the Owners, selecting Bonds for redemption pursuant to the terms of the Fiscal Agent Agreement, giving notice of redemption and meetings of the Owners, maintaining the Bond Register and maintaining and administering the funds and accounts established pursuant to the Fiscal Agent Agreement. The Fiscal Agent also performs all other acts authorized or directed of the Fiscal Agent pursuant to the terms of the Fiscal Agent Agreement. The Fiscal Agent Agreement provides that the recitals of fact and all promises, covenants and agreements contained therein and in the Bonds are to be taken as statements, promises, covenants and agreements of the District, and the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of the Fiscal Agent Agreement or the Bonds. The Fiscal Agent Agreement provides for certain protections from liability of the Fiscal Agent except for its own negligence or willful misconduct, as further specified in the Fiscal Agent Agreement. Events of Default, Remedies Events of Default. Any one or more of the following events shall constitute an “event of default”: (a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed or from mandatory redemption; (b) default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) default by the District in the observance of any of the other agreements, conditions or covenants on its part in the Fiscal Agent Agreement or in the Bonds contained, and the continuation of such default for a period of 30 days after the District shall have been given notice in writing of such default by the Fiscal Agent, provided that if within 30 days the District has commenced curing of the default and diligently pursues elimination thereof, such period shall be extended to permit such default to be eliminated; provided that, any noncompliance with the terms of the Continuing Disclosure Covenant under the Fiscal Agent Agreement (and set forth above) shall not be an event of default under the terms of the Fiscal Agent Agreement.

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Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) by mandamus or other suit or proceeding at law or in equity to enforce his or her rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Fiscal Agent Agreement; (b) by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) upon the happening of an event of default (as defined in the Fiscal Agent Agreement), by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in the Fiscal Agent Agreement, or in the Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as provided in the Fiscal Agent Agreement, out of the Net Taxes pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Fiscal Agent Agreement. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by the Fiscal Agent Agreement may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy in the Fiscal Agent Agreement conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given pursuant to the Fiscal Agent Agreement or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law.

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Application of Net Taxes After Default. If an Event of Default shall occur and be continuing, all Net Taxes and any other funds thereafter received by the Fiscal Agent under any of the provisions of the Fiscal Agent Agreement shall be applied by the Fiscal Agent as follows and in the following order: (a) to the payment of any expenses necessary in the opinion of the Fiscal Agent to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Fiscal Agent (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Fiscal Agent Agreement; (b) to the payment of the principal of and interest then due with respect to the Bonds (upon presentation of the Bonds to be paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject to the provisions of the Fiscal Agent Agreement, as follows: First: To the payment to the Owners entitled thereto of all installments of interest then due in the order of the maturity of such installments and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the Owners entitled thereto, without any discrimination or preference; and Second: To the payment to the Owners entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by call for redemption, with interest on the overdue principal at the rate borne by the respective Bonds on the date of maturity or redemption, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the Owners entitled thereto, without any discrimination or preference. Any remaining funds shall be transferred by the Fiscal Agent to the Special Tax Fund. Limitation on Bondowners’ Right to Sue. Except as expressly provided for in the Fiscal Agent Agreement, no Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Fiscal Agent Agreement, the Act or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Fiscal Agent written notice of the occurrence of an Event of Default, (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Fiscal Agent to exercise the powers granted in the Fiscal Agent Agreement or to institute such suit, action or proceeding in its own name, (c) such Owner or said Owners shall have tendered to the Fiscal Agent indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and (d) the Fiscal Agent shall have refused or omitted to comply with such request for a period of 60 days after such written request shall have been received by, and such tender of indemnity shall have been made to, the Fiscal Agent.

