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CDC - Item 4B - Resolution Number 2006-25E M P S y O Iff MCOR✓ORALED �QyO 0 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION STAFF REPORT TO: AND HONORABLE CHAIRMAN AND COMMISSION M ERS FROM: ANDREW C. LAZZARETTO, EXECUTIVE DIRECT DATE: NOVEMBER 14, 2006 SUBJECT: RESOLUTION NO. 2006 -25 — AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $26,000,000 OF THE COMMISSION'S REDEVELOPMENT PROJECT NO. 1 TAX ALLOCATION BONDS, SERIES 2006B AND THE EXECUTION AND DELIVERY OF A SECOND SUPPLEMENT TO THE INDENTURE, A PURCHASE CONTRACT, A CONTINUING DISCLOSURE AGREEMENT AND AN OFFICAL STATEMENT, AND APPROVING A PRELIMINARY OFFICIAL STATEMENT IN CONNECTION THEREWITH AND AUTHORIZING RELATED ACTIONS SUMMARY At its October 24, 2006 meeting, the Community Development Commission authorized staff to pursue the refunding of all outstanding debt from the 1993 Tax Allocation Bond issue and use Piper Jaffray to serve as the senior managing underwriter. As part of the refunding process, the City Council and Community Development Commission must approve resolutions authorizing the issuance of the bonds and the execution and delivery of a second supplement to the indenture, a purchase contract, a continuing disclosure agreement, official statement and a preliminary official statement. Staff Recommendation Staff recommends that the Commission take the following action: • Approve Resolution No. 2006 -25 (Attachment 1) authorizing the issuance of tax allocation bonds. • Approve certain documents related to the bond issue as mentioned above. BACKGROUND In November 1993, the Rosemead Redevelopment Agency issued $36.7 million of tax allocation bonds for purposes of refunding a prior bond issue and to provide additional financing to the Agency for redevelopment related purposes. In February 2006, the Rosemead Community Development Commission (also known as the Rosemead Redevelopment Agency) issued $14 million of tax allocation bonds to refund a portion of the outstanding 1993 Bonds and to finance redevelopment activity in Project Area No. 1. The Commission currently owes approximately $23.1 million from the 1993 Bond issue. APPROVED FOR CITY COUNCIL AGENDA: (J��- • 0 Community Development Commission November 14, 2006 Paae 2 of 3 Senate Bill 1069 was approved on September 22, 2005. This granted redevelopment agencies in California the legal authority to refund bonds that mature more than 50 years from the original date of the adopted redevelopment plan. This now allows the Rosemead Community Development Commission to refund the remaining $23.1 million of debt from the 1993 Bond issue. ANALYSIS At the current market interest rates, the. Community Development Commission can refinance the remaining outstanding portion of the 1993 Tax Allocation Bonds of $23.1 million and save, on the average, $165,000 annually in debt service. As part of the refunding process, the City Council and Community Development Commission must approve resolutions which authorize the execution and delivery of the Bonds and the following documents: • The Second Supplemental Indenture sets forth the terms and conditions of this series of bonds. (Attachment 2) • The Purchase Contract is the agreement that will be executed by the Commission and Piper Jaffray at the time bonds are sold. (Attachment 3) • The Continuing Disclosure Agreement is an annual requirement that a financial report be provided to the bond holders. (Attachment 4) • The Preliminary Official Statement is the primary disclosure and offering document which is made available to potential bond investors. (Attachment 5) • The final Official Statement is a document that is published with all the final interest rates, annual debt service schedules, etc. (Attachment 6) Once the resolutions and related documents are adopted and in place, the refunding bonds will be offered for sale by Piper Jaffray to investors. This is scheduled to take place on December 14 If the bonds are purchased, the refunding will close on December 21 The trustee will immediately invest the bond proceeds in the United States Government Securities and notify all owners of the outstanding 1993 Bonds that on February 6, 2007 they will be redeemed in full and the debt will be cancelled. After February 6, 2007, the Commission will no longer pay debt service on the 1993 Bonds. Instead, the Commission will begin making debt service payments on the refunding bonds and begin to realize the annual savings. Community Development Commission November 14, 2006 Page 3 of 3 It should be noted that at this time, staff is not proposing that any new funds be generated by this bond issue. This issue would only be to refinance the Commission's existing debt. FINANCIAL REVIEW Staff is recommending that the Commission approve the necessary documentation for the bond issue as well as authorize the issuance of the refunding bonds in a not to exceed amount of $26 million. While the Commission currently owes $23.1 million, the total refunding bond issue size could vary depending upon the interest rate when the bonds are sold. In addition there will also be costs for issuance included in the overall bond total. However, Piper Jaffary and staff are confident that the overall total will be less than $26 million. Based upon the current level market interest rates, the refunding will produce approximately $165,000 of annual debt service savings over the life of the bonds. It should be noted that the level of debt service savings could vary depending upon the level of interest rates on the day the bonds are sold. However, as part of Resolution No. 2006 -25, the Commission is authorizing staff to stop the refunding process if the debt service savings at the time the bonds are sold is not sufficient. PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification process. LEGAL REVIEW This staff report and the attached resolution have been reviewed and approved by the City Attorney. Submitted by: Bri aeki Redevelopment and Economic Development Manager Attachment 1 — Community Development Commission Resolution No. 2006 -25 Attachment 2 — Second Supplemental Indenture Attachment 3 — Purchase Contract Attachment 4 — Continuing Disclosure Agreement Attachment 5 — Preliminary Official Statement RESOLUTION NO. 2006 -25 RESOLUTION OF THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $26,000,000 OF THE COMMISSION'S REDEVELOPMENT PROJECT NO. 1 TAX ALLOCATION REFUNDING BONDS, SERIES 2006B AND THE EXECUTION AND DELIVERY OF A SECOND SUPPLEMENT TO INDENTURE, A PURCHASE CONTRACT, A CONTINUING DISCLOSURE AGREEMENT AND AN OFFICIAL STATEMENT, AND APPROVING A PRELIMINARY OFFICIAL STATEMENT IN CONNECTION THEREWITH AND AUTHORIZING RELATED ACTIONS WHEREAS, the Rosemead Community Development Commission (the "Commission") is a redevelopment agency, a public body, corporate and politic, duly created, established and authorized to transact business and exercise powers under and pursuant to the provisions of the Community Redevelopment Law of the State of California (the "Law "), including the power to issue bonds for any of its corporate purposes; WHEREAS, a plan for a redevelopment project known and designated as "Redevelopment Project No. 1" (the "Project"), has been adopted and approved in accordance with the Law: WHEREAS, the plan contemplates that the Commission will issue its bonds to finance and/or refinance a portion of the cost of such Project; WHEREAS, the Commission has heretofore authorized and issued its Redevelopment Project No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993A Bonds ") pursuant to an Indenture, dated as of October 1, 1993 (the "Original Indenture'), between the Commission, as successor to the Rosemead Redevelopment Agency, and U.S. Bank National Association, as successor trustee (the "Trustee'), for the purpose of financing and /or refinancing portions of the Project; WHEREAS, the Commission has heretofore authorized and issued its Rosemead Community Development Commission Redevelopment Project No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "), pursuant to the Original Indenture and a First Supplement to Indenture (the "First Supplemental Indenture'), between the Commission and the Trustee, for the purpose of financing and /or refinancing portions of the Project, including the refunding of a portion of the Series 1993A Bonds, and to pay costs of issuance relating to the Series 2006A Bonds; WHEREAS, the Commission intends to provide for the issuance of its Rosemead Community Development Commission Redevelopment Project No. I Tax Allocation Refunding Bonds, Series 2006B (the "Series 2006B Bonds"), pursuant to the Original Indenture, the First Supplemental Indenture and a Second Supplement to Indenture (the "Second Supplemental Indenture'), between the Commission and the Trustee for the purpose of financing and /or US WEST:260114344.2 41555 -9 WWW"AT refinancing portions of the Project, including the remaining Series 1993A Bonds, and to pay costs of issuance relating to the Series 2006B Bonds; WHEREAS, the Commission proposes to sell the Series 2006B Bonds to Piper Jaffray, as underwriter (the "Underwriter "), pursuant to a Purchase Contract (the "Purchase Contract "), between the Commission and the Underwriter; WHEREAS, the purchase by the Underwriter of the Series 2006B Bonds will result in significant public benefits in the form of demonstrable savings in effective interest rates, and the more efficient delivery of local agency services; WHEREAS, a form of the Preliminary Official Statement (the "Preliminary Official Statement') to be distributed in connection with the public offering of the Series 2006B Bonds has been prepared; WHEREAS, Rule 15c2 -12 promulgated under the Securities Exchange Act of 1934 ( "Rule 15c2 -12 ") requires that, in order to be able to purchase or sell the Series 2006B Bonds, the Underwriter must have reasonably determined that the Commission has undertaken in a written agreement or contract for the benefit of the holders of the Series 2006B Bonds to provide disclosure of certain financial information and certain material events on an ongoing basis; WHEREAS, in order to cause such requirement to be satisfied, the Commission desires to execute and deliver a Continuing Disclosure Agreement (the "Continuing Disclosure Agreement'); and WHEREAS, the Commission has been presented with the form of each document referred to herein relating to the financing contemplated hereby, and the Commission has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; NOW, THEREFORE, BE IT RESOLVED BY THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION, AS FOLLOWS: Section 1. The foregoing recitals are true and correct and the Commission hereby so finds and determines. Section 2. The issuance of not to exceed $26,000,000 aggregate principal amount of Rosemead Community Development Commission, Redevelopment Project No. 1, Tax Allocation Refunding Bonds, Series 2006B is hereby approved. Section 3. The form of the Second Supplemental Indenture, on file with the Secretary of the Commission and incorporated into this Resolution by reference, is hereby approved. The Chair of the Commission, the Vice -Chair of the Commission, the Executive Director of the Commission, the Finance Officer of the Commission, the Deputy Executive Director of Community Development of the Commission, the Secretary of the Commission, or such other officer or employee of the Commission as the Executive Director may designate (the "Authorized Officers "), are each hereby authorized and directed, for and in the name and on behalf of the Commission, to execute and deliver the Second Supplemental Indenture in US WEST'.260114344.2 41555 -9 W W W"'W (3 • • substantially the form on file with the Secretary and presented to this meeting, with such additions thereto or changes or insertions that hereafter become necessary in the interest of the Commission and which are approved by the Authorized Officer executing the same, in consultation with the Commission's bond counsel, such approval to be conclusively evidenced by such execution and delivery. Section 4. The form of Purchase Contract relating to the Series 2006B Bonds between the Underwriter and the Commission, on file with the Secretary of the Commission and incorporated into this Resolution by reference, is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Commission, to accept the offer to purchase the Series 2006B Bonds as in the Purchase Contract and to execute and deliver the Purchase Contract in substantib the form on file with the Secretary and presented to this meeting, with such additions thereto or changes or insertions that hereafter become necessary in the interest of the Commission and which are approved by the Authorized Officer executing the same, in consultation with the Commission's bond counsel, such approval to be conclusively evidenced by the execution and delivery of the Purchase Contract; provided, however, that the net present value savings as a result of the refunding of the Series 1993A Bonds is at least equal to 5% of the principal amount of the Series 1993A Bonds being refunded. Section 5. The form of Continuing Disclosure Agreement relating to the Series 2006B Bonds, on file with the Secretary of the Commission and incorporated into this Resolution by reference (the "Continuing Disclosure Agreement"), is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Commission, to execute and deliver the Continuing Disclosure Agreement in substantially the form on file with the Secretary of the Commission, with such additions thereto or changes or insertions that hereafter become necessary in the interest of the Commission and which are approved by the .Authorized Officer executing the same, in consultation with the Commission's bond counsel, such approval to be conclusively evidenced.by the execution and delivery of the Continuing Disclosure Agreement. Section 6. The form of Preliminary Official Statement relating to the Series 2006B Bonds, on file with the Secretary of the Commission and incorporated into this resolution by reference, is hereby approved. The Authorized Officers are each hereby authorized and directed to execute a certificate deeming the Preliminary Official Statement final as of its date, except for certain final pricing and related information, pursuant to Securities Exchange Commission Rule 15c2 -12. The Underwriter is hereby authorized to distribute the Preliminary Official Statement as so deemed final to prospective purchasers of the Series 2006B Bonds. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Commission, to execute a final Official Statement (the "Official Statement ") in substantially the form of such deemed final Preliminary Official Statement, including such final pricing and related information and with such additions thereto or changes therein as hereafter become necessary in the interest of the Commission and which are approved by the Authorized Officer executing the same, such approval to be conclusively evidenced by the execution and delivery of such Official Statement. The Underwriter is hereby authorized to distribute copies of said final Official Statement to all actual purchasers of the Series 2006B Bonds. US_W EST:260114344.2 41555 -9 WWWWWB Section 7. The Chair, Vice - Chair, Executive Director, General Counsel, Treasurer, Secretary and all other officers, agents and employees of the Commission are hereby' authorized and directed, in the name and on behalf of the Commission, to take such actions, execute and deliver such documents and certificates, including an escrow agreement with respect to the refunding of the Series 1993A Bonds, a tax certificate and certificates relating to the Official Statement, and do any and all things which they, or any of them, deem necessary or desirable to accomplish the lawful issuance, sale and delivery of the Series 2006B Bonds in accordance with the Original Indenture, the First Supplemental Indenture, the Second Supplemental Indenture, the Official Statement, this Resolution and all related documents. Section 8. This Resolution shall become effective immediately upon its passage. I, Nina Castruita, Secretary of the Rosemead Community Development Commission, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of said Commission held on November 14, 2006, by the following vote, to wit: AYES: NOES: ABSENT: Secretary Community Development Commission Chairman Community Development Commission US WEST:260114344.2 41555 -9 W WB/11'WB US_ WEST: 26011443 1.1 41555 -9 W WB/W WB 0 SECOND SUPPLEMENT TO INDENTURE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION TO U.S. BANK NATIONAL ASSOCIATION as Trustee Dated as of December 1, 2006 Relating to $26,000,000 Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds, Series 2006B . ATTACHMENT2 0 0 SECOND SUPPLEMENT TO INDENTURE THIS SECOND SUPPLEMENT TO INDENTURE (this "Second Supplement ") is dated as of December 1, 2006, by and between the Rosemead Community Development Commission, a public body, corporate and politic, organized and existing under, and by virtue of the laws of the State of California (the "Commission "), and U.S. Bank National Association, as successor trustee to State Street Bank and Trust Company of California, N.A., a national banking association organized and existing under the laws of the United States and authorized to accept and execute trusts of the character herein set out with a corporate trust office located in Los Angeles, California, as trustee (the "Trustee "); WITNESSETH: WHEREAS, the Commission is a redevelopment agency, a public body, corporate and politic duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the Community Redevelopment Law (Part 1 of Division 24 of the Health and Safety Code of the State of California and referred to herein as the "Law "), and the powers of such agency include the power to issue bonds for any of its corporate purposes; and WHEREAS, a redevelopment plan for a redevelopment project known and designated as the "Redevelopment Project Area No. 1" has been adopted and approved and all requirements of law for, and precedent to, the adoption and approval of said plan have been duly complied with; and WHEREAS, the plan contemplates that the Commission will issue its bonds to finance and /or refinance a portion of the cost of such redevelopment; and WHEREAS, the Commission, has heretofore issued its Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993A Bonds ") in the original principal amount of $34,275,000 for the purpose of financing portions of the Redevelopment Project Area No. 1, which Series 1993A. Bonds were issued pursuant to the terms of an Indenture, dated as of October 1, 1993 (the "Original Indenture "), between the Trustee and the Commission; and WHEREAS, the Commission has heretofore authorized and issued its Rosemead Community Development Commission Redevelopment Project No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "), pursuant to the Original Indenture and a First Supplement to Indenture (the "First Supplement'), between the Commission and the Trustee, for the purpose of financing and /or refinancing portions of the Project, including the refunding of a portion of the Series 1993A Bonds, and to pay costs of issuance relating to the Series 2006A Bonds; WHEREAS, the Commission, by Resolution No. 2006 -_, adopted on November 14, 2006 (the "Resolution "), authorized the issuance of not to exceed $26,000,000 aggregate principal amount of its Redevelopment Project Area No. 1, Tax Allocation Refunding Bonds, US_ WEST: 260114431.1 41555 -9 W WB /W WB 0 9 Series 2006B (the "Series 2006B Bonds ") for the purpose of financing and /or refinancing the redevelopment project; and WHEREAS, the Commission has determined to issue the Series 2006B Bonds pursuant to the Original Indenture, the First Supplement and this Second Supplement, which Original Indenture, as supplemented by the First Supplement and this Second Supplement, and as hereinafter supplemented, is referred to as the "Indenture "; and WHEREAS, the Indenture provides that the Commission may issue subsequent Series of Additional Bonds from time to time by a Supplemental Indenture, subject to the conditions and limitations contained in the Law and in Section 4.01 of the Indenture; and WHEREAS, the conditions and limitations contained in the Law and in Section 4.01 of the Indenture have been satisfied or will be satisfied at the time of the issuance of the Series 2006B Bonds; and WHEREAS, the Commission has further determined that the amendments and supplements to the Indenture herein contained are necessary and desirable and can be made pursuant to Section 8.01 of the Indenture without the consent of any Bondholders; and WHEREAS, all things necessary to cause the Series 2006B Bonds, when authenticated by the Trustee and issued as in this Second Supplement and the Original Indenture and First Supplement provided, to be legal, special obligations of the Commission, enforceable in accordance with their terms, and to constitute this Second Supplement and the Original Indenture and the First Supplement a valid agreement for the uses and purposes