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Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Fiscal Agent Agreement or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Fiscal Agent Agreement or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Fiscal Agent Agreement, the Act or other applicable law with respect to the Bonds, except in the manner provided in the Fiscal Agent Agreement, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Fiscal Agent Agreement and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Fiscal Agent Agreement. Defeasance Any Outstanding Bond(s) shall be deemed to have been paid within the meaning expressed in the Fiscal Agent Agreement if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of and interest and any premium due on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, or a designated bank or trust company as escrow holder, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund, the Bond Fund the Redemption Fund and the Reserve Fund and available for such purpose, is fully sufficient to pay the principal of and interest and any premium on such Bond as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent, or a designated bank or trust company as escrow holder, noncallable direct obligations of, or obligations guaranteed by, the United States of America, in which the District may lawfully invest its money, in such amount as certified by a nationally recognized certified public accountant which will, together with the interest to accrue thereon and monies then on deposit in the Special Tax Fund, the Bond Fund, the Redemption Fund and the Reserve Fund available for such purpose, together with the interest to accrue thereon, be fully sufficient to pay and discharge the principal of and interest and any premium on such Bond as and when the same shall become due and payable; then, notwithstanding that any such Bond shall not have been surrendered for payment, all obligations of the District under the Fiscal Agent Agreement, and any Supplement, with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to pay or cause to be paid to the Owners of any such Bonds not so surrendered and paid, all sums due thereon and except for the covenants of the District contained and identified in the Fiscal Agent Agreement.

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Miscellaneous Unclaimed Monies. Anything in the Fiscal Agent Agreement to the contrary notwithstanding, to the extent permitted by law and subject to the applicable escheat laws of the State, any money held by the Fiscal Agent in trust for the payment and discharge of any of the Bonds which remains unclaimed for one year after the date when such Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for one year after the date of deposit of such money if deposited with the Fiscal Agent after the date when such monies become due and payable, shall be repaid by the Fiscal Agent to the District, as its absolute property and free from trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look thereafter only to the District for the payment of such Bonds. The Fiscal Agent shall annually give notice to the District of the amount of any unclaimed monies that are available for transfer to the District, and the District shall request such transfer in writing. However, before being required to make any such payment to the District, the Fiscal Agent shall, at the expense of the District, cause to be mailed to the Owners of such Bonds, at their addresses as they appear on the Bond Register, a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District.

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APPENDIX F

DTC AND THE BOOK-ENTRY ONLY SYSTEM The following description of the Depository Trust Company (“DTC”), the procedures and record

keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds (in this Official Statement, the “Securities”) to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Securities and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the issuer of the Securities (the “Issuer”) nor the trustee, fiscal agent or paying agent

appointed with respect to the Securities (the “Agent”) takes any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to

the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Securities, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Securities, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Securities, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for

the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized

under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated

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subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated in this Official Statement by reference.

3. Purchases of Securities under the DTC system must be made by or through Direct

Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are

registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct

Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are

being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect

to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

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8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its services as depository with respect to the Securities at any

time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

10. Issuer may decide to discontinue use of the system of book-entry-only transfers through

DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been

obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.


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APPENDIX G

FORM OF ISSUER CONTINUING DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE (Community Facilities District)

$18,030,000

COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF THE SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

SERIES 2013 SPECIAL TAX BONDS

This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “District”) in connection with the issuance of the bonds captioned above (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of July 1, 2013 (the “Fiscal Agent Agreement”), by and between the District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). The District hereby covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed

and delivered by the District for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent

Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report provided by the District pursuant to, and as

described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” means the date that is seven months after the end of the District's fiscal

year (currently January 31 based on the District’s fiscal year end of June 30). “Dissemination Agent” means Willdan Financial Services, or any successor Dissemination

Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the

Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.

“Official Statement” means the final official statement dated August 7, 2013, executed by the

District in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original

underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under

the Securities Exchange Act of 1934, as it may be amended from time to time.

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“School District” means the Saugus Union School District. Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than the Annual

Report Date, commencing January 31, 2014, with the report for the 2012-13 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. The audited financial statements of the District may be included within or constitute a portion of the audited financial statements of the School District. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) If the District does not provide, or cause the Dissemination Agent to provide, an Annual

Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the District, file a report with the District

and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The District's Annual Report shall contain or incorporate

by reference the following documents and information: (a) The School District's audited financial statements for the most recently completed fiscal

year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement:

THE SCHOOL DISTRICT'S ANNUAL FINANCIAL STATEMENT IS PROVIDED

SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE DISTRICT OR THE SCHOOL DISTRICT, OTHER THAN NET TAXES, ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND NEITHER THE DISTRICT NOR THE SCHOOL DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF

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THE DISTRICT OR THE SCHOOL DISTRICT IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. (b) Total assessed value (per the Los Angeles County Assessor’s records) of all parcels

currently subject to the Special Tax within the District, showing the total assessed valuation for all land and the total assessed valuation for all improvements within the District and distinguishing between the assessed value of improved and unimproved parcels. Parcels are considered improved if there is an assessed value for the improvements in the Assessor's records.