herein set forth in accordance with their terms, have been done and taken, and the creation, execution and delivery of this Second Supplement and the creation, execution and issuance of the Series 2006B Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW THEREFORE, THIS SECOND SUPPLEMENT TO INDENTURE WITNESSETH, that in order to secure the payment of the principal of, and the interest and premium, if any, on, all Bonds at any time issued and outstanding under the Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Commission does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds, as follows: ARTICLE XV SERIES 2006B BONDS; AMENDMENTS; MISCELLANEOUS SECTION 15.01 Authorization and Terms of Series 2006B Bonds A Series of Bonds to be issued under the Indenture is hereby created and such Series of Bonds are designated as the "Rosemead Community Development Commission, Redevelopment Project Area No. 1, Tax Allocation Refunding Bonds, Series 200613" (herein called the "Series 2006B Bonds "). The -2- US_ WEST:260114431.1 41555 -9 W W B/ W W B 0 0 aggregate principal amount of Series 2006B Bonds which may be issued and outstanding under this Indenture shall not exceed $26,000,000. The Series 2006B Bonds shall be dated the Dated Date, shall bear interest, at the rates per annum (payable on April 1 and October 1 in each year, commencing April 1, 2007), and shall mature and become payable on October 1 in each of the years as to principal in the amounts set forth below: Maturity Date Principal Interest (October 1) Amount Rate 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2026 2033 Interest on the Series 2006B Bonds shall be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2006B Bonds shall be issued as fully registered bonds in Authorized Denomination. The Series 2006B Bonds shall be numbered as determined by the Trustee. The Series 2006B Bonds shall bear interest from the Interest Payment Date next preceding the date of registration thereof, unless such date of registration is during the period from the 16th day of the month next preceding an Interest Payment Date to and including such Interest Payment Date, in which event they shall bear interest from such Interest Payment Date, or unless such date of registration is on or before March 15, 2007, in which event they shall bear interest from their Dated Date; provided, however, that if, at the time of registration of any Series 2006B Bond, interest is then in default on the Outstanding Series 2006B Bonds, such Series 2006B Bond shall bear interest from the Interest Payment Date to which interest previously has been paid or made available for payment on the Outstanding Series 2006B Bonds. Payment of interest on the Series 2006B Bonds due on or before the maturity or prior redemption of such Series 2006B Bonds shall be made to the person whose name appears on the bond registration books of the Trustee as the registered owner thereof, as of the close of business on the 15th day of the month next preceding the Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such registered owner at his address as it appears on such books or, upon written request received prior to the 15th day of the month preceding an Interest Payment Date of an Owner of at least $1,000,000 in aggregate principal amount of Series 2006B Bonds, by wire transfer in immediately available funds to an account -3- US WEST: 260114431.1 41555 -9 W WB /W WB within the continental United States designated by such Owner. Principal and redemption premiums, if any, on the Series 2006B Bonds shall be payable upon the surrender thereof at maturity or the earlier redemption thereof at the principal corporate trust office of the Trustee and shall be paid in lawful money of the United States of America. The Commission may at any time execute and deliver the Series 2006B Bonds authorized to be issued hereunder and upon the Written Request of the Commission, the Trustee shall authenticate and deliver the Series 2006B Bonds. SECTION 15.02 Form of Series 2006B Bonds The Series 2006B Bonds, the Trustee's certificate of authentication, and the form of assignment to appear thereon shall be in substantially the forms, respectively, attached hereto as Appendix A with necessary or appropriate variations, omissions and insertions as permitted or required by the Indenture. SECTION 15.03 Terms of Redemption of Series 2006B Bonds (a) Optional Redemption. Series 2006B Bonds due on or before October 1, 2016 shall not be subject to redemption before their respective stated maturities. Series 2006B Bonds maturing on or after October 1, 2017 shall be subject to redemption, as a whole or in part, as designated by the Commission, or, absent such designation, pro rata among maturities, and by lot within any one maturity if less than all of the Series 2006B Bonds of such maturity are to be redeemed, prior to their respective maturity dates, at the option of the Commission, on any date on or after October 1, 2016, from funds derived by the Commission from any source, at the redemption price of the principal amount of Series 2006B Bonds called for redemption, together with interest accrued thereon to the date fixed for redemption. (b) Sinking Account Redemption. Series 2006B Bonds shall also be subject to mandatory redemption in part by lot prior to their stated maturity dates, on any October 1, on or after October 1, 20_, solely from funds derived by the Commission from the required deposit into the Term Bond Sinking Account provided for in Section 15.05 hereof, at the principal amount thereof plus accrued interest thereon to the redemption date, without premium, in the aggregate principal amounts and on the dates set forth below; provided, however, that if some but not all of such Term Series 2006B Bonds have been redeemed pursuant to other redemption provisions of this Indenture, the total amount of all future Sinking Account payments set forth below shall be reduced by the aggregate principal amount of such Term Series 2006B Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis in integral multiples of $5,000 as determined by the Commission (notice of which determination shall be given by the Commission to the Trustee): -4- US_ WEST: 26011443 1.1 41555 -9 W W BI W W B 0 �J Series 2006B Bonds Sinking Payment Date (October 1) Principal Amount to be Redeemed 2033 * Maturity SECTION 15.04 Application of Proceeds of Series 2006B Bonds Upon receipt of payment for the Series 2006B Bonds, the Trustee shall set aside and deposit the proceeds received from such sale and delivery in the following respective funds and accounts: (i) The Trustee shall deposit in the Series 2006B Expense Account in the Expense Fund an amount equal to $ to pay costs incurred in connection with the issuance of the Series 2006B Bonds. (ii) [ The Trustee shall transfer $ of the proceeds of the Series 2006B Bonds to the Commission for deposit into the Redevelopment Fund.] (iii) The Trustee shall deposit the amount of $ refunding escrow established under the Escrow Agreement. in the [In addition, simultaneously with the receipt of payment for the Series 2006B Bonds, the Trustee shall release $ on deposit in the Reserve Account and $ on deposit in the Debt Service Fund under the Original Indenture and transfer the aggregate $ to the refunding escrow established under the Escrow Agreement.] For record - keeping purposes, the Trustee may establish such additional accounts as may be necessary to reflect such transfer of proceeds. In order to verify the use of and the remaining available amount of the Series 2006B Bond proceeds, the Commission shall create such accounts and otherwise take such steps as may be required to be able to separately account for the proceeds of the Series 2006B Bonds. SECTION 15.05 Series 2006B Sinking Account On or before five (5) days preceding each Sinking Account Payment Date for the Series 2006B Bonds, the Trustee shall set 5- US WEST: 260114431.1 41555 -9 W W WW W B 0 • aside from the Debt Service Fund and deposit in the Sinking Account an amount of money equal to the amount required to redeem Series 2006B Bonds on the next succeeding October 1, pursuant to Section 15.03(b) hereof. All such moneys in the Term Bond Sinking Account shall be used by the Trustee to redeem the Series 2006B Bonds in accordance with Section 15.03(b) hereof. SECTION 15.06 Amendments to Indenture (a) The following defined terms are added to Section 1.01 hereof: Ambac Assurance The term "Ambac Assurance" means Ambac Assurance Corporation, a Wisconsin - domiciled stock insurance company. Bond Insurer The term 'Bond Insurer" means with respect to Series 2006B Bonds, Ambac Assurance. Dated Date The term "Dated Date" means with respect to Series 2006B Bonds the date of initial issuance and delivery thereof. Escrow Agreement The term "Escrow Agreement' means the Escrow Agreement, dated as of December 1, 2006 Between the Commission and U.S. Bank National Association, as escrow agent thereunder. Financial Guaranty Insurance Policy The term "Financial Guaranty Insurance Policy" means the financial guaranty insurance policy issued by Ambac Assurance insuring the payment when due of the principal of and interest on the Obligations as provided therein. Series 2006B Bonds The term "Series 2006B Bonds" means the Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds, Series 2006B. (b) The following definitions are amended in the following manner: [to be provided, if any] ARTICLE XVI ADDITIONAL PROVISIONS RELATING TO BOND INSURER SECTION 16.01 Additional Notice Requirements The following notices shall be given to Ambac Assurance as Bond Insurer for the Series 2006B Bonds: Notices to be sent to the attention of the SURVEILLANCE DEPARTMENT: (a) While the Financial Guaranty Insurance Policy is in effect, the Commission or the Trustee, as appropriate, shall furnish to Ambac Assurance, upon request, the following: M US_ WEST : 260114431.1 41555 -9 W WB /W WB 0 0 (i) a copy of any financial statement, audit and /or annual report of the Commission; and (ii) such additional information it may reasonably request. Upon request, such information shall be delivered at the Commission's expense to the attention of the Surveillance Department, unless otherwise indicated. (b) a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to this Indenture relating to the security for the Bonds. (c) To the extent that the Obligor has entered into a continuing disclosure agreement with respect to the Bonds, Ambac Assurance shall be included as party to be notified. Notices to be sent to the attention of the GENERAL COUNSEL OFFICE: (d) The Trustee or Commission, as appropriate, shall notify Ambac Assurance of any failure of the Commission to provide relevant notices, certificates, etc. (e) Notwithstanding any other provision of this Indenture, the Trustee or Commission, as appropriate, shall immediately notify Ambac Assurance if at any time there are insufficient moneys to make any payments of principal and /or interest as required and immediately upon the occurrence of any event of default hereunder. SECTION 16.02 Additional Information to be Provided Ambac Assurance The Commission will permit Ambac Assurance to discuss the affairs, finances and accounts of the Commission or any information Ambac Assurance may reasonably request regarding the security for the Bonds with appropriate officers of the Commission. The Trustee or Commission, as appropriate, will permit Ambac Assurance to have access to and to make copies of all books and records relating to the Bonds at any reasonable time. Ambac Assurance shall have the right to direct an accounting at the Commission's expense, and the Commission's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from Ambac Assurance shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Bonds. SECTION 16.03 No Defeasance if Series 2006B Bonds Paid By Bond Insurer Notwithstanding anything in Article X to the contrary, in the event that the principal and /or interest due on the Series 2006B Bonds shall be paid by the Bond Insurer pursuant to the Financial Guaranty Insurance Policy, the Series 2006B Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Commission, and the assignment and pledge created by this Indenture and all covenants, agreements and other obligations of the Commission to the registered owners shall continue to exist and shall run to the benefit of Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such registered owners, in each case to the extent of such payment. -7- us_ WEST 26o1 14431.1 41555 -9 W W B/W W B 0 SECTION 16.04 Payment Procedure Pursuant to the Financial Guaranty insurance Policy As long as the Financial Guaranty Insurance Policy shall be in full force and effect, the Commission, the Trustee agrees to comply with the following provisions: (a) At least one (1) business day prior to all Interest Payment Dates the Trustee will determine whether there will be sufficient funds in the Funds and Accounts to pay the principal of or interest on the Bonds on such Interest Payment Date. If the Trustee determines that there will be insufficient funds in such Funds or Accounts, the Trustee shall so notify Ambac Assurance. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both. If the Trustee has not so notified Ambac Assurance at least one (1) business day prior to an Interest Payment Date, Ambac Assurance will make payments of principal or interest due on the Series 2006B Bonds on or before the first (1st) business day next following the date on which Ambac Assurance shall have received notice of nonpayment from the Trustee. (b) the Trustee shall, after giving notice to Ambac Assurance as provided in (a) above, make available to Ambac Assurance and, at Ambac Assurance's direction, to The Bank of New York, in New York, New York, as insurance trustee for Ambac Assurance or any successor insurance trustee (the "Insurance Trustee "), the registration books of the Commission maintained by the Trustee and all records relating to the Funds and Accounts maintained under this Indenture. (c) the Trustee shall provide Ambac Assurance and the Insurance Trustee with a list of registered owners of Series 2006B Bonds entitled to receive principal or interest payments from Ambac Assurance under the terms of the Financial Guaranty Insurance Policy, and shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Series 2006B Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon Series 2006B Bonds surrendered to the h3surance Trustee by the registered owners of Series 2006B Bonds entitled to receive full or partial principal payments from Ambac Assurance. (d) the Trustee shall, at the time it provides notice to Ambac Assurance pursuant to (a) above, notify registered owners of Series 2006B Bonds entitled to receive the payment of principal or interest thereon from Ambac Assurance (i) as to the fact of such entitlement, (ii) that Ambac Assurance will remit to them all or a part of the interest payments next coming due upon proof of Holder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from Ambac Assurance, they must surrender their Series 2006B Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Series 2006B Bonds to be registered in the name of Ambac Assurance) for payment to the Insurance Trustee, and not the Trustee and (iv) that should they be entitled to receive partial payment of principal from Ambac Assurance, they must surrender their Series 2006B Bonds for payment thereon first to the Trustee who shall note on such Series 2006B Bonds the portion of the principal paid by the Trustee and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. -g- US_ WEST260114431.1 41555 -9 W W B/W W 13 0 0 (e) in the event that the Trustee has notice that any payment of principal of or interest on an Series 2006B Bond which has become Due for Payment and which is made to a Holder by or on behalf of the Commission has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time Ambac Assurance is notified pursuant to (a) above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available, and the Trustee shall furnish to Ambac Assurance its records evidencing the payments of principal of and interest on the Series 2006B Bonds which have been made by the Trustee and subsequently recovered from registered owners and the dates on which such payments were made. (f) in addition to those rights granted Ambac Assurance under this Indenture, Ambac Assurance shall, to the extent it makes payment of principal of or interest on Series 2006B Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Financial Guaranty Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note Ambac Assurance's rights as subrogee on the registration books of the Commission maintained by the Trustee upon receipt from Ambac Assurance of proof of the payment of interest thereon to the registered owners of the Series 2006B Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note Ambac Assurance's rights as subrogee on the registration books of the Commission maintained by the Trustee upon surrender of the Series 2006B Bonds by the registered owners thereof together with proof of the payment of principal thereof. ARTICLE XVII MISCELLANEOUS SECTION 17.01 Continuing Disclosure The Commission hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement executed by the Commission in connection with the issuance of the Series 2006B Bonds (the "Continuing Disclosure Agreement "). Notwithstanding any other provision of this Indenture, failure of the Commission to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder; provided, however, that the Trustee at the written direction of any underwriter or the Owners of at least 25% aggregate principal amount of Series 2006B Bonds, shall (but only to the extent funds in an amount satisfactory to the Trustee have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Trustee whatsoever, including, without limitation, fees and expenses of its attorneys), or any Owner or beneficial owner of the Series 2006B Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. SECTION 17.02 Terms of Series 2006B Bonds Subject to the Indenture Except as in this Second Supplement expressly provided, every term and condition contained in the Indenture shall apply to this Second Supplement and to the Series 2006B Bonds with the same -9- US WES] 260114431.1 41555 -9 WWf3 /WWB 0 force and effect as if the same were herein set forth at length, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Second Supplement. This Second Supplement and all of the terms and provisions herein contained shall form part of the Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Indenture. The Indenture is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and supplemented hereby. SECTION 17.03 Due Authorization The Commission has reviewed all proceedings heretofore taken relative to the authorization of the Series 2006B Bonds and has found, as a result of such review, and does hereby find and determine, that the Commission has duly and regularly complied with all applicable provisions of law and is duly authorized by law to issue the Series 2006B Bonds in the manner and upon the terms in the Indenture and this Second Supplement provided and that all acts, conditions and things required by law to exist, happen and be performed precedent to and in connection with the issuance of the Series 2006B Bonds exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Commission is now duly empowered to issue the Series 2006B Bonds. SECTION 17.04 Execution in Several Counterparts This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Commission and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 17.05 Governing Law This Second Supplement shall be governed and construed in accordance with the laws of the State of California. -10- US WEST260114431.1 41555 -9 W WBMWB 0 LIZ IN WITNESS WHEREOF, the ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION has caused this Second Supplement to be signed in its name by its Authorized Officer, and U.S. Bank National Association, in token of its acceptance of the trusts created hereunder, has caused this Second Supplement to be signed in its corporate name by its officer thereunto duly authorized, all as of the date and year first above written. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Attest: Secretary 0 Authorized Officer U.S. BANK NATIONAL ASSOCIATION, as Trustee C Authorized Officer -11- US WEST:260114431.1 41555 -9 W W B/W W B 0 APPENDIX A [Form of Series 2006B Bond] No. A -1 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION REFUNDING BOND, SERIES 2006B RATE OF INTEREST: MATURITY DATE: DATED DATE: CUSIP: % October 1, December _, 2006 Registered Owner: CEDE & Co. Principal Amount: DOLLARS THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION, a public body, corporate and politic, duly organized and existing under and pursuant to the laws of the State of California (the "Commission "), for value received hereby promises to pay to the registered owner specified above, or registered assigns, on the Maturity Date specified above the Principal Amount specified above, together with interest thereon from the interest payment date next preceding the date of registration on this Bond (unless this Bond is registered during the period from the 16th day of the month next preceding an interest payment date to and including such interest payment date, in which event it shall bear interest from such interest payment date, or unless this Bond is registered on or before March 15, 2007 in which event it shall bear interest from its Dated Date) until the principal hereof shall have been paid, at the Rate of Interest specified above, payable on April 1, 2007 and semiannually thereafter on April 1 and October I in each year. Both the interest hereon and principal hereof are payable in lawful money of the United States of America. The principal (or redemption price) hereof is payable upon surrender hereof at maturity or the earlier redemption hereof at the principal corporate trust office of U.S. Bank National Association, as Trustee, in St. Paul, Minnesota. Interest hereon is payable by check or draft mailed on the interest payment date by first class mail to the person in whose name this Bond is registered at the close of business on the 15th day of the month next preceding the applicable interest payment date at such person's address as it appears on the registration books of the Trustee, or upon written request received prior to the 15th day of the month preceding an interest payment date of an owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account designated by such owner within the continental United States. This Bond is one of a duly authorized issue of Rosemead Community Development Commission, Redevelopment Project Area No. 1, Tax Allocation Refunding Bonds, Series 2006B (the "Bonds "), limited in aggregate principal amount to $26,000,000, all of 0 US_ WEST:260114431.1 41555 -9 W W B/ W W B A -1 0 0 like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions), all issued under the provisions of the Community Redevelopment Law of the State of California, as supplemented and amended (the "Law "), and pursuant to the provisions of an Indenture, dated as of October 1, 1993, as supplemented and amended by a First Supplement to Indenture, dated as of March 1, 2006, and a Second Supplement to Indenture, dated as of December 1, 2006, each between the Commission and the Trustee (collectively, the "Indenture "). All Bonds are equally and ratably secured in accordance with the terms and conditions of the Indenture, and reference is hereby made to the Indenture, to any indentures supplemental thereto and to the Law for a description of the terms on which the Bonds are issued, for the provisions with regard to the nature and extent of the security provided for the Bonds and of the nature, extent and manner of enforcement of such security, and for a statement of the rights of the registered owners of the Bonds; and all the terms of the Indenture and the Law are hereby incorporated herein and constitute a contract between the Commission and the registered owner from time to time of this Bond, and to all the provisions thereof the registered owner of this Bond, by his acceptance hereof, consents and agrees. Each registered owner hereof shall have recourse to all the provisions of the Law and the Indenture and shall be bound by all the terms and conditions thereof. The Bonds are issued to provide funds to aid in the financing and refinancing of the Redevelopment Project Area No. I Area of the Commission, a duly adopted redevelopment project in the city of Rosemead, California, as more particularly described in the Indenture. The Bonds are special obligations of the Commission and are payable, as to interest thereon, principal thereof and any premiums upon the redemption thereof, exclusively from the Pledged Tax Revenues (as that term is defined in the Indenture and herein called the "Pledged Tax Revenues "), and the Commission is not obligated to pay them except from the Pledged Tax Revenues. The Bonds are equally secured by a pledge of, and charge and lien upon, the Pledged Tax Revenues, and the Pledged Tax Revenues constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds. Additional tax allocation bonds payable from the Pledged Tax Revenues may be issued which will rank equally as to security with the Bonds, but only subject to terms and conditions set forth in the Indenture. The Commission hereby covenants and warrants that, for the payment of the interest on and principal of and redemption premium, if any, on this Bond and all other Bonds issued under the Indenture when due, there has been created and will be maintained by the Trustee a special fund into which all Pledged Tax Revenues shall be deposited, and as an irrevocable charge the Commission has allocated the Pledged Tax Revenues solely to the payment of the interest on and principal of and redemption premiums, if any, on the Bonds, and the Commission will pay promptly when due the interest on and principal of and redemption premium, if any, on this Bond and all other Bonds of this issue and all additional tax allocation bonds authorized by the Indenture out of said special fund, all in accordance with the terms and provisions set forth in the Indenture. The Bonds are subject to optional and mandatory sinking fund redemption has provided in the Indenture. US_ WEST260114431.1 41555 -9 W WD /W W9 A -2 0 0 As provided in the Indenture, notice of redemption of this Bond shall be mailed not less than thirty (30) days nor more than sixty (60) days before the redemption date to the registered owner hereof, but failure to receive such notice shall not affect the sufficiency of such proceedings for redemption. If notice of redemption has been duly given as aforesaid and money for payment of the above - described redemption price is held by the Trustee, then such Bonds shall, on the redemption date designated in such notice, become due and payable at the above - described redemption price; and from and after the date so designated interest on the Bonds so called for redemption shall cease to accrue and registered owners of such Bonds shall have no rights in respect thereof except to receive payment of such redemption price thereof. If an event of default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture; except that the Indenture provides that in certain events such declaration and its consequences may be rescinded by the registered owners of at least twenty - five per cent (25 %) in aggregate principal amount of the Bonds then outstanding. The Bonds are issuable only in the form of fully registered Bonds in the denomination of $5,000 or any integral multiple of $5,000 (not exceeding the principal amount of Bonds maturing at any one time). The owner of any Bond or Bonds may surrender the same at the above - mentioned office of the Trustee in exchange for an equal aggregate principal amount of fully registered Bonds of any other authorized denominations, in the manner, subject to the conditions and upon the payment of the charges provided in the Indenture. This Bond is transferable, as provided in the Indenture, only upon a register to be kept for that purpose at the above - mentioned office of the Trustee by the registered owner hereof in person, or by his duly authorized attorney, upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds, in the same aggregate principal amount, shall be issued to the transferee in exchange therefor as provided in the Indenture, and upon payment of the charges therein prescribed. The Commission and the Trustee may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the interest hereon and principal hereof and redemption premium, if any, hereon and for all other purposes. The rights and obligations of the Commission and of the registered owners of the Bonds may be amended at any time in the manner, to the extent and upon the terms provided in the Indenture. This Bond is not a debt of the City of Rosemead, the State of California or any of its political subdivisions, and neither said City, and State nor any of its political subdivisions is liable hereon, nor in any event shall this Bond or any interest hereon or any redemption premium hereon be payable out of any funds or properties other than those of the Commission. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction, and neither the members of the Commission nor any persons executing the Bonds shall be personally liable on the Bonds by reason of their issuance. US WEST:2 601 1443 1. 1 41555 -9 W W B/W W 13 A -3 0 0 This Bond shall not be entitled to any benefits under the Indenture or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been signed by the Trustee. It is hereby certified that all of the acts, conditions and things required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Commission, does not exceed any limit prescribed by the Constitution or laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. IN WITNESS WHEREOF, the Rosemead Community Development Commission has caused this Bond to be executed in its name and on its behalf by its Chairperson and attested by its Secretary, and has caused this Bond to be dated as of the date above written. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Chairperson Attest: Secretary US WEST:260114431.1 41s95-9 W WB/W WB A -4 0 0 This is one of the Bonds described in the within- mentioned Indenture which has been authenticated and registered on 2006. U.S. BANK NATIONAL ASSOCIATION, as Trustee C Authorized Signatory US WEST260114431.1 416)5 -9 W WB /W WB A -5 C BOND INSURANCE 0 Financial Guaranty Insurance Policy No. (the "Policy ") with respect to payments due for principal of and interest on this Bond has been issued by Ambac Assurance Corporation ( "Ambac Assurance "). The Policy has been delivered to The Bank of New York, New York, New York, as the Insurance Trustee under said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be secured from Ambac US WEST:2 60 1 1 413 1.1 41 s55 -9 W W BI W W I3 A -6 For value received the undersigned do(es) hereby sell, assign and transfer unto (Social Security or other identifying Number of Assignee ) the within - mentioned registered Bond and do(es) hereby irrevocably constitute and appoint attorney to transfer the same on the bond register of the Trustee, with full power of substitution in the premises. Dated: Signature guaranteed: Notice: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) to this Assignment must correspond with the name(s) as written on the face of the within registered Bond in every particular, without alteration or enlargement or any change whatsoever. US_W EST:260114431.1 41555 -9 W W n/W W U A-7 0 0 $[26,000,000] ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION REFUNDING BONDS SERIES 2006B PURCHASE CONTRACT November , 2006 Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Ladies and Gentlemen: Piper Jaffray & Co. (the "Underwriter ") hereby offers to enter into this Purchase Contract (the "Purchase Contract ") with the Rosemead Community Development Commission (the "Commission ") for the purchase by the Underwriter of the Commission's Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds, Series 2006B (the "Series 2006B Bonds "). Capitalized terms not otherwise defined herein shall have the meaning assigned such terms in the Indenture, hereinafter defined. This offer is made subject to acceptance thereof by the Commission prior to 5:00 p.m., applicable California time, on the date hereof, and upon such acceptance, as evidenced by the execution hereof by the authorized officers of the Commission in the space provided below, this Purchase Contract shall be in full force and effect in accordance with its terms and shall be binding upon the Commission and the Underwriter. 1. Purchase and Sale of Bonds Upon the terms and conditions and upon the basis of the representations herein set forth, the Commission hereby agrees to sell to the Underwriter and the Underwriter agrees to purchase from the Commission, all (but not less than all) of the Series 2006B Bonds in the aggregate principal amount of S[26,000,000].00, at the purchase price of $ (representing the par amount of the Series 2006B Bonds, plus net original issue premium of $ , less an underwriting discount of $ ) . The Series 2006B Bonds are being issued pursuant to Resolution No. 2006 -_, adopted by the Commission on November 14, 2006 (the "Bond Resolution "), the Indenture, dated as of October 1, 1993 (the "Original Indenture "), by and between the Commission and State Street Bank and Trust Company of California, N.A., as predecessor trustee to U.S. Bank National Association, as trustee (the "Trustee "), as amended and supplemented by a First US_W EST .1 260119676 41555 -9 W WB /W WB L ATTACHMENT 3 0 0 Supplement to Indenture, dated as of March 1, 2006 (the "First Supplement ") and a Second Supplement to Indenture, dated as of December 1, 2006 (the "Second Supplement," and together with the First Supplement and the Original Indenture, the "Indenture ") between the Commission and U.S. Bank National Association, as trustee (the "Trustee "). The Series 2006B Bonds shall mature and shall be subject to redemption on the dates and in the amounts and shall bear interest at the rates as set forth in the Second Supplement and the Official Statement (as hereinafter defined) and in Appendix I attached hereto. The Series 2006B Bonds shall be authorized to be issued by a resolution duly adopted by the Commission (the "Bond Resolution ") and by the Indneture, in accordance with the California Community Redevelopment Law (Part 1 of Division 24 of the California Health and Safety Code) (the "Redevelopment Law "), and other applicable laws and the Constitution of the State of California. The Underwriter agrees to make a bona fide public offering of the Series 2006B Bonds at the initial offering prices set forth in the Official Statement; however, the Underwriter reserves the right to make concessions to dealers and to change such initial offering prices as the Underwriter shall deem necessary in connection with the marketing of the Series 2006B Bonds. Terms defined in the Official Statement are used herein as so defined. 2. Official Statement The Commission hereby ratifies, approves and confirms the distribution of the Preliminary Official Statement of the Commission with respect to the Series 2006B Bonds, dated November _, 2006 (together with the Appendices thereto, any documents incorporated therein by reference, and any supplements or amendments thereto, the "Preliminary Official Statement "), in connection with the public offering and sale of the Series 2006B Bonds by the Underwriter. The Commission shall deliver, or cause to be delivered, to the Underwriter within seven business days from the date hereof, five executed copies of the final Official Statement prepared in connection with the Series 2006B Bonds (together with the Appendices thereto, any documents incorporated therein by reference, and any supplements or amendments thereto on or prior to the Closing, the "Official Statement ") to be dated as of the date hereof and to be in such form as shall be approved by the Commission and the Underwriter and Such additional conformed copies thereof as the Underwriter may reasonably request in sufficient quantities to comply with applicable Municipal Securities Rulemaking Board rules, with Rule 15c2 -12, adopted by the Securities Exchange Commission on June 28, 1989 ( "Rule 15c2 -12 ") and to meet potential customers requests for copies of the Official Statement. By acceptance of this Purchase Contract, the Commission hereby authorizes the use of copies of the Official Statement in connection with the public offering and sale of the Series 2006B Bonds. 3. Delivery of Bonds At 9:00 a.m., applicable California time, on December _, 2006, or at such earlier or later time or date, as shall be agreed upon by the Commission and the Underwriter (such time and date herein referred to as the "Closing Date "), the Trustee shall deliver to the Underwriter, on behalf of the Commission, at a location or locations to be designated by the Underwriter, on behalf of the Commission, in New York, New York (or such other place as may be designated by the Underwriter prior to the Closing Date), the Series 2006B Bonds in "book- entry" fully registered form, and the other documents herein mentioned; and the Underwriter shall accept such delivery and pay the purchase price of the Series 2006B Bonds as set forth in Section I US_ W EST260119676.1 41555 -9 W Wn /W WD 2 hereof by same day funds (such delivery and payment being herein referred to as the "Closing "). The Series 2006B Bonds shall be made available to the Underwriter not later than the second business day before the Closing Date for purposes of inspection. 4. Representations of the Commission The Commission represents that: (a) The Commission is a public body, corporate and politic, duly organized and existing, and authorized to transact business and exercise powers under and pursuant to the provisions of the Redevelopment Law and has, and at the date of the Closing will have, full legal right, power and authority (A) to enter into this Purchase Contract, (B) to adopt the Bond Resolution, (C) to issue, sell and deliver the Series 2006B Bonds to the Underwriter as provided herein, and (D) to cant' out and to consummate the transactions contemplated by the Bond Resolution, the Indenture, this Purchase Contract and the Official Statement; (b) The Preliminary Official Statement, as of its date, was correct in all material respects and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; (c) The Official Statement, as of its date, is correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading; (d) The Commission covenants with the Underwriter that prior to the earlier of (i) receipt of notice from the Underwriter that Official Statements are no longer required under Rule 15c2 -12 or (ii) 25 days after the end of the underwriting period (defined below) (the "Delivery Period "), if an event occurs, of which the Commission has knowledge, which might or would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Commission shall notify the Underwriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment.to the Official Statement, the Commission shall cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, and all printing expenses thereby incurred shall be paid for by the Commission. The term "end of the underwriting period" means the later of (i) the date the Commission delivers the Series 2006B Bonds to the Underwriter or (ii) the date the Underwriter does not retain an unsold balance of the Series 2006B Bonds for sale to the public; (e) If the information contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subparagraph, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the end of the Delivery Period, the portions of the Official Statement so supplemented or amended will not US WGST:260119676J 41555 -9 WWB/WWB 3 0 0 contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (f) The Commission has complied, and will at the Closing be in compliance, in all respects, with the Redevelopment Law and any other applicable laws of the State of California; (g) By official action of the Commission prior to or concurrently with the acceptance hereof, the Commission has duly authorized and approved the Preliminary Official Statement and the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the Commission of the obligations on its part contained, in the Bond Resolution, the Indenture, the Series 2006B Bonds and this Purchase Contract; (h) The adoption of the Bond Resolution and the execution and delivery of the Series 2006B Bonds, the Indenture and this Purchase Contract, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, note, resolution, agreement or other instrument to which the Commission is a party or is otherwise subject; and, except as described in the Official Statement, the Commission has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the revenues pledged pursuant to, or subject to the lien of, the Bond Resolution or the Indenture; (i) All approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to adoption of the Bond Resolution, execution and delivery by the Commission of this Purchase Contract, the Indenture and the issuance, sale and delivery of the Series 2006B Bonds have been obtained or will be obtained prior to the Closing (provided the Commission shall not be responsible for state blue sky filings); 0) The Series 2006B Bonds when issued, authenticated and delivered in accordance with the Bond Resolution and the Indenture will be validly issued, and will be valid and binding, obligations of the Commission; (k) The terms and provisions of the Bond Resolution and the Indenture comply in all respects with the requirements of the Redevelopment Law, and the Bond Resolution has been duly adopted by the Commission and is valid, legal and binding upon the Commission enforceable in accordance with its terms subject to bankruptcy, moratorium or insolvency or other laws affecting creditors' rights generally and general rules of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); (1) Except as disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending or, to the knowledge of the Commission, threatened against the Commission, affecting the existence of the Commission or the titles of its members or officers, or seeking to US_ WEST: 260119676.1 41555 -9 W WB /W WB 4 0 0 enjoin the sale, issuance or delivery of the Series 2006B Bonds or the revenues of the Commission pledged or to be pledged to pay the principal of, redemption premium, if any, and interest on the Series 2006B Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Series 2006B Bonds, the Bond Resolution, the Indenture or this Purchase Contract or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or contesting the power or authority of the Commission to issue the Series 2006B Bonds, to adopt the Bond Resolution or to execute and deliver the Purchase Contract or the Indenture nor is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Series 2006B Bonds, the Bond Resolution, the Indenture or this Purchase Contract; (m) Any certificate signed by an authorized officer of the Commission and delivered to the Underwriter shall be deemed a representation and warranty of the Commission to the Underwriter as to the statements made therein; (n) The Series 2006B Bonds shall be secured in the manner and to the extent set forth in the Bond Resolution and the Indenture, as appropriate; and (o) The Commission has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Commission is an issuer whose arbitrage certificates may not be relied upon. (p) The proceeds of the Series 2006B Bonds are being used to (1) refund the Commission's outstanding Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993A Bonds "); and (2) to pay costs of issuance related to the Series 2006B Bonds. The expenditures of the proceeds of the Series 1993A Bonds were for facilities and improvements which constitute redevelopment activities authorized by the Redevelopment Law and the Redevelopment Plan for the Redevelopment Project Area No. 1. (q) The State of California Department of Housing and Community Development (the "Department ") completed its audit of the Rosemead Community Development Commission compliance with statutory housing and housing fund requirements on May 12, 2005. The Commission provided the Department with all relevant information related to the prepayment of a portion of the Commission's Low and Moderate Income Housing Fund obligation through fiscal year 2021 -22 in the manner and the amounts set forth in Exhibit A to Commission Resolution 93 -27, adopted on October 13, 1993. The final audit report of the Department accepted the Commission's prepayment methodology. 