(c) The total dollar amount of delinquencies in the District as of August 1 of any year and, in

the event that the total delinquencies within the District as of August 1 in any year exceed 5% of the Special Tax for the previous year, delinquency information for each parcel responsible for more than $5,000 in the payment of Special Tax, amounts of delinquencies, length of delinquency and status of any foreclosure of each such parcel.

(d) The amount of prepayments of the Special Tax with respect to the District for the prior

Fiscal Year. (e) A land ownership summary listing property owners responsible for more than 5% of the

annual Special Tax levy, as shown on the Los Angeles County Assessor's last equalized tax roll prior to the September next preceding the Annual Report Date.

(f) The principal amount of the Bonds outstanding and the balance in the Reserve Fund

(along with a statement of the Reserve Requirement) as of the September 30 next preceding the Annual Report Date.

(g) The current debt service schedule for the Bonds, reflecting the application of any

prepayments of the Special Tax. (h) A statement of the maximum special tax and the actual special taxes levied for the prior

Fiscal Year. (i) An updated table in substantially the form of the table in the Official Statement entitled

“Appraised Values and Value-to-Burden Ratios” based upon the most recent information available, provided that assessed values shown on the Los Angeles County assessor’s most recent equalized tax roll prior to the September next preceding the Annual Report Date may be substituted for appraised values.

(j) An updated table in substantially the form of the table in the Official Statement entitled

“Direct and Overlapping Governmental Obligations” as of the District’s most recently completed fiscal year, but only until all of the property in the District is classified as “Developed Property” under the Rate and Method of Apportionment for the District.

(k) Any changes to the Rate and Method of Apportionment for the District set forth in

Appendix B to the Official Statement. (l) A copy of the annual information required to be filed by the District with the California

Debt and Investment Advisory Commission pursuant to the Act and relating generally to outstanding District bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information.

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(m) The current status of the compliance by the property owners within the District to provide a letter of credit or cash deposit as set forth in the Fiscal Agent Agreement, including the current stated amount of each letter of credit or cash deposit and the manner in which the requirements are being satisfied.

(n) In addition to any of the information expressly required to be provided under paragraphs

(a) through (m) of this Section, the District 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.

Any or all of the items listed above may be included by specific reference to other documents,

including official statements of debt issues of the District or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The District shall clearly identify each such other document so included by reference.

Section 5. Reporting of Listed Events. (a) The District shall give, or cause to be given, notice of the occurrence of any of the following

Listed Events with respect to the Bonds:

(1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed

or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds.

(7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if

material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the District. (13) The consummation of a merger, consolidation, or acquisition involving the

District, or the sale of all or substantially all of the assets of the District (other than in the ordinary course of business), the entry into a definitive agreement to

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undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

(14) Appointment of a successor or additional Fiscal Agent or the change of name of

the Fiscal Agent, if material.

(b) Upon the occurrence of a Listed Event, the District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Indenture.

(c) The District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if

the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the Bonds. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the District will cause a notice to be filed as set forth in paragraph (b) above.

(d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above

is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the

MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The District's obligations under this Disclosure

Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. The District may, from time to time, appoint or engage a

Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent will be Willdan Financial Services.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure

Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

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(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of

nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the

manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

If the annual financial information or operating data to be provided in the Annual Report is

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

If an amendment is made to the undertaking specifying the accounting principles to be followed

in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to

prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the District to comply with any provision of this

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

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Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the District, the Property Owner, the Fiscal Agent, the Bond owners or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the

District, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.

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

Date: August 22, 2013


By:

Joan Lucid, Ed.D., Superintendent, Saugus Union School District, on

behalf of Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing

Authority AGREED AND ACCEPTED: Willdan Financial Services, as Dissemination Agent By: Name: Title:

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EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “District”)

Name of Bond Issue: Community Facilities District No. 2006-1C of the Saugus-Castaic School

Facilities Financing Authority Series 2013 Special Tax Bonds

Date of Issuance: August 22, 2013 NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respect to

the above-named Bonds as required by the Continuing Disclosure Certificate dated August 22, 2013 executed by the District and countersigned by Willdan Financial Services, as dissemination agent. The District anticipates that the Annual Report will be filed by _____________.

Dated:

DISSEMINATION AGENT: Willdan Financial Services By: Its:

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APPENDIX H

FORM OF PROPERTY OWNER DISCLOSURE CERTIFICATE

CONTINUING DISCLOSURE CERTIFICATE (Property Owner)

$18,030,000


SERIES 2013 SPECIAL TAX BONDS This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by

D.R. Horton Los Angeles Holding Company, Inc., a California corporation (the “Property Owner”), in connection with the issuance by Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “District”) of the bonds captioned above (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of July 1, 2013 (the “Fiscal Agent Agreement”), by and between the District and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). The Property Owner covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed

and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent

Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Affiliate” of another Person means (a) a Person directly or indirectly owning, controlling, or

holding with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person, 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person.

“Assumption Agreement” means an undertaking of a Major Owner, for the benefit of the holders

and beneficial owners of the Bonds, containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the District), whereby such Major Owner agrees to provide semi-annual reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 12 hereof.

“Dissemination Agent” means U.S. Bank National Association, or any successor Dissemination

Agent designated in writing by the Property Owner, with the written consent of the District, and which has filed with the Property Owner, the District and the Fiscal Agent a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

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“Major Owner” means, as of any Report Date, an owner of land in the District responsible in the

aggregate for 10% or more of the Special Taxes actually levied at any time during the then-current fiscal year.

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the

Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.

“Official Statement” means the final official statement dated August 7, 2013, executed by the

District in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original

underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Person” means an individual, a corporation, a partnership, a limited liability company, an

association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

“Property” means (i) the property owned by the Property Owner in the District as of the Report

Date, and (ii) the property that was formerly owned by the Property Owner but is still subject to the undertakings of this Disclosure Certificate.

“Report Date” means (a) September 30 of each year, and (b) March 31 of each year. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under

the Securities Exchange Act of 1934, as the same may be amended from time to time. “Semi-Annual Report” means any Semi-Annual Report provided by the Property Owner

pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Special Taxes” means the special taxes levied on the Property. Section 3. Provision of Semi-Annual Reports. (a) The Property Owner shall, or upon written direction of the Property Owner the

Dissemination Agent shall, not later than the Report Date, commencing March 31, 2014, provide to the MSRB, in an electronic format as prescribed by the MSRB, a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the District. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent (if different from the Property Owner), the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the District to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Fiscal Agent, the Participating Underwriter and the District may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.

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(b) If the Dissemination Agent does not receive a Semi-Annual Report by 15 calendar days

prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 7 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall provide to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A, with a copy to the Fiscal Agent (if other than the Dissemination Agent), the District and the Participating Underwriter.

(c) The Dissemination Agent shall:

(i) determine prior to each Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and;

(ii) to the extent the Semi-Annual Report has been furnished to it, file a report

with the Property Owner (if the Dissemination Agent is other than the Property Owner), the District and the Participating Underwriter certifying that the Semi-Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.

Section 4. Content of Semi-Annual Reports. The Property Owner’s Semi-Annual Report shall

contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The Property Owner shall clearly identify each such other document so included by reference.

In addition to any of the information expressly required to be provided in Exhibit B, each Semi-

Annual Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of

the following Listed Events with respect to itself or the Property, if material:

(i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner that owns property in the District that, in the reasonable judgment of the Property Owner, could have a material and adverse impact on the Property Owner’s ability to pay Special Taxes prior to delinquency or to sell or develop the Property as proposed in the Official Statement or a more recent Semi-Annual Report;

(ii) failure to pay any taxes, special taxes (including the Special Taxes) or

assessments due with respect to the Property prior to the delinquency date;

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(iii) filing of a lawsuit against the Property Owner or, if known, an Affiliate of the

Property Owner, seeking damages which, if successful, could have a material and adverse impact on the Property Owner’s ability to pay Special Taxes prior to delinquency or to sell or develop the Property as proposed in the Official Statement or a more recent Semi-Annual Report;

(iv) material damage to or destruction of the improvements on the Property; (v) any payment default or other material default by the Property Owner on any loan

with respect to the construction of improvements on the Property that would have a material adverse effect on the Property Owner’s most recently disclosed financing or development plan with respect to the Property, or the ability of the Property Owner to pay Special Taxes levied against its Property when due; and

(vi) any cancellation of, failure to renew, or amendment or modification of any letter

of credit to be provided by the Property Owner and described in the Official Statement, but excluding any permitted replacement with an alternative letter of credit, permitted termination of the letter of credit or permitted reductions in the amount thereof. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event,

the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law.