5. Representations of the Underwriter The Underwriter represents that it has full right, power, and authority to enter into this Purchase Contract. 6. Rule 15c2 -12 Covenant The Commission covenants to comply, and to perform all actions as may be requested by the Underwriter in order for the Underwriter to comply, with the applicable provisions of Rule 15c2 -12. US_ WEST: 260119676.1 4 1555 9 WWB /WWB 5 0 0 7. Conditions to Obligations of Underwriter The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties and agreements of the Commission contained herein and upon the accuracy of the statements to be contained in the documents, opinions, and instruments to be delivered at the Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, accept delivery of, and pay for the Series 2006B Bonds on the Closing Date is subject to the performance by the Commission of their respective obligations hereunder at or prior to the Closing. The parties hereto expressly understand that the obligations to purchase the Series 2006B Bonds are and shall be subject to the following further conditions: (a) At the time of the Closing, (i) the representations and warranties of the Commission contained herein shall be true, complete and correct; (ii) each of the documents and certificates required to be delivered at Closing shall have been duly executed, acknowledged and delivered by the appropriate parties thereto, shall be in full force and effect and shall not have been amended, modified or supplemented, except as therein permitted or as may have been agreed to in writing by the Underwriter; and (iii) the Bond Resolution shall be in full force and effect and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter; (b) The Underwriter shall have the right to cancel its obligations to purchase the Series 2006B Bonds if between the date hereof and the Closing, (i) legislation shall have been enacted (or resolution passed) by or introduced or pending legislation amended in the Congress of the United States or the State of California (the "State ") or shall have been reported out of committee or be pending in committee (specifically including, but not limited to, legislation proposed in connection with the current State budget crisis which if enacted would adversely affect the Commission's receipt of tax increment revenues), or a decision shall have been rendered by a court of the United States or the State or the Tax Court of the United States, or a ruling shall have been made or a resolution shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States or the Internal Revenue Service, or other federal or State authority, with respect to federal or State taxation upon interest on obligations of the general character of the Series 2006B Bonds or with respect to the security pledged to pay debt service on the Series 2006B Bonds, that, in the Underwriter's reasonable judgment, materially adversely affects the market for the Series 2006B Bonds, or the market price generally of obligations of the general character of the Series 2006B Bonds or (ii) there shall exist any event that, in the Underwriter's reasonable judgment, either (A) makes untrue or incorrect in any material respect any statement or information in the Official Statement or (B) is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect, or (iii) there shall have occurred any outbreak or escalation of hostilities or other local, national or international calamity or crisis (it being acknowledged by the Underwriter that as of the date hereof, no such event is occurring), or a default with respect to the debt obligations of, or the institution of proceedings under the federal bankruptcy laws by or against, any state of the United States or agency thereof, or any city in the United States having a population of over one million, the effect of which on the financial markets of the United States will be such as in the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Series 2006B Bonds or enforce contracts for the sale of the Series 2006B Bonds, or (iv) there US WHST:260119676.1 41555 -9 W We/W We 6 0 0 shall be in force a general suspension of trading on the New York Stock Exchange, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of determination by that Exchange or by order of the Securities and Exchange Commission of the United States or any other governmental authority having jurisdiction that, in the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Series 2006B Bonds or enforce contracts for the sale of the Series 2006B Bonds, or (v) a general banking moratorium shall have been declared by federal, New York or State authorities having jurisdiction and be in force that, in the Underwriter's reasonable judgment, makes it impracticable for the Underwriter to market the Series 2006B Bonds or enforce contracts for the sale of the Series 2006B Bonds, or (vi) legislation shall be enacted or be proposed or actively considered for enactment, or a decision by a court of the United States shall be rendered, or a ruling, regulation, proposed regulation or statement by or on behalf of the Securities and Exchange Commission of the United States or other governmental agency having jurisdiction of the subject matter shall be made, to the effect that the Series 2006B Bonds, any obligations of the general character of the Series 2006B Bonds or the Bond Resolution or the Indenture are not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, or of the Trust Indenture Act of 1939, as amended and as then in effect, or otherwise are or would be in violation of any provision of the federal securities laws, or (vii) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose any material restrictions not now in force with respect to the Series 2006B Bonds or obligations of the general character of the Series 2006B Bonds or securities generally, or materially increase any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, underwriters; or (viii) a ruling, regulation or order of the Treasury Department of the United States or the Internal Revenue Service (the "IRS "), specifically including Circular 230 initially proposed by the IRS on December 30, 2003, shall be made effective on or prior to the Closing Date, which in the Underwriter's reasonable judgment, materially and adversely affects the market price of the Series 20068 Bonds; or (ix) there shall have been any materially adverse change in the affairs of the Commission which in the Underwriter's reasonable judgment materially and adversely affects the market for the Series 2006B Bonds; and (c) At or prior to the Closing, the Underwriter shall receive the following: (1) The unqualified approving opinion of Orrick, Herrington & Sutcliffe LLP ( "Bond Counsel ") with respect to the Series 2006B Bonds, addressed to the Underwriter and the Commission, dated the date of the Closing, in substantially the form attached to the Official Statement as Appendix C; (2) The opinion of Orrick, Herrington & Sutcliffe LLP, as disclosure counsel to the Commission, addressed to or upon which the Underwriter may rely, dated the Closing Date, in substantially the form attached hereto as Exhibit A (3) The opinion or opinions of counsel to the Commission with respect to the Series 2006B Bonds, addressed to the Underwriter, Bond Counsel and the US_ WEST : 260119676,1 41555 -9 W WB /W WB 7 • • Commission, dated the date of Closing, in substantially the form attached hereto as Exhibit B; (4) A certificate dated the date of the Closing, signed by the Executive Director of the Commission to the effect that: (i) the representations, warranties and covenants of the Commission contained herein are true and correct in all material respects on and as of the date of Closing with the same effect as if made on the date of Closing; (ii) the Commission has complied with all the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to Closing; (iii) no event affecting the Commission has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement of information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; and (iv) the Bond Resolution, the Original Indenture, the First Supplement and the Second Supplement are in full force and effect and have not been amended in any respect, except as approved in writing by the Underwriter; (5) A certificate of the Trustee dated the date of the Closing, to the effect that: (i) the Trustee is a national banking association organized and existing under and by virtue of the laws of the United States of America, having full power and being qualified and duly authorized to perform the duties and obligation of the Trustee under and pursuant to the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement; (ii) the Trustee has agreed to perform the duties and obligations of the Trustee as set forth in the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement; (iii) compliance with the provisions on the Trustee's part contained in the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement will not conflict with or constitute a breach of or default under any judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Trustee is a party or is otherwise subject, or, to the best knowledge of the Trustee, any material law or administrative regulation to which the Trustee is subject, as a result of which the Trustee's ability to perform its obligations under the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement would be impaired, nor will any such compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the lien created by the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement; and (iv) the Trustee has not been served in any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending nor, to the best of the knowledge of the Trustee, is any such action, suit, proceeding, inquiry or investigation threatened against the Trustee, affecting the existence of the Trustee, or the titles of its officers to US WEST: 260119676.1 41555 -9 W W 13/ W W B 8 0 0 their respective offices or seeking to prohibit, restrain or enjoin the issuance, sale and delivery of the Series 2006B Bonds or the collection of revenues pledged or to be pledged to pay the principal of, premium, if any, and interest on the Series 2006B Bonds, or the pledge thereof, or in any way contesting the powers of the Trustee or its authority to perform its obligations under the Bond Resolution, the Indenture, the Escrow Agreement and the Continuing Disclosure Agreement, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Bond Resolution, the Indenture, the Escrow Agreement or the Continuing Disclosure Agreement; (6) Two copies of this Purchase Contract duly executed and delivered by the parties hereto; (7) Two copies of the Official Statement, executed on behalf of the Commission by the Executive Director; (8) Two copies of the Original Indenture, the First Supplement and the Second Supplement; (9) Two copies of the Escrow Agreement; (10) Two copies of the Continuing Disclosure Agreement; (11) Two certified copies of the Bond Resolution; (12) Receipt of a municipal bond insurance policy guaranteeing payment of principal and interest on the Series 2006B Bonds (the "Policy "), to be provided by Ambac Assurance Corporation (the "Bond Insurer "), together with certificates of the Bond Insurer and an opinion of its counsel relating to the legal status of the Bond Insurer, the information pertaining to the Bond Insurer and the Policy contained in the Official Statement, and the enforceability of the Policy, all in form and substance acceptable to the Underwriter; and (13) Evidence from Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. that the Series 2006B Bonds have been rated at least "BBB +" (Underlying) and "AAA" (based upon the bond insurance policy), and that such ratings continue to be in effect as of the Closing date; (14) A certificate of [The Arbitrage Group, Inc.], independent certified public accountants, dated the Closing Date, to the effect that, with respect to the Escrow Agreement it has verified the accuracy of the mathematical computations of the adequacy of the Investment Securities (as defined in the Escrow Agreement), together with the earnings thereon and the cash held in the Escrow Fund established under such Escrow Agreement, to pay when due the principal and interest due and to become due on the Prior Bonds to be paid from such Escrow Fund on and prior to the redemption date thereof and to pay the redemption price thereof on such redemption date; US_ WEST:260119676.1 41555 -9 W WB /W WB 9 w • (15) The opinion of counsel to the Trustee, in form and substance acceptable to the Underwriter; and (16) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Commission with this Purchase Contract, legal requirements (including tax exemption), and the performance or satisfaction by the Commission at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Commission. The Commission will furnish the Underwriter with such conformed copies of such opinions, certificates, letters and documents as the Underwriter may reasonably request. If the Commission shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the Commission shall have any further obligations hereunder, except as provided in Section 8 hereof. However, the Underwriter may in its sole discretion waive one or more of the conditions imposed by this Purchase Contract for the protection of the Underwriter, and proceed with the Closing. 8. Expenses The Underwriter shall be under no obligation to pay, and the Commission shall pay from its available funds or from the proceeds of the Series 2006B Bonds, certain expenses set forth in this Section, including but not limited to: (i) all expenses in connection with the preparation, distribution and delivery of the Preliminary Official Statement, the Official Statement, and any amendment or supplement thereto, and this Purchase Contract, exclusive of underwriter's counsel fees; (ii) all expenses in connection with the printing, issuance and delivery of the Series 2006B Bonds; (iii) the fees and disbursements of Bond Counsel; (iv) the fees and disbursements of counsel and consultants, including pricing and redevelopment advisors, to the Commission in connection with the Series 2006B Bonds; (v) the disbursements of the Commission in connection with the Series 2006B Bonds; (vi) the fees and disbursements of the Trustee, including but not limited to, fees and disbursements of its counsel, travel and other expenses; (vii) any and all fees incurred in connection with obtaining a rating on the Series 2006B Bonds or in obtaining any form of credit enhancement or bond insurance; and (xiii) all expenses in connection with the preparation, execution and delivery of the Indenture and the Series 2006B Bonds and the preparation and adoption of the Bond Resolution. 9. Qualification under Securities Laws The Commission agrees to cooperate with the Underwriter in any endeavor to qualify the Series 2006B Bonds for offering and sale under the securities or "blue sky" laws of such jurisdictions of the United States as the Underwriter may request; provided that the Commission shall not be required to qualify in, or Submit to the general jurisdiction of, any state in which it is not now so qualified or of which it has not submitted to the general jurisdiction. The Commission consents to the use of the Preliminary Official Statement and Official Statement by the Underwriter in obtaining such qualifications. US WEST:260H9676.1 41555 -9 W W BM W B 10 • 10. Notice Any notice or other communication to be given to the Commission under this Purchase Contract may be given by delivering the same in writing at the address set forth above. Any such notice or communication to be given to the Underwriter may be given by delivering the same in writing to: Piper Jaffray & Co. 345 California Street, Suite 2200 San Francisco, CA 94104 Attention: Eric Scriven, Vice President 11. Governing Law This Purchase Contract shall be governed by the laws of the State of California. This Purchase Contract may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] US WES r 260119676.1 41555 -9 W WB /W WB 11 0 0 12. Parties in Interest This Purchase Contract is made solely for the benefit of the signatories hereto (including the respective successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. All representations, warranties and agreements in this Purchase Contract shall remain operative and in full force and effect, regardless of (a) delivery of and payment for any of the Series 2006B Bonds and (b) any termination of this Purchase Contract. Very truly yours, PIPER JAFFRAY & CO. Authorized Representative Accepted and agreed to as of the date first written above: ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Attest: C Authorized Officer Secretary US_ WEST260119676.1 41555 -9 W WB /W WB 12 APPENDIX MATURITY SCHEDULE Series 2006B Bonds Maturity Ectober 1 Interest Amount Rate Price or Yield US WEST: 260119676.1 41555 -9 W WB/W WB E EXHIBIT A [Form of Opinion of Disclosiire Counsel] [Closing Date] Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Re: Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds Revenue Refunding Bonds, Series 2006B Ladies and Gentlemen: We have acted as disclosure counsel to the Rosemead Community Development Commission (the "Agency "), as the Commission on this date of S[26,000,000] aggregate principal amount of Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds, Series 2006B (the "Series 2006B Bonds "). In that connection, we have reviewed a printed copy of the official statement of the Commission, dated November _, 2006, with respect to the Series 2006B Bonds (the "Official Statement'), the Purchase Contract, dated November _, 2006 (the "Purchase Contract'), between the Commission and Piper Jaffray & Co., as underwriter (the "Underwriter "), certificates and opinions of the Commission, the City of Rosemead, the Trustee and others, and we have made such investigations of law as we have deemed appropriate as a basis for the conclusion hereinafter expressed. We have not reviewed any electronic version of the Official Statement, and assume that any such version is identical in all respects to the printed version. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Official Statement. In arriving at the conclusion hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, the validity, accuracy and sufficiency of the records, documents, certificates and opinions referred to above (including the accuracy of all factual matters represented and legal conclusions contained therein, including, without limitation, any representations and legal conclusions regarding the due authorization, issuance, delivery, validity and enforceability of the Series 2006B Bonds and the exclusion of interest thereon from gross income for federal income tax purposes, and the legality, validity and enforceability of the Original Indenture, the First Supplement , the Second Supplement, and any laws, documents or instruments that may be related to the issuance, payment or security of the Series 2006B Bonds. We have assumed that all records, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine. We are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement and make US_W BST:260119676.1 41555 -9 WWB /WWB A -1 0 0 no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as disclosure counsel.to the Commission, to assist it in part of its responsibility with respect to the Official Statement, we participated in conferences with representatives of the Commission and the City and their respective counsel, the Underwriter and others, during which the contents of the Official Statement and related matters were discussed. Based on our participation in the above - mentioned conferences (which did not extend beyond the date of the Official Statement), and in reliance thereon and on the records, documents, certificates, opinions and matters mentioned above, we advise you as a matter of fact and not opinion that, during the course of our role as disclosure counsel with respect to the Series 2006B Bonds, no facts came to the attention of the attorneys in our firm rendering legal services in connection with such role which caused us to believe that the Official Statement as of its date (except for any CUSIP numbers, financial, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, absorption, real estate or environmental matters, any information about the Bond Insurer or the Insurance Policy, DTC or its book -entry system, or Appendices A, C, E and G, included or referred to therein, which we expressly exclude from the scope of this paragraph and as to which we express no opinion or view) contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. By acceptance of this letter you recognize and acknowledge that: (i) the preceding paragraph is not an opinion but in the nature of negative observations based on certain limited activities performed by specific lawyers in our firm in our role as disclosure counsel; (ii) the scope of those activities performed by us were inherently limited and do not purport to encompass all activities that the Commission may be responsible to undertake; (iii) those activities performed by us rely on third party representations, warranties, certifications and opinions, including and primarily, representations, warranties and certifications made by the Commission, and are otherwise subject to the conditions set forth herein; and (iv) this letter may not be sufficient for or appropriate to your purposes. This letter is furnished by us as disclosure counsel. Our engagement with respect to this matter has terminated as of the date hereof, and we disclaim any obligation to update this letter. This letter is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners of Bonds or by any other party to whom it is not specifically addressed. Very truly yours, ORRICK, HERRINGTON & SUTCLIFFELLP US_ WEST:260119676.1 41555 -9 W W B/W W B A -2 0 EXHIBIT B 0 /Form of Opinion of Counsel to the Commission] [Closing Date] Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Piper Jaffray & Co. 345 California Street, Suite 2200 San Francisco, California 94104 Orrick, Herrington & Sutcliffe LLP 777 S. Figueroa Street, Suite 3200 Los Angeles, California 90017 Re: Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Refunding Bonds Series 2006B Ladies and Gentlemen: We have acted as counsel to the Rosemead Community Development Commission (formerly Rosemead Redevelopment Agency, the "Commission') in connection with the sale of its Redevelopment Project Area No. I Tax Allocation Refunding Bonds, Series 2006B (the "Series 2006B Bonds "). The Series 2006B Bonds are being issued pursuant to Resolution No. 2006 -_, adopted by the Commission on November 14, 2006 (the "Bond Resolution'), the Indenture, dated as of October 1, 1993 (the "Original Indenture "), by and between the Commission and State Street Bank and Trust Company of California, N.A., as predecessor trustee to U.S. Bank National Association, as trustee (the "Trustee "), as amended and supplemented by a First Supplement to Indenture, dated as of March 1, 2006 and a Second Supplement to Indenture, dated as of December 1, 2006 (as amended, the "Indenture ") between the Commission and the Trustee. In that connection we have examined originals or copies certified or otherwise identified to my satisfaction of the Issuing Documents, as defined below, the Tax Certificate dated as of the date hereof (the "Tax Certificate "), the Continuing Disclosure Agreement for the Series 2006B Bonds, dated as of December 1, 2006 (the "Continuing Disclosure Agreement ") by and among the Commission, the Trustee and U.S. Bank National Association, as dissemination agent, the Escrow Agreement, dated as of December 1, 2006 (the "Escrow Agreement') between the Commission and the Trustee in its capacity as escrow bank under the Escrow Agreement, and the Official Statement of the Commission, dated November _, 2006 (the "Official Statement') relating to the Series 2006B Bonds. The Indenture, the Continuing Disclosure Agreement and the Escrow Agreement are collectively referred to herein as the "Issuing Documents." US_W EST260119676.1 41555 -9 W W B(W W B C-1 0 0 Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Issuing Documents. Based on the foregoing, we are of the opinion that: (i) The Commission is a public body, corporate and politic, duly organized and validly existing under the laws of the State. (ii) The Issuing Documents have been duly authorized, executed and delivered by the Commission and, assuming due authorization, execution and delivery by the other parties thereto, constitute the valid, legal and binding obligations of the Commission enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors rights and by the application of equitable principles if equitable remedies are sought. (iii) The Bond Resolution has been duly adopted at a meeting of the governing body of the Commission, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. The Bond Resolution is in full force and effect, has not been modified, amended or rescinded and constitutes the valid and binding obligation of the Commission enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors rights and by the application of equitable principles if equitable remedies are sought. (iv) The execution and delivery of the Second Supplement, the Continuing Disclosure Agreement, the Escrow Agreement, the Tax Certificate, the Purchase Contract and the Official Statement and compliance with the provisions of the Issuing Documents, under the circumstances contemplated thereby, (a) to the best of my knowledge based on inquiry deemed sufficient by me for the purpose of this opinion, do not and will not in any material respect conflict with or constitute on the part of the Commission a breach of or default under any agreement or other instrument to which the Commission is a party or by which it is bound, and (b) do not and will not in any material respect constitute on the part of the Commission a violation, breach of or default under any existing law, regulation, court order or consent decree to which the Commission is subject. (v) The Official Statement has been duly authorized by the governing body of the Commission and executed on its behalf by an authorized officer of the Commission. (vi) No additional authorization, approval, consent, waiver or any other action by any person, board or body, public or private, not previously obtained is required as of the date hereof for the Commission to adopt the Bond Resolution, to enter into or to perform its obligations under the Issuing Documents. (vii) Except as otherwise disclosed in the Official Statement, there is no litigation, proceeding, action, suit, or investigation at law or in equity before or US WEST:260119676.1 41555 -9 W WB /W WB C -2 • • by any court, governmental agency or body, pending or threatened against the Commission, challenging the creation, organization or existence of the Commission, or the validity of the Series 2006B Bonds or the Issuing Documents or seeking to restrain or enjoin the repayment of the Series 2006B Bonds or in any way contesting or affecting the validity of the Series 2006B Bonds or the Issuing Documents or any of the transactions referred to therein or contemplated thereby or contesting the authority of the Commission to enter into or perform its obligations under any of the Series 2006B Bonds or the Issuing Documents, or which, in any manner, questions the right of the Commission to issue or to use the Pledged Tax Revenues for repayment of the Series 2006B Bonds or affects in any manner the right or ability of the Commission to enter into the Series 2006B Bonds or to collect or pledge the Pledged Tax Revenues for repayment of the Series 2006B Bonds. (viii) Based upon examinations which we have made and our discussions in conferences with certain officials of the Commission and others with respect to the Official Statement and without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement (including the Appendices attached thereto), nothing has come to my attention which would lead me to believe that the Official Statement (other than financial and statistical data therein and incorporated therein by reference, and other than information relating to the Bond Insurer or its Insurance Policy, DTC or its Book -Entry System, and the information provided by the Underwriter for inclusion in the Official Statement, as to which no opinion is expressed) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Very truly yours, WALLIN, KRESS, REISMAN & KRANITZ LLP US WEST260119676.1 41555 -9 W W 13/ W W E C -3 0 0 CONTINUING DISCLOSURE AGREEMENT RELATING TO THE SERIES 2006B BONDS THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement'), is executed and entered into as of December 1, 2006, by and among the ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION, a public body, corporate and politic, organized and existing under, and by virtue of the laws of the State of California (the "Commission "), U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, in its capacity as trustee (the "Trustee "), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, in its capacity as Dissemination Agent (the "Dissemination Agent'). WITNESSETH: WHEREAS, the Commission, has heretofore issued its Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993A Bonds ") in the original principal amount of $34,275,000 for the purpose of financing portions of the Redevelopment Project Area No. 1, which Series 1993A Bonds were issued pursuant to the terms of an Indenture, dated as of October 1, 1993 (the "Original Indenture "), between the Trustee and the Commission; WHEREAS, pursuant to the First Supplement to Indenture, dated as of March 1, 2006 (the "First Supplement' and the Original Indenture as supplemented by the First Supplement, and as hereinafter supplemented, referred to herein as the "Indenture "), by and between the Commission and the Trustee, the Commission has issued the Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A, in the aggregate principal amount of $14,005,000; WHEREAS, pursuant to the Second Supplement to Indenture, dated as of December 1, 2006 (the "First Supplement' and the Original Indenture as supplemented by the First Supplement, and as hereinafter supplemented, referred to herein as the "Indenture "), by and between the Commission and the Trustee, the Commission has issued the Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006B (the "Bonds "), in the aggregate principal amount of $ ; and WHEREAS, this Disclosure Agreement is being executed and delivered by the Commission and U.S. Bank National Association, in its capacity as Trustee and in its capacity as Dissemination Agent, for the benefit of the holders and beneficial owners of the Bonds and in order to assist the underwriters of the Bonds in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Indenture. In addition, the following capitalized terms shall have the following meanings: 01 IS West: 260119696.1 41555 -8 MKH /MKH AVIACHMENT4 0 0 "Annual Report" means any Annual Report provided by the Commission pursuant to, and as described in, Sections 2 and 3 hereof. "Annual Report Date" means not later than 270 days following the end of the Commission's fiscal year (which is currently June 30), commencing March 31, 2007. "Commission" means the Rosemead Community Development Commission. "Disclosure Representative" means the Executive Director of the Commission, or his or her designee, or such other person as the Commission shall designate in writing to the Trustee from time to time. "Dissemination Agent" means U.S. Bank National Association, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Commission and which has filed with the Trustee a written acceptance of such designation. "Listed Events" means any of the events listed in Section 4(a) hereof. "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Official Statement" means the Official Statement, dated _, 2006, relating to the Bonds. "Participating Underwriter" means any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" means each National Repository and each State Repository. "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. "State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository. Section 2. Provision of Annual Reports (a) The Commission shall, or, upon furnishing the Annual Report to the Dissemination Agent, shall cause the Dissemination Agent to, provide to each Repository and to Ambac Assurance an Annual Report which is consistent with the requirements of Section 3 hereof, not later than the Annual Report Date, commencing with the report for the 2005 -06 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 hereof, provided, however, that the audited financial statements of the Commission, if any, may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the Commission's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 4(f) hereof. OHS West: 260119696.1 41555 -8 MKH/MKI 1 2 9 0 (b) Not later than 15 business days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the Commission shall provide the Annual Report (in a form suitable for reporting to the Repositories) to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall notify the Disclosure Representative of such failure to receive the Annual Report. (c) If the Trustee is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Trustee shall send a notice to the Municipal Securities Rulemaking Board and the appropriate State Repository, if any, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; (ii) provide any Annual Report received by it to each Repository, as provided herein: and (iii) provided the Dissemination Agent has received the Annual Report pursuant to Section 2(b) hereof, file a report with the Commission and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. Section 3. Content of Annual Reports The Commission's Annual Report shall contain or incorporate by reference the following: (a) The Commission's audited financial statements, if any, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Commission's audited financial statements, if any, are not available by the time the Annual Report is required to be filed pursuant to Section 2(a) hereof, the Annual Report shall contain unaudited financial statements in a format similar to that used for the Commission's audited financial statements, and the audited financial statements, if any, shall be filed in the same manner as the Annual Report when they become available. (b) The following information: (i) An update of the information contained in Table 2 of the Official Statement for the most recently completed fiscal year. (ii) An update of the information contained in Table 3 of the Official Statement for the most recently completed fiscal year. (iii) An update of the information contained in Table 4 of the Official Statement based upon the most recently completed fiscal year. OHS West: 260119696.1 41555 -8 MKH /MKH 3 0 0 (iv) An update of the information contained in Table 7 of the Official Statement for the most recently completed fiscal year. (v) The amount of any payments by the Commission during the most recently completed Fiscal Year of the type described in "RISK FACTORS — State Budget Deficit and Its Impact on Pledged Tax Revenues" in the Official Statement. (c) In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, the Commission 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 Commission or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Commission shall clearly identify each such other document so included by reference. Section 4. Reporting of Significant Events (a) Pursuant to the provisions of this Section, the Commission shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (i) Principal and interest payment delinquencies. (ii) Non - payment related defaults. (iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions or events affecting the tax- exempt status of the security. (vii) Modifications to rights of security holders. (viii) Contingent or unscheduled bond calls. (ix) Defeasances. (x) Release, substitution, or sale of property securing repayment of the securities. (xi) Rating changes. OHS Wese260119696.1 41555 -5 MKH /MKH 4 0 0 (b) The Trustee shall, within five business days of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the Commission promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f); provided, however, that the Dissemination Agent shall have no liability to Bond owners for any failure to provide such notice. For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of the Listed Events described under clauses (ii), (iii), (vi), (x) and (xi) above shall mean actual knowledge by an officer at the corporate trust office of the Trustee. The Trustee shall have no responsibility for determining the materiality of any of the Listed Events. (c) Whenever the Commission obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the Commission shall as soon as possible determine if such event would be material under applicable Federal securities law. (d) If the Commission determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Commission shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f). The Commission shall provide the Dissemination Agent with a form of notice of such event in a format suitable for reporting to the Municipal Securities Rulemaking Board and each State Repository, if any. (e) If in response to a request under subsection (b), the Commission determines that the Listed Event would not be material under applicable Federal securities law, the Commission shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f). (f) If the Dissemination Agent has been instructed by the Commission to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository and Ambac Assurance. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) 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 pursuant to the Indenture. Section 5. Termination of Reporting Obligation The Commission's obligations under this Disclosure Agreement 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 Commission shall give notice of such termination in the same manner as for a Listed Event under Section 4(f) hereof. Section 6. Electronic Filing Submission of Annual Reports and notices of Listed Events to DisclosureUSA.org or another "Central Post Office" designated and accepted by the Securities and Exchange Commission shall constitute compliance with the requirement of filing such reports and notices with each Repository hereunder; and the Commission may satisfy its obligations hereunder to file any notice, document or information with a Repository by filing the same with any dissemination agent or conduit, including DisclosureUSA.Org or another "Central Post Office" or similar entity, assuming or charged with responsibility for accepting notices, OHS West: 260119696.1 41555 -8 MKH /MKH 5 documents or information for transmission to such Repository, to the extent permitted by the Securities and Exchange Commission or Securities and Exchange Commission staff or required by the Securities and Exchange Commission. For this purpose, permission shall be deemed to have been granted by the Securities and Exchange Commission staff if and to the extent the agent or conduit has received an interpretive letter, which has not been revoked, from the Securities and Exchange Commission staff to the effect that using the agent or conduit to transmit information to the Repository will be treated for purposes of the Rule as if such information were transmitted directly to the Repository. Section 7. Dissemination Agent The Commission may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty days' written notice to the Commission and the Trustee. The Dissemination Agent shall have no duty to prepare the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the Commission in a timely manner and in a form suitable for filing. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. Section 8. Amendment; Waiver Notwithstanding any other provision of this Disclosure Agreement, the Commission, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the Commission, so long as such amendment does not adversely affect the rights or obligations of the Trustee or the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof 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 (i) is approved by holders of sixty percent of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of holders. 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 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. OHS West: 260119696.1 41555 -8 MKH /MKH 6 0 0 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 statements or information, in order to provide information to investors to enable them to evaluate the ability of the Commission to meet its obligations, including its obligation to pay debt service on the Bonds. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 4(0 hereof. Section 9. Additional Information Nothing in this Disclosure Agreement shall be deemed to prevent the Commission from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement 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 Agreement. If the Commission 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 Agreement, the Commission shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default In the event of a failure of the Commission to comply with any provision of this Disclosure Agreement, the Trustee at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Trustee, take such actions as may be necessary.and appropriate, including seeking mandate or specific performance by court order, to cause the Commission to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Commission or the Trustee to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture, and the Trustee and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded to the Trustee thereunder. The Dissemination Agent and the Trustee shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement. The Commission agrees to indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agent, harmless against any loss, expense and liabilities which it may incur arising out of the disclosure of information pursuant to this Disclosure Agreement or 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. This Disclosure Agreement does not apply to any other securities issued or to be issued by the Commission. The Dissemination Agent shall have no obligation to make any disclosure OHS West 260119696.1 41555 -8 MKH /MKH 7 0 0 concerning the Bonds, the Commission or any other matter except as expressly set out herein, provided that no provision of this Disclosure Agreement shall limit the duties or obligations of the Trustee under the Indenture. The Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual Report or any notice of a Listed Event. The Dissemination Agent may conclusively rely upon the Annual Report provided to it by the Commission as constituting the Annual Report required of the Commission in accordance with the Disclosure Agreement. The fact that the Trustee has or may have any banking, fiduciary or other relationship with the Commission or any other party, apart from the relationship created by the Indenture and this Disclosure Agreement, shall not be construed to mean that the Trustee has knowledge or notice of any event or condition relating to the Bonds or the Commission except in its respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be construed to require the Dissemination Agent to interpret or provide an opinion concerning any information disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such disclaimer language concerning the Dissemination Agent's responsibilities hereunder with respect thereto as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the determination of the Commission as to the materiality of any event for purposes of Section 4 hereof. Neither the Trustee nor the Dissemination Agent make any representation as to the sufficiency of this Disclosure Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the Commission for its services provided hereunder in accordance with its schedule of fees, as amended from time to time, and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its duties hereunder. The Commission's obligations under this Section shall survive the termination of this Disclosure Agreement. Section 12. Beneficiaries This Disclosure Agreement shall inure solely to the benefit of the Commission, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Counterparts This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 14. Merger Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. OHS West: 260119696.1 41555 -8 MKH/MKFI 8 0 0 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION an Authorized Officer ATTEST: ME Secretary U.S. BANK NATIONAL ASSOCIATION, as Trustee an Authorized Officer : U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent Authorized Officer OHS West: 260119696.1 41555 -8 MKIi /MKH 0 0 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Rosemead Community Development Commission Name of Bond Issue: Rosemead Community Development Commission Redevelopment Project Area No. I Tax Allocation Bonds, Series 2006B Date of Issuance: , 2006 NOTICE IS HEREBY GIVEN that the Rosemead Community Development Commission (the "Commission ") has not provided an Annual Report with respect to the above - named Bonds as required by the Continuing Disclosure Agreement, dated as of December 1, 2006, by and among the Commission and U.S. Bank National Association, in its capacity as Trustee and in its capacity as Dissemination Agent. [The Commission anticipates that the Annual Report will be filed by .] Dated: In U.S. Bank National Association, as Trustee, on behalf of the Rosemead Community Development Commission cc: Rosemead Community Development Commission OHS Wcst:260119696.1 41555 -5 MKH/MKH A—I 0 0 OH &S 11/02/06 Draft PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER , 2006 NEW ISSUE— FULL BOOK -ENTRY Ratings (Insured): S &P: "[AAAI" Underlying Rating: S &P: "IBBB +I" (See "RATINGS" herein) In the opinion of Orrick, Herrington Sutcliffe LLA Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy ofcertain representations and compliance with certain covenants, interest on the Series 2006B Bonds is exchtded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the fiather opinion of Bond Counsel, interest on the Series 2006B Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of or the accrual or receipt of interest on, the Series 2006B Bonds. See "TAX MA77ERS " herein. $26,000,000' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION (LOS ANGELES COUNTY, CALIFORNIA) REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION BONDS SERIES 2006B Darted: Date of Delivery Due: October 1, as shown on inside cover THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY, IT IS NOT A SUMMARY OF ALL OF THE PROVISIONS OF THE SERIES 20068 BONDS. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Series 2006B Bonds will be issued in denominations of $5,000 or any integral multiple thereof as shown on the inside cover page of this Official Statement. Interest on the Series 2006B Bonds is payable on April 1 and October I of each year, commencing April 1, 2007. The Series 2006B Bonds will be issued in book -entry form, without coupons, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( "DTC "). Purchasers of the Series 2006B Bonds will not receive physical certificates from the Commission representing their interests in the Series 20068 Bonds purchased. ETC will act as securities depository for the Series 2006B Bonds. The principal of and interest on the Series 2006B Bonds are payable directly to ETC by U.S. Bank National Association, Los Angeles, California, as Trustee. Upon receipt of payments of such principal and interest, DTC is obligated to remit such principal and interest to the participants in ETC for subsequent disbursement to the beneficial owners of the Series 2006B Bonds. - The Series 2006B Bonds are being issued by the Rosemead Community Development Commission (the "Commission "): (I) to refund the Commission's outstanding Series 1993 Bonds (as defined herein); and (2) to pay costs of issuance related to the Series 200613 Bonds. See "PLAN OF FINANCE" herein. The Series 2006B Bonds are subject to optional and mandatory redemption as described herein. Payment of the principal of and interest on the Series 2006B Bonds when due will be insured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the Series 2006B Bonds. A/»bac The Series 2006B Bonds are limited obligations of the Commission and are payable, as to interest thereon and principal thereof, exclusively from the Pledged Tax Revenues, and the Commission is not obligated to pay them except from the Pledged Tax Revenues. All of the Series 2006B Bonds are equally secured by a pledge of, and charge and lien upon, all of the Pledged Tax Revenues, and the Pledged Tax Revenues constitute a trust fund for the security and payment of the interest on and the principal of the Series 20068 Bonds. The Series 2006B Bonds are not a debt of the City of Rosemead, the State of California or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable Preliminary, subject to change. OHS WEST:260116199.3 41555 -8 MKH ATTACHMENT 5 0 0 therefor, nor in any event will the Series 2006B Bonds be payable out of any funds or properties other than those of the Commission. The Series 20068 Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction, and neither the members of the Commission nor any persons executing the Series 2006B Bonds are liable personally on the Series 2006B Bands by reason of their issuance. For a discussion of some of the risks associated with the purchase of the Series 2006B Bonds, see "RISK FACTORS" herein. Legal matters incident to the issuance and sale of the Series 2006B Bonds are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Las Angeles, California, Bond Counsel. As Bond Counsel, Orrick, Herrington & Sutcliffe LLP undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon jar the Commission in connection with the Series 2006B Bonds by Wallin, Kress, Reisman & Kranitz LLP, Santa ALonica, California, as counsel to the Commission, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. The Commission anticipates that the Series 2006B Bonds, in book entry form, will be available for delivery to DTC in New York, New York on or about December _, 2006 PiperJaffray Dated: , 2006 OHS WESI:260116199.3 41555 -8 MKH 0 MATURITY SCHEDULE SERIES 2006B BONDS BASE CUSH' 777510 $ Serial Bonds Maturity Interest (October 1) Amount Rate Yield 2019 2020 2021 2022 2023 2024 2025 2026 0 CUSIP Numbert $ % Series 2006B Term Bonds dated October I, 20_ priced to yield % CUSIP No. t $ % Series 2006B Term Bonds dated October 1, 2033 priced to yield _% CUSIP No. t t CUSIP data, copyright 2006, American Bankers Association. CUSIP data herein are provided for convenience of reference only. Neither the Commission or the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above. OHS WEST: 260116199.3 41555 -8 MKI I ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Gary A. Taylor, Chairperson John H. Nunez, Vice Chairperson Margaret Clark Jay T. Imperial John Tran CITY /COMMISSION STAFF Andrew Lazzaretto City Manager and Executive Director of the Commission Donald J. Wagner Assistant City Manager and Assistant Executive Director of the Commission Peter L. Wallin City Attorney and General Counsel to the Commission Brian Saeki Redevelopment Manager Oliver Chi Deputy City Manager Nina Castruita City Clerk Special Services U.S. Bank National Association Trustee Orrick, Herrington & Sutcliffe LLP Bond Counsel and Disclosure Counsel Wallin, Kress, Reisman & Kranitz LLP Commission's Counsel The Arbitrage Group, Inc. Verification Agent OHS WEST:260116199.3 41555 -8 MKH 0 0 NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OR SALE OF THE SERIES 2006B BONDS, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMMISSION, THE CITY OR THE UNDERWRITER. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED ON THE INSIDE COVER PAGE OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY NOR WILL THERE BE ANY SALE OF THE SERIES 2006B BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER, SOLICITATION OR SALE. THE OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE SERIES 2006B BONDS. Statements contained in this Official Statement which involve time estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been furnished by the Commission, the City, or other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Commission, the City or the Underwriter. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Commission or the City since the date hereof. 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 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. This Official Statement is submitted in connection with the sale of securities referred to herein and may not be reproduced or be used, as a whole or in part, for any other purpose. IN CONNECTION WITH THE OFFERING OF THE SERIES 2006B BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2006B BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER TO SELL THE SERIES 2006B BONDS TO CERTAIN_ DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THE SERIES 2006B BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE SERIES 20068 BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. OHS WEST:260116199.3 41555 -8 MKH 0 0 OFFICIAL STATEMENT $24,000,000' ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION (LOS ANGELES COUNTY, CALIFORNIA) REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION BONDS SERIES 2006B INTRODUCTORY STATEMENT This Official Statement, including the cover page, the inside cover page and appendices hereto, is provided to furnish information regarding the Commission's $24,000,000' aggregate principal amount of Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006B (the "Series 2006B Bonds "). The Series 2006B Bonds are to be issued by the Rosemead Community Development Commission (the "Commission'). The Series 2006B Bonds are payable from and secured by Pledged Tax Revenues, as defined in the Indenture, dated as of October I, 1993 (the "Original Indenture "), by and between the Commission and U.S. Bank National Association, as successor in interest to State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee "), as amended and supplemented to date, including by that Second Supplement to Indenture, dated as of December I, 2006 (the "Second Supplement to Indenture," together with the Original Indenture, the "Indenture "), by and between the Commission and the Trustee. As used herein, the term "Pledged Tax Revenues" means, for each Fiscal Year, the taxes (including, except to the extent limited by law, all payments, reimbursements and subventions, if any, specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations) eligible for allocation to the Commission pursuant to the Redevelopment Law (as defined below) in connection with the Project Area, excluding (a) amounts, if any, required to be deposited by the Commission in the Housing Fund and used for certain housing purposes, provided, however, that such amounts shall not be excluded if and to the extent that the Commission makes Such amounts available as Pledged Tax Revenues, (b) amounts, if any, payable pursuant to the County Agreement, but only to the extent such amounts are not subordinated to the payment of debt service on the Bonds, (c) amounts, if any, payable pursuant to Section 33607.5 of the Redevelopment Law, but only to the extent such amounts are not subordinated to the payment of debt service on the Bonds and (d) amount, if any, received by the Commission pursuant to Section 16111 of the Government Code, as provided in the Redevelopment Plan. Capitalized terms used in this paragraph and not defined are defined below. See "SECURITY FOR THE SERIES 2006B BONDS" herein. The Series 20068 Bonds are being issued by the Commission: (1) to refund the Commission's outstanding Series 1993 Bonds (as defined below); and (2) to pay costs of issuance related to the Series 2006B Bonds. See "PLAN OF FINANCE" herein. The Series 2006B Bonds The Series 2006B Bonds are being issued pursuant to the Constitution and the laws of the State of California (the "State "), including the California Community Redevelopment Law (Part 1, commencing with Section 33000 of Division 24 of the Health and Safety Code of the State (the "Redevelopment Law "). Additionally, the Series 2006B Bonds are being issued pursuant to a Resolution adopted by the Commission on November , 2006, and pursuant to and secured by the Indenture. See "SECURITY FOR THE SERIES 2006B BONDS" herein. Preliminary, subject to change. OHS WEST 260116199.3 41555 -8 MKH 0 0 The Commission and Redevelopment Project Area No. 1 The Commission. The Rosemead Community Development Commission, formerly known as the Rosemead Redevelopment Agency, was activated in 1972 by City Ordinance. The City Council Members serve as the Members of the Commission. The Commission is a separate public body which plans and implements projects in accordance with the requirements of the Redevelopment Law. The Commission has two active project areas, Redevelopment Project Area No. I and Redevelopment Project No. 2. The Series 2006B Bonds are being issued to refinance redevelopment activity for Redevelopment Project Area No. 1. Tax increment generated in Redevelopment Project Area No. 2 is NOT available to pay debt service on the Series 2006B Bonds. The Project Area. The Redevelopment Plan for the Redevelopment Project Area No. 1 ( "Redevelopment Project Area No. I" or the "Project Area" herein) was adopted by Ordinance No. 340 of the City Council on June 27, 1972. The Project Area is a contiguous area of about 511 acres and is roughly triangular with Garvey Avenue, San Gabriel Boulevard and Walnut Grove Avenue being the major thoroughfares traversing the area. The Project Area is within a few miles of the City's Civic Center and is located between the San Bernardino and Pomona Freeways to the north and south, respectively. On _ the Commission issued $ aggregate principal amount of Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006B Bonds "). Tax Allocation Financing Pursuant to the Redevelopment Law, a portion of all property tax revenues, including certain reimbursements by the State of California, collected by or for each taxing agency on any increase in the taxable value of certain property within each redevelopment project over that shown on the assessment rolls for the base year applicable to each such redevelopment project may be pledged to the repayment of indebtedness incurred by the Commission in connection with project redevelopment. Under the Indenture, the Commission has pledged tax increments to the payment of the principal of, premium, if any, and interest on the Series 2006B Bonds. See "SECURITY FOR THE SERIES 2006B BONDS" herein. Certain events, including any future decrease in the taxable valuation in the Project Area or in the applicable tax rates or increased delinquencies in the payment of property taxes within the Project Area may reduce tax increment allocated to and received by the Commission, and correspondingly may adversely impact the ability of the Commission to pay debt service on the Series 2006B Bonds. See "RISK FACTORS" herein. Bond Insurance The scheduled payment of principal of and interest on the Series 2006B Bonds when due will be insured under a financial guaranty insurance policy (the "Policy ") to be issued concurrently with the delivery of the Series 2006B Bonds by Ambac Assurance Corporation (the "Bond Insurer" or "Ambac Assurance "). See "BOND INSURANCE" herein. Tax Exemption For a summary of the opinion of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Special Counsel. see "TAX MATTERS" herein. OHS WEST:260116199.3 41555 -8 MKH 2 0 Continuing Disclosure The Commission has covenanted for the benefit of owners of the Series 2006B Bonds to provide, so long as the Series 2006B Bonds are outstanding, certain financial information and operating data relating to the Commission by not later than 270 days following the end of the Commission's fiscal year (which is currently June 30), commencing March 31, 2007, for the 2005 -06 fiscal year report (the "Annual Report") and to provide notices of the occurrences of certain enumerated events, if material. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(6)(5). The Commission has never failed to comply in all material respects with any continuing disclosure undertakings with regard to Rule 15c2- 12(b)(5) to provide annual reports or notices of material events. The specific nature of the information to be contained in the Annual Report or the notices of material events by the Commission is set forth in APPENDIX E — "FORM OF CONTINUING DISCLOSURE AGREEMENT." Additional Information There follows in this Official Statement brief descriptions of the Series 2006B Bonds, the security for the Series 2006B Bonds, the Indenture, the Commission, the Project Area, and certain other information relevant to the issuance of the Series 2006B Bonds. All references herein to the Indenture are qualified in their entirety by reference to the definitive forms thereof and all references to the Series 2006B Bonds are further qualified by references to the information with respect thereto contained in the appropriate Indenture. Selected information regarding the City of Rosemead and the County of Los Angeles is included in Appendix A. The proposed form of legal opinion for the Series 2006B Bonds is set forth in Appendix B. Certain information relating to DTC and the book -entry only system is included in Appendix C. Definitions and a summary of certain provisions of the Indenture are included in Appendix D. The proposed form of Continuing Disclosure Agreement is included in Appendix E. The specimen form of the Policy of the Bond Insurer is included in Appendix F. All capitalized terms used herein and not normally capitalized have the meanings assigned to them in the Indenture, as applicable, unless otherwise stated in this Official Statement. The information set forth herein and in the Appendices hereto has been furnished by the Commission and includes information which has been obtained from other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Underwriter. Copies of the Indenture and the Commission's audited financial statements regarding the Project Area for the Fiscal Year ended June 30, 2005, are available upon request of the Commission. The Commission's address and telephone number for such purpose are as follows: 8838 East Valley Boulevard, P.O. Box 399, Rosemead, California 91770, Attn: City Manager. PLAN OF FINANCE General The Series 2006B Bonds are being issued by the Commission: (1) to refund the Commission's outstanding Series 1993 Bonds (as defined below); and (2) to pay costs of issuance related to the Series 2006B Bonds. A portion of the proceeds of the Series 2006B Bond proceeds will be deposited in an escrow account and used to refinance redevelopment activities through the refunding of the outstanding principal amount of the Commission's Redevelopment Project Area No. I Tax Allocation Bonds, Series 1993A (the "Series 1993 Bonds "). See "Plan of Refunding" below. Plan of Refunding $ of the proceeds of the Series 2006B Bonds together with $ currently on deposit in the Reserve Account and $ currently on deposit in the Debt Service Fund under the 01 IS WEST:260116199.3 41555 -8 MICH 3 • • Original Indenture will be deposited in an escrow fund (the "Escrow Fund ") established under an Escrow Agreement between the Commission and the Trustee. The moneys so deposited will be used to purchase certain securities (the " Government Obligations "), the interest and principal of which will be sufficient to pay on April I, 2006, the scheduled interest on the outstanding Series 1993 Bonds and on February 6, 2007 (the "Redemption Date "), the principal of the outstanding Series 1993 Bonds scheduled to mature on October 1, 2033 (the "Refunded Bonds ") at a redemption price of 100% and accrued and unpaid interest thereon. (See "VERIFICATION" herein). Upon the issuance of the Series 2006B Bonds, irrevocable instructions will be given to mail a timely notice of redemption of the Refunded Bonds on the Redemption Date. The maturing principal of and the investment income to be derived from the Government Obligations in the Escrow Fund will held in trust solely for the Refunded Bonds and will not be available to pay the principal amount or purchase price of or interest on the Series 2006B Bonds or any obligations other than the Refunded Bonds. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds for the Series 2006B Bonds are as follows: ESTIMATED SOURCES AND USES OF FUNDS Sources of Funds: Principal Amount of Series 20068 Bonds Net Original Issue Premium Underwriter's Discount Funds released from Original Indenture TOTAL SOURCES OF FUNDS Uses of Funds: Deposit to Series 2006B Expense Account Deposit to Escrow Fund TOTAL USES OF FUNDS (n Includes the premium for the Financial Guaranty Insurance Policy issued by the Bond Insurer, the fees and expenses of Bond Counsel and Disclosure Counsel, the Trustee (including counsel fees), the rating agencies, other costs incidental to the issuance of the Series 2006B Bonds, and the costs of printing. THE SERIES 2006B BONDS Description of the Series 2006B Bonds The Series 20068 Bonds will be dated, will bear interest at the annual rates and will mature, subject to prior redemption or acceleration, as shown on the inside cover page of this Official Statement. The Series 2006B Bonds will be issued in denominations of $5,000 or any integral multiple of $5,000 in excess thereof. Interest on the Series 2006B Bonds will be payable on April I and October 1 of each year (each an "Interest Payment Date "), commencing April I, 2007. Principal and redemption premiums, if any, on the Series 2006B Bonds will be payable upon the surrender thereof at maturity or the earlier redemption thereof at the principal corporate trust office of the Trustee and will be paid in lawful money of the United States of America. Interest on the Series 2006B Bonds will be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2006B Bonds will bear interest from the Interest Payment Date next preceding the date of registration thereof, unless such date of registration is during the period from the 16th day of the month next OHS WES'[ 260116199.3 41555 -8 MKI I 0 0 preceding an Interest Payment Date to and including such Interest Payment Date, in which event they will bear interest from such Interest Payment Date, or unless such date of registration is on or before September 15, 2006, in which event they will bear interest from their Dated Date; provided, however, that if, at the time of registration of any Series 2006B Bond, interest is then in default on the outstanding Series 2006B Bonds, such Series 2006B Bond will bear interest from the Interest Payment Date to which interest previously has been paid or made available for payment on the outstanding Series 2006B Bonds. Payment of interest on the Series 2006B Bonds due on or before the maturity or prior redemption of such Series 2006B Bonds will be made to the person whose name appears on the bond registration books of the Trustee as the registered owner thereof, as of the close of business on the 15th day of the month next preceding the Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such registered owner at his address as it appears on such books or, upon written request received prior to the 15th day of the month preceding an Interest Payment Date of an Owner of at least $1,000,000 in aggregate principal amount of Series 2006B Bonds, by wire transfer in immediately available funds to an account within the continental United States designated by such Owner. DTC and Book -Entry Only System DTC will act as securities depository for the Series 2006B Bonds. The Series 2006B Bonds will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered certificate will be issued for each series and for each year in which the Series 2006B Bonds mature in denominations equal to the aggregate principal amount of the Series 2006B Bonds of each series maturing in that year, and will be deposited with DTC. So long as Cede & Co. is the registered owner of the Series 2006B Bonds, as nominee of DTC, references herein to the owners of the Series 2006B Bonds or Bondowners means Cede & Co. and does not mean the actual purchasers of the Series 2006B Bonds (the "Beneficial Owners "). See APPENDIX C — "DTC AND BOOK -ENTRY ONLY SYSTEM," herein, for a further description of DTC and its book -entry system. Redemption Option( Redemption. The Series 2006B Bonds due on or before October 1, 2016 are not subject to redemption prior to their respective stated maturities. Series 2006B Bonds maturing on or after October I, 2017 are subject to redemption, as a whole or in part, as designated by the Commission, or, absent such designation, pro rata among maturities, and by lot within any one maturity if less than all of the Series 2006B Bonds of such maturity are to be redeemed, prior to their respective maturity dates, at the option of the Commission, on any date on or after October 1, 2016, from funds derived by the Commission from any source, at the redemption prices of the principal amount of the Series 2006B Bonds to be redeemed, together with interest accrued thereon to the date fixed for redemption. Purchase in Lieu of Redemption. In lieu of redemption of any Term Bond, amounts on deposit in the Debt Service Fund or in the Sinking Account therein may also be used and withdrawn by the Trustee at any time, upon the Request of the Commission received by the Trustee prior to the selection of Bonds for redemption, for the purchase of such Term Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Fund) as the Commission may in its discretion determine, but not in excess of the principal amount thereof Plus accrued interest to the purchase date; provided, however, that no Bonds shall be purchased by the Trustee in accordance with this paragraph with a settlement date more than 90 days prior to the redemption date. The principal amount of any Term Bonds so purchased by the Trustee in any twelve month period ending 60 days prior to any Principal Payment Date in any year shall be credited towards and shall reduce the principal amount of such Term Bonds required to be redeemed on such Principal Payment Date in such year. Of IS W €s'r:260116199.3 41555 -8 MKH 5 0 0 Selection of Bonds. Whenever less than all the Outstanding Bonds of a Series maturing on any one date are called for redemption at any one time, the Trustee shall select the Bonds to be redeemed from the Outstanding Bonds of such Series maturing on such date not previously selected for redemption, by lot in any manner which the Trustee deems fair; provided, however, that if less than all the Outstanding Term Bonds of a Series of any maturity are called for redemption at any one time, upon the written direction from the Commission, the Trustee shall specify a reduction in any Sinking Account Installment payments required to be made with respect to such Bonds (in an amount equal to the amount of Outstanding Term Bonds to be redeemed) which, to the extent practicable, results in approximately equal Annual Debt Service on the Bonds Outstanding following such redemption. Notice of Redemption Notice of redemption will be mailed by first class mail by the Trustee, not less than 30 nor more than 60 days prior to the redemption date to (I) the respective Owners of Series 2006B Bonds designated for redemption at their addresses appearing on the bond registration books of the Trustee, (2) to one or more Information Services designated in writing to the Trustee by the Commission and (3) the Securities Depositories. Each notice of redemption will state the date of such notice, the Series 2006B Bonds to be redeemed, the date of issue of such Series 20068 Bonds, the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity are to be redeemed, the distinctive certificate numbers of the Series 2006B Bonds of such maturity to be redeemed and, in the case of Series 2006B Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on said date there will become due and payable on each of such Series 2006B Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Series 2006B Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon will cease to accrue, and will require that such Series 2006B Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Failure by the Trustee to give notice pursuant to above to any one or more of the Information Services or Securities Depositories, or the insufficiency of any such notice will not affect the sufficiency of the proceedings for redemption. The failure of any Owner to receive any redemption notice mailed to such Owner and any defect in the notice so mailed will not affect the sufficiency of the proceedings for redemption. The Commission will have the right to rescind any optional redemption by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of redemption will be canceled and annulled if for any reason funds are not available on the date fixed for redemption for the payment in full of the Series 2006B Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture. The Commission and the Trustee will have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. From and after the date fixed for redemption, if notice of such redemption shall have been duly given and funds available for the payment of such redemption price of the Bonds so called for redemption shall have been duly provided, no interest shall accrue on such Bonds from and after the redemption date specified in such notice. DEBT SERVICE SCHEDULES FOR THE SERIES 2006B BONDS AND THE SERIES 1993 BONDS OHS WEST:260116199.3 41555 -8 MKH 6 0 0 Set forth below is the principal and interest on the Series 20068 Bonds and Series 1993 Bonds remaining outstanding as of the date of issuance of the Series 2006B Bonds. DEBT SERVICE ON THE BONDS Series 2006A Series 2006B Series 20068 Series 20068 Total Year Total * Principal Interest Total Debt Service 2007 $1,347,994 2008 1,350,594 2009 1,348,131 2010 1,349,856 2011 1,349,481 2012 1,351,931 2013 1,353,156 2014 1,348,156 2015 1,351,406 2016 1,351,906 2017 1,349,656 2018 1,351,656 2019 328,531 2020 327,331 2021 325,369 2022 327,994 2023 -- 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total $17,513,148.00 * Assumes the refunding of the Refunded Bonds as described herein. Source: Rosemead Community Development Commission and Piper Jaffray & Co., as Undenvriter of the Series 20068 Bonds. SECURITY FOR THE SERIES 2006B BONDS Pledge and Allocation of Taxes Under provisions of the California Constitution and the Redevelopment Law, taxes levied upon taxable property in the Project Area each year by or for the benefit of the State of California, any city, county, city and county or other public corporation ( "taxing agencies ") for Fiscal Years beginning after the effective date of the ordinance approving the redevelopment plan for the Project Area (the "Effective Date "), are divided as follows: 1. The portion equal to the amount of those taxes which would have been produced by the current tax rate, applied to the assessed value of the taxable property in the Project Area as last equalized prior to the Effective Date is paid (when collected) into the funds of those respective taxing agencies as taxes by or for such taxing agencies; OHS WEST:260116199.3 41555 -8 MKI 1 0 0 2. Except as provided in subparagraph (3) below, that portion of such levied taxes each year in excess of such amount is allocated to and when collected paid into a special fund of the Commission, to the extent required to pay the principal of and interest on loans, moneys advanced to, or indebtedness (whether funded, refunded, assumed or otherwise) incurred by the Commission to finance or refinance, in whole or in part, (])the Commission's redevelopment projects within the Project Area and (2)under certain circumstances, publicly owned improvements outside of the Project Area; and 3. That portion of the taxes identified in subparagraph (2) above that are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of principal of, and the interest on, any bonded indebtedness for the acquisition or improvement of real property approved by the voters of the taxing agency on or after January 1, 1989, will be allocated to, and when collected will be paid into, the fund of such taxing agency. Pursuant to the Indenture, "Pledged Tax Revenues" means, for each Fiscal Year, the taxes (including, except to the extent limited by law, all payments, reimbursements and subventions, if any, specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate limitations) eligible for allocation to the Commission pursuant to the Redevelopment Law in connection with the Project Area, excluding (a) amounts, if any, required to be deposited by the Commission in the Housing Fund and used for certain housing purposes, provided, however, that such amounts shall not be excluded if and to the extent that the Commission snakes such amounts available as Pledged Tax Revenues, (b) amounts, if any, payable pursuant to the County Agreement, but only to the extent such amounts are not subordinated to the payment of debt service on the Bonds, (c) amounts, if any, payable pursuant to Section 33607.5 of the Redevelopment Law, but only to the extent such amounts are not subordinated to the payment of debt service on the Bonds and (d) amount, if any, received by the Commission pursuant to Section 16111 of the Government Code, as provided in the Redevelopment Plan. Pursuant to the Indenture, the term "Housing Fund" means the Low and Moderate Income Housing Fund, established pursuant to Section 33334.3 of the Redevelopment Law with respect to the Project Area and held by the Commission. The County of Los Angeles (the "County ") and the Commission entered into a certain agreement for reimbursement of tax increment funds with the County, the Consolidated Fire Protection District, and the County Public Library District pertaining to the Project Area. The elements of the County Agreement include the following: (i) the Commission is to provide for a pass - through of a portion of its tax increment revenues received after July I, 1988 for the Consolidated Fire Protection District; and (ii) the Commission is to allow an additional pass - through of tax increment revenues for the Los Angles County Public Library District at such time that the Commission or the City constructs a replacement facility. Such pass - through payments will not be available to the Commission to pay debt service on the Series 20O6B Bonds. When the Commission extended the time frame to incur debt pursuant to California State Senate Bill ( "SB ") 211, it initiated statutory pass throughs to all affected tax agencies that do not currently have tax sharing agreements. The general levy share of all agencies that do not currently possess tax- sharing agreements is approximately 83% of every $1.00 of property tax generated. Pursuant to SB 211, these pass throughs may be subordinated to bond debt if the Commission makes the finding that the issuance of the debt will not impact the Commission's ability to make the statutory payments. The Commission has made the appropriate findings, and therefore it is assumed that these payments are subordinated to bond indebtedness accordingly. These statutory pass - throughs to affected agencies began in the year 2004 -05 at a rate of 25% of the tax increment growth net of the Housing Set -Aside Requirement with a base year of 2003 -04. An increase in the amount of pass through payments will begin in Fiscal Year 2014 -15 at a rate of 21% of the tax increment growth net of the Housing Set -Aside Requirement with a base year of 2013 -14. The County includes the unitary assessed values in its calculation of SB 211 pass throughs. However, there is no OHS WEST 260116199.3 41555 -8 M1IKH 0 0 consistent methodology among various counties within the State as to the calculation of SB 211 pass throughs. For the purpose the projections set forth herein, the City has calculated the pass throughs based on the County's methodology. The Commission has no power to levy and collect property taxes, and any legislative property tax de- emphasis or provision of additional sources of income to taxing agencies having the effect of reducing the property tax rate would, in all likelihood, reduce the amount of Pledged Tax Revenues that would otherwise be available to pay the principal of, interest on and premium, if any, on the Series 20068 Bonds. Likewise, broadened property tax exemptions could have a similar effect. For a further description of factors which may result in decreased Pledged Tax Revenues, see "RISK FACTORS" herein. Reserve Accounts General. To further secure the payment of principal of and interest on the Series 20068 Bonds, the Commission is required to fund the Reserve Account established under the Original Indenture. The Reserve Account is a common reserve for Bonds at any time then Outstanding under the Indenture, in this case including the Series 2006A Bonds, the Series 2006B Bonds and any Additional Bonds to be issued in accordance with the Indenture. The following describes the Reserve Account provisions under the Indenture. Reserve Account Requirement. As defined in the Indenture, the Reserve Account Requirement for the Bonds means, as of any calculation date, an amount equal to the least of (i) ten percent (10 %) of the amount (within the meaning of Section 148 of the Code), as certified by the Commission to the Trustee, of that portion of Bonds Outstanding with respect to which Annual Debt Service is calculated, (ii) 125% of