(c) If the Property Owner determines that knowledge of the occurrence of a Listed Event

would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the Fiscal Agent, the District and the Participating Underwriter.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the

MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Duration of Reporting Obligation.

(a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following:

(i) upon the legal defeasance, prior redemption or payment in full of all the

Bonds, or (ii) at such time as Property is no longer responsible for payment of 10% or more

of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes

attributable to the Property. The Property Owner shall give notice of the termination of its obligations under this

Disclosure Certificate in the same manner as for a Listed Event under Section 5.

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(b) If a portion of the Property is conveyed to a person or entity that, upon such

conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property conveyed to such Major Owner may be assumed by such Major Owner and the Property Owner’s obligations hereunder will be terminated. In order to effect such assumption, such Major Owner shall enter into an Assumption Agreement in form and substance satisfactory to the District and the Participating Underwriter. Section 8. Dissemination Agent. The Property Owner may, from time to time, with the written

consent of the District, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with the written consent of the District, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. The Dissemination Agent may resign by providing thirty days’ written notice to the District, the Property Owner and the Fiscal Agent.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure

Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):

(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may

only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of

nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the

manner provided in the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to

prevent the Property Owner from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Agreement to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Property Owner to comply with any provision

of this Disclosure Certificate, the Fiscal Agent shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take

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such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination

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

Section 13. Notices. Any notice or communications to be among any of the parties to this

Disclosure Certificate may be given as follows: To the Issuer: Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority 24930 Avenue Stanford Santa Clarita, CA 91355

Attention: Assistant Superintendent of Business Phone: (661) 294-5300 Fax: (661) 294-7525 To the Dissemination Agent: U.S. Bank National Association and Fiscal Agent 550 South Hope Street, Suite 500 Los Angeles, California 90071 Attention: Corporate Trust Department Phone: (213) 615-6047 Fax: (213) 615-6197 To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Ferry Building San Francisco, California 94111 Attention: Municipal Research Department Phone: (415) 445-2300 Fax: (415) 445-2395

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To the Property Owner: D.R. Horton Los Angeles Holding Company, Inc. 2280 Wardlaw Circle, Suite 100 Corona, California 92880 Attention: Stephen H. Fitzpatrick, Division President, Inland

Empire Division Phone: (951) 272-9000 Fax: (800) 538-2176 And to: D.R. Horton, America’s Builder 501 West Broadway, Suite 1200 San Diego, California 92101 Attention: Matt Farris and William E. Mayer Phone: (619) 849-4947 Fax: (800) 657-8204 D.R. Horton, Inc. 301 Commerce Street, Suite 500 Fort Worth, Texas 76102 Attention: Ted I. Harbour and Thomas Montano Phone: (817) 390-8200 Fax: (817) 390-8249 Any person may, by written notice to the other persons listed above, designate a different

address or telephone number(s) to which subsequent notices or communications should be sent. Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the

District, the Property Owner (its successors and assigns), the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization.

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Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: August 22, 2013

D.R. Horton Los Angeles Holding Company, Inc., a California corporation By: Stephen H. Fitzpatrick, Division President, Inland Empire

AGREED AND ACCEPTED: U.S. Bank National Association, as Dissemination Agent By: Title:

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EXHIBIT A

NOTICE OF FAILURE TO FILE SEMI-ANNUAL REPORT Name of Issuer: Community Facilities District No. 2006-1C of the Saugus-Castaic

School Facilities Financing Authority Name of Bond Issue: Community Facilities District No. 2006-1C of the Saugus-Castaic

School Facilities Financing Authority Series 2013 Special Tax Bonds

Date of Issuance: August 22, 2013 NOTICE IS HEREBY GIVEN that ____________ (the “Major Owner”) has not provided a Semi-

Annual Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated August 22, 2013. The Major Owner anticipates that the Semi-Annual Report will be filed by ____________.

Dated: DISSEMINATION AGENT: U.S. Bank National Association By: _______________________ Its: _______________________

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EXHIBIT B

SEMI-ANNUAL REPORT

COMMUNITY FACILITIES DISTRICT NO. 2006-1C Of the Saugus-Castaic School Facilities Financing Authority

SERIES 2013 SPECIAL TAX BONDS This Semi-Annual Report is hereby submitted under Section 4 of the Continuing Disclosure

Certificate (the “Disclosure Certificate”) dated as of August 22, 2013 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (the “District”).

Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings

given to them in the Disclosure Certificate.

I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not

more than 60 days before the date of this Semi-Annual Report). A. Description of the Property currently owned by the Property Owner in the District (the

“Property”) in substance and form similar to such information in the Official Statement for the Bonds: ________________________________________________________________________ ________________________________________________________________________ B. Updated information regarding land development and home construction activities

described in the Official Statement for the Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

________________________________________________________________________ ________________________________________________________________________ C. Status of building permits and any material changes to the description of land use or

development entitlements described in the Official Statement for the Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

________________________________________________________________________ ________________________________________________________________________

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

________________________________________________________________________ ________________________________________________________________________

II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Semi-

Annual Report, describe any material change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement.

________________________________________________________________________ ________________________________________________________________________

III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Semi-

Annual Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement.

________________________________________________________________________ ________________________________________________________________________

IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Semi-

Annual Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the headings “PROPERTY OWNERSHIP” and “PROPOSED PROPERTY DEVELOPMENT” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement.

________________________________________________________________________ ________________________________________________________________________

V. Other Material Information In addition to any of the information expressly required above, provide such further information,

if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

________________________________________________________________________ ________________________________________________________________________

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Certification The undersigned Property Owner hereby certifies that this Semi-Annual Report constitutes the

Semi-Annual Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT

OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.

THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT

OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.

Dated: __________________________, a ___________________ By: Title:

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APPENDIX I

FORM OF OPINION OF BOND COUNSEL

Upon delivery of the Bonds, Bowie, Arneson, Wiles & Giannone, Newport Beach, California, Bond Counsel to the Saugus-Castaic School Facilities Financing Authority, expects to render their final approving opinion with respect to the Bonds in substantially the following form: Board of Directors Saugus-Castaic School Facilities Financing Authority 24930 Avenue Stanford Santa Clarita, CA 91355 Re: $18,030,000 Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority Series 2013 Special Tax Bonds Final Opinion of Bond Counsel Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance and sale by Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority (“District”) of $18,030,000 aggregate principal amount of bonds designated “Community Facilities District No. 2006-1C of the Saugus-Castaic School Facilities Financing Authority Series 2013 Special Tax Bonds” (“Bonds”). The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), Resolution 2013-14 # 01 adopted by the Board of Directors of the Saugus-Castaic School Facilities Financing Authority (“Authority”) acting in its capacity as the Legislative Body of the District on July 23, 2013, and the Fiscal Agent Agreement executed in connection therewith dated as of July 1, 2013, by and between the District and U.S. Bank National Association (“Fiscal Agent Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Fiscal Agent Agreement. As Bond Counsel, we have examined copies certified to us as being true and complete copies of the proceedings in connection with the formation of the District and the issuance of the Bonds (“District Proceedings”). We have also examined certificates and representations of fact made by public officials and officers of the District and the Authority, the Underwriter and others as we have deemed necessary to render this opinion. Attention is called to the fact that we have not been requested to examine and have not examined any documents or information relating to the District or the Authority other than the record of the District Proceedings hereinabove referred to, and no opinion is expressed as to any

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financial or other information, or the adequacy thereof which has been or may be supplied to any purchaser of the Bonds. We have assumed the genuineness of all documents and signatures presented to us and the due and legal execution and delivery thereof by, and validity against, any parties other than the District. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any matters that come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with the issuance thereof and we disclaim any obligation to update this letter. As to questions of fact material to our opinion, we have relied upon the representations of fact and certifications referred to above, and we have not undertaken by independent investigation to verify the authenticity or the accuracy of the factual matters represented, warranted or certified therein. Furthermore, we have assumed compliance with all covenants contained in the Fiscal Agent Agreement, the Tax Certificate and other documents related to the District Proceedings, including, without limitation, covenants compliance with which is necessary to assure that future actions or events will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. Failure to comply with certain of such covenants may cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of original issuance of the Bonds. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Fiscal Agent Agreement and the Tax Certificate and other documents related to the District Proceedings are subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to creditors' rights and remedies, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against school districts in the State of California (“State”). We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisions contained in the foregoing documents. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. The Fiscal Agent Agreement, the Tax Certificate and other documents related to the District Proceedings refer to certain requirements and procedures which may be changed and certain actions which may be taken or omitted under the circumstances and subject to terms and conditions set forth in such documents. No opinion is expressed herein as to the effect on any Bond or the interest thereon if any such change is made, or action is taken or omitted, upon the advice or approval of counsel other than ourselves.

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Based on and subject to the foregoing, and in reliance thereon, and our consideration of such questions of law as we have deemed relevant to the circumstances, we are of the following opinions: 1. The District has, and the District Proceedings show, full power and authority to issue the Bonds. The Bonds constitute legal, valid and binding obligations of the District, payable in accordance with their terms. The Bonds are limited obligations of the District payable solely from and secured by a pledge of the Net Taxes, and from other funds and accounts pursuant to the Fiscal Agent Agreement, and are not obligations of the Authority, the State or any public agency thereof (other than the District). The District has the full right, power and authority to levy and pledge the Net Taxes to the Owners of the Bonds. 2. The Fiscal Agent Agreement has been duly and validly authorized, executed and delivered by, and constitutes a valid and binding obligation of, the District. 3. Interest on the Bonds (including any original issue discount properly allocable to the owner thereof) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended, and is exempt from State personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum taxes imposed on individuals and corporations, although it should be noted that, with respect to corporations, such interest will be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. We express no opinion regarding other tax consequences related to the Bonds or to the accrual or receipt of the interest on the Bonds. We express no opinion as to any matter other than as expressly set forth above. Very truly yours,


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APPENDIX J

COMMUNITY FACILITIES DISTRICT BOUNDARY MAP

L

PROPOSED BOUNDARIES OF SAUGUS-CASTAIC SCHOOL FACILITIES FINANCING AUTHORITY

COMMUNITY FACILITIES DISTRICT NO. 2006-1C COUNTY OF LOS ANGELES

STATE OF CALIFORNIA

(1) Filed in the office of the Clerk of the Board of Trustees of the Saugus Union School District this_ day of ___ , 20_.

Clerk of the Board of Trustees of the Saugus Union School District, acting as the Clerk of the Board of Directors of the Saugus-castaic School Facilities Financing Authority

(2) I hereby certify that the within map showing the proposed boundaries of Community Facilities Disbict No. 2006-1 C of the Saugus-Castaic School Facilities Financing Authority, County of Los Angeles, State of California, was approved by the Board of Trustees of the Saugus Union School District, acting in its capacity as the Board of Directors of the Saugus-Castaic School FadiiUes Financing Authority at a meeting thereof, held on this_ day of ___ , 20_, by its Resolution No. __ .

Clerk of the Board of Trustees of the Saugus Union School District, acting as the Clerk of the Board of Directors of the Saugus-Castaic School Facilities Financing Authority

(3) Filed this_ day of ___ , 20_, at the hour of_ o"clock _.m. in Book __ of Maps of Assessment and Community Facilities Districts at Page(s) ___, in the office of the County Recorder In the County of Los Angeles, State of California.

By: Los~-A"n"g"'e"les=eo=unty="Re""g"ist"ra=r-"Rec:o==rn~er

LEGEND Proposed Boundaries of Community Facilities District No. 2006-1C

Parcel 2 of Parcel Map No. 25802

Reference Is hereby made to the Assessor maps of the County of Los Angeles for an exact description of the lines and dimensions of each lot and parcel.

PREPARED BY DOLINKA GROUP

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Documents

$18,030,000 COMMUNITY FACILITIES DISTRICT NO. 2006-1C OF …cdiacdocs.sto.ca.gov/2013-1293.pdf · facilities to be owned and operated by the Santa Clarita Valley Sanitation District,