Average Annual Debt Service of such Bonds or (iii) Maximum Annual Debt Service of such Bonds; provided, that for the purposes of such calculations, there shall be excluded an amount of Bonds or debt service thereon equal to the amount deposited in any escrow fund established pursuant to the Indenture. The Trustee shall set aside from the Debt Service Fund and deposit in the Reserve Account an amount of money (or other authorized deposit of security, as contemplated by the following paragraphs) equal to the Reserve Account Requirement. No deposit need be made in the Reserve Account so long as there shall be on deposit therein an amount equal to the Reserve Account Requirement. All money in (or available to) the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of replenishing the Interest Account, the Principal Account or the Sinking Account in such order, in the event of any deficiency at any time in any of such accounts, or for the purpose of paying the interest on or principal of or redemption premiums, if any, on the Bonds in the event that no other money of the Commission is lawfully available therefor, or for the retirement of all Bonds then Outstanding, except that for so long as the Commission is not in default under the Indenture, any amount in the Reserve Account in excess of the Reserve Account Requirement may, upon Written Request of the Commission, be withdrawn from the Reserve Account by the Trustee and transferred to the Commission. In lieu of making the Reserve Account Requirement deposit in the Reserve Account or in replacement of moneys then on deposit in the Reserve Account (which shall be transferred by the Trustee to the Commission upon delivery of a letter of credit satisfying the requirements stated below), the Commission, with the consent of the Bond Insurer, if any, and with prior written notification to S &P and Moody's, may deliver to the Trustee an irrevocable letter of credit issued by a financial institution having, at the time of such delivery, unsecured debt obligations rated in at least the second highest rating category (without respect to any modifier) of S &P and Moody's, in an amount, together with moneys, Authorized Investments or insurance policies satisfying the requirements set forth in the Indenture on deposit in the Reserve Account, equal to the Reserve Account Requirement and consistent with the terms specified in the Indenture. Such letter of credit shall have a term of no less than three (3) years. The issuer of such letter of credit shall be required to notify the Trustee and the Commission whether or not the letter of credit will be extended no later than 13 months prior to the stated expiration date thereof. At least one year prior to the stated expiration of OHS WEST: 260116199.3 41555 -8 MKH 9 0 0 such letter of credit, the Commission shall either (i) deliver a replacement letter of credit, (ii) deliver an extension of the letter of credit for at least an additional year, or (iii) deliver to the Trustee an insurance policy satisfying the requirements set forth in the Indenture. Upon delivery of such replacement letter of credit, extended letter of credit, or insurance policy, the Trustee shall deliver the then effective letter of credit to or upon the order of the Commission. If the Commission shall fail to deposit a replacement letter of credit, extended letter of credit or insurance policy with the Trustee, the Commission shall immediately commence to make monthly deposits with the Trustee so that an amount equal to the Reserve Account Requirement is on deposit in the Reserve Account no later than the stated expiration date of the letter of credit. If the Commission shall fail to make such deposits, the Trustee shall draw on such letter of credit on or before 10 days prior to its stated expiration date in an amount necessary to replenish the Reserve Account to the Reserve Account Requirement. If a drawing is made on the letter of credit, the Commission shall make such payments as may be required by the terms of the letter of credit or any obligations related thereto (but no less than quarterly pro rater payments) so that the letter of credit shall, absent the delivery to the Trustee of an insurance policy satisfying the requirements set forth in the Indenture or the deposit in the Reserve Account of an amount sufficient to increase the balance in the Reserve Account to the Reserve Account Requirement, be reinstated in the amount of such drawing within one year of the date of such drawing. In lieu of making the Reserve Account Requirement in the Reserve Account or in replacement of moneys then on deposit in the Reserve Account (which shall be transferred by the Trustee to the Commission upon delivery of an insurance policy satisfying the requirements stated below), the Commission, with the consent of the Bond Insurer, if any, and with prior written notification to S &P and Moody's, may also deliver to the Trustee an insurance policy securing an amount, together with moneys, Authorized Investments or letters of credit satisfying the requirements set forth in the Indenture on deposit in the Reserve Account, no less than the Reserve Account Requirement, issued by an insurance company licensed to issue insurance policies guaranteeing the timely payment of debt service on the Bonds and whose unsecured debt obligations (or for which obligations secured by such insurance company's insurance policies), at the time of such delivery, are rated in the highest rating category (without respect to any modifier) of A.M. Best & Company, S &P and Moody's. If and to the extent that the Reserve Account has been funded with a combination of cash (or Authorized Investments) and a Qualified Reserve Instrument, then all such cash (or Authorized Investments) shall be completely used before any demand is made on such Qualified Reserve Instrument, and replenishment of the Qualified Reserve Instrument shall be made prior to any replenishment of any cash (or Authorized Investments). If the Reserve Account is funded, in whole or in part, with more than one Qualified Reserve Instrument, then any draws made against such Qualified Reserve Instrument shall be made pro -rata. Funding of Reserve Account Requirement. Upon issuance of the Series 2006B Bonds, the Reserve Account Requirement will equal $ . Upon issuance of the Series 2006B Bonds, the Commission will have funded approximately 50% of the Reserve Account Requirement under a Reserve Surety Bond previously issued by the Bond Insurer. The Reserve Surety Bond is a Qualified Reserve Instrument as defined below. [Amounts in the Reserve Account in excess of the Reserve Account Requirement will be withdrawn from the Reserve Account and transferred to the Escrow Fund.] See "ESTIMATED SOURCES AND USES OF FUNDS." Issuance of Additional Bonds The Commission may at any time after the issuance and delivery of the Series 2006B Bonds issue Additional Bonds payable from Pledged Tax Revenues and secured by a lien and charge upon Pledged Tax Revenues equal to and on a parity with the lien and charge securing the Outstanding Bonds theretofore issued under the Indenture, but only subject to the specific conditions set forth in the Indenture, which are conditions precedent to the issuance of any such Additional Bonds: OHS WEST: 260116199.3 41555 -8 MKH 10 1 0 0 (1) The Commission will be in compliance with all covenants set forth in the Indenture and any Supplemental Indentures, and a Certificate of the Commission to that effect will have been filed with the Trustee. (2) The issuance of such Additional Bonds have been duly authorized pursuant to the Redevelopment Law and all applicable laws, and the issuance of such Additional Bonds has been provided for by a Supplemental Indenture duly adopted by the Commission which will contain certain matters set forth in the Indenture. (3) The Pledged Tax Revenues based upon the assessed valuation of taxable property in the Project Area as shown on the most recently equalized assessment roll and the most recently established tax rates preceding the date of the Commission's adoption of the Supplemental Indenture providing for the issuance of such Additional Bonds will be in an amount equal to at least 125% of the Maximum Annual Debt Service on all then Outstanding Bonds and such Additional Bonds and any unsubordinated loans, advances or indebtedness payable from Pledged Tax Revenues pursuant to the Redevelopment Law. For the purposes of the issuance of Additional Bonds, Outstanding Bonds will not include any Bonds the proceeds of which are deposited in an escrow fund held by an escrow agent, provided that the Supplemental Indenture authorizing issuance of such Additional Bonds will provide that: (a) such proceeds will be deposited or invested with or secured by an institution rated "AA" by S &P or "Aa" by Moody's (without regard to negative modifiers) at a rate of interest which, together with amounts made available by the Commission from bond proceeds or otherwise, is at least sufficient to pay Annual Debt Service on the foregoing Bonds; (b) moneys may be transferred from said escrow fund only if Pledged Tax Revenues for the next preceding fiscal year will be at least equal to 125% of Maximum Annual Debt Service on all Outstanding Bonds less a principal amount of Bonds which is equal to moneys on deposit in said escrow fund after each such transfer; and (c) Additional Bonds will be redeemed from moneys remaining on deposit in said escrow fund at the expiration of a specified escrow period in such manner as may be determined by the Commission. For purposes of calculation of Pledged Tax Revenues as described in this paragraph, the property tax rate shall be assumed to be the actual tax rate the year in which the calculation is made. In the event such Additional Bonds are to be issued solely for the purpose of refunding and retiring any Outstanding Bonds, interest and principal payments on the Outstanding Bonds to be so refunded and retired from the proceeds of such Additional Bonds being issued will be excluded from the foregoing computation of Maximum Annual Debt Service. Nothing contained in the Indenture will limit the issuance of any tax allocation bonds of the Commission payable from Pledged Tax Revenues and secured by a lien and charge on Pledged Tax Revenues if, after the issuance and delivery of such tax allocation bonds, none of the Bonds theretofore issued under the Indenture will be Outstanding nor will anything contained in the Indenture prohibit the issuance of any tax allocation bonds or other indebtedness by the Commission secured by a pledge of tax increment revenues (including Pledged Tax Revenues) subordinate to the pledge of Pledged Tax Revenues securing the Bonds. As used above, the term "Maximum Annual Debt Service" means the largest Annual Debt Service during the period from the date of such determination through the final maturity date of any Outstanding Bonds. The tern "Annual Debt Service" means, for each Bond Year, the sum of (1) the interest falling due on the Outstanding Bonds in such Bond Year, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds, if any, are redeemed from the Sinking Account, as may be scheduled (except to the extent that such interest is to be paid from the proceeds of sale of any Bonds), (2) the principal amount of the Outstanding Serial Bonds, if any, maturing by their terms in such Bond Year, and (3) the minimum amount of such Outstanding Term Bonds required to be paid or called and redeemed in such Bond Year. OtIS WEST 260116199.3 41555 -8 MKII 1 I 0 0 In addition, under the Indenture, the Commission has covenanted with the Owners of all of the Bonds at any time Outstanding that it will not enter into any Commission Indebtedness (as defined below) or make any expenditure payable from taxes allocated to the Commission under the Redevelopment Law the payments of which, together with payments theretofore made or to be made with respect to other Commission Indebtedness (including, but not limited to the Bonds) previously entered into by the Commission, would exceed the then effective limit on the amount of taxes which can be allocated to the Commission pursuant to the Redevelopment Law and the Redevelopment Plan. In furtherance of such covenant, the Commission will cause to be prepared and filed with the Trustee annually, within 180 days after the close of each Fiscal Year, so long as any of the Bonds are Outstanding, complete audited financial statements with respect to such Fiscal Year showing the Gross Tax Increment (defined in the Indenture as, all monies allocated to the Commission pursuant to Section 33670 of the Redevelopment Law and the Redevelopment Plan, including amounts required to be deposited into the Low and Moderate Income Housing Fund, payments due under any tax sharing agreements (unless excluded from the Tax Increment Limitation) and payments received as subventions or payments in lieu of taxes) as of the end of such Fiscal Year. Based upon such audited financial statements, the Commission will prepare or cause to be prepared and filed with the Trustee and the Bond Insurer a pro forma statement demonstrating the future availability of sufficient tax increment revenues (within the existing limitation on the amount of Gross Tax Increment allocable and payable to the Commission under the Redevelopment Plan (the "Tax Increment Limitation ")) to pay when due (i) Commission Indebtedness, (ii) the amount payable in the then current Fiscal Year included within the Tax Increment Limitation which are required by Section 33334.2 of the Redevelopment Law to be deposited in the Commission's Low and Moderate Income Housing Fund (the "Set -Aside Requirement "), and (iii) all amounts included within the Tax Increment Limitation which are payable pursuant to the pass - through agreements until the final maturity of the Bonds (the "Pass- Through Payments "). The pro forma statement shall be prepared on or before March 1 of each year or as soon thereafter as practicable, commencing March 1, 2007, and shall set forth: (i) the difference between the Tax Increment Limitation less the total amount of Gross Tax Increment theretofore allocated to the Commission (the "Remaining Limitation Amount "); and (ii) the principal and interest remaining to be paid on Commission Indebtedness, plus the Set -Aside Requirement and the Pass- Through Payments (collectively, the "Total Debt Service "). To the extent the Remaining Limitation Amount is less than 105% of the Total Debt Service, the pro forma statement shall set forth the principal amount of the Bonds (to the nearest integral multiple of $5,000) that must be retired in order for the Remaining Limitation Amount to be at least equal to 105% of the Total Debt Service (the "Prepayment Amount "). At the time the Remaining Limitation Amount is determined to be less than 105% of the Total Debt Service, the Commission shall notify the Trustee of the Prepayment Amount and transfer such Prepayment Amount to the Trustee for deposit in the Turbo Redemption Account. Such monies shall be used to redeem, prepay or defease the Bonds. Notwithstanding the above, if prior to any such redemption, prepayment or defeasance, a subsequent annual pro forma statement indicates that future Gross Tax Increment will be 105% or more of the Total Debt Service in each year such debt service is payable, the Commission may authorize the Trustee to transfer such Pledged Tax Revenues from the Redemption Account to the Special Fund. As defined in the Indenture, the term "Commission Indebtedness" means any obligation the payment of which is to be made in whole or in part (but if in part, only to the extent of that part) out of taxes allocated to the Commission pursuant to Section 33670 of the Redevelopment Law. For purposes of determining compliance with the covenant contained in Section 4.03 hereof the following assumptions shall apply: (i) the principal and interest remaining to be paid on Commission Indebtedness shall include only such amounts as are scheduled to be paid by the Commission pursuant to the terms of the loan or other form of agreement under which such Commission Indebtedness was incurred. Commission Indebtedness without a stated maturity shall be deemed to mature on the final maturity date of the Bonds; (ii) amounts scheduled to be paid by the Commission shall include regularly scheduled principal and interest payments, including, amounts payable pursuant to any mandatory redemption provision; and (iii) Commission Indebtedness bearing interest OHS WEST:260116199.3 41555 -8 MKH 12 0 0 at a variable rate of interest shall be deemed to accrue interest at the lesser of the maximum rate specified or 12% per annum. Series 2006B Bonds Not a Debt of the City or the State The Series 2006B Bonds are limited obligations of the Commission and are payable, as to interest thereon and principal thereof, exclusively from the Pledged Tax Revenues, and the Commission is not obligated to pay them except from the Pledged Tax Revenues. All of the Series 2006B Bands are equally secured by a pledge of, and charge and lien upon, all of the Pledged Tax Revenues, and the Pledged Tax Revenues constitute a trust fund for the security and payment of the interest on and the principal of the Series 2006B Bonds. The Series 2006B Bonds are not a debt of the City of Rosemead, the State of California or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable therefor, nor in any event will the Series 2006B Bonds be payable out of any funds or properties other than those of the Commission. The Series 2006B Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction, and neither the members of the Commission nor any persons executing the Series 2006B Bonds are liable personally on the Series 2006B Bonds by reason of their issuance. BOND INSURANCE The following information has been furnished by Ambac Assurance Corporation ( "Ambac Assurance') for use in this Official Statement. Reference is made to Appendix F for a specimen of the Ambac Assurance Corporation Financial Guaranty Insurance Policy. The information relating to Annbac Assurance and the Financial Guaranty Insurance Policy contained above has been furnished by Ambac Assurance. No representation is made by the Commission or the Underwriter as to the accuracy, completeness or adequacy of such information or as to the absence of material adverse changes in the condition of Ambac Assurance subsequent to the date of this Official Statement. Payment Pursuant to Financial Guaranty Insurance Policy Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial Guaranty Insurance Policy ") relating to the Series 2006B Bonds effective as of the date of issuance of the Series 2006B Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, in New York, New York or any successor thereto (the "Insurance Trustee ") that portion of the principal of and interest on the Series 2006B Bonds which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes Due for Payment or within one business day following the date on which Ambac Assurance shall have received notice of Nonpayment from the Trustee. The insurance will extend for the term of the Series 2006B Bonds and, once issued, cannot be canceled by Ambac Assurance. The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. if the Series 2006B Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Series 2006B Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding Series 20068 Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the Series 2006B Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. OHS wEST:260116199.3 41555 -8 MKH 13 0 0 In the event the Trustee has notice that any payment of principal of or interest on a Series 2006B Bond which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available. The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in the Policy. Specifically, the Financial Guaranty Insurance Policy does not cover: a) payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity, b) payment of any redemption, prepayment or acceleration premium. C) nonpayment of principal or interest caused by the insolvency or negligence of any Trustee, Paying Agent or Bond Registrar, if any. If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of Series 2006B Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such Series 2006B Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of Holder entitlement to interest payments and an appropriate assignment of the Holder's right to payment to Ambac Assurance. Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Series 2006B Bond, appurtenant coupon, if any, or right to payment of principal or interest on such Series 2006B Bond and will be fully subrogated to the surrendering Holder's rights to payment. In the event that Ambac Assurance were to become insolvent, any claims arising under such Financial Guaranty Insurance Policy would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. Ambac Assurance Corporation Ambac Assurance Corporation ( "Ambac Assurance ") is a Wisconsin- domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $8,994,000,000 (unaudited) and statutory capital of approximately $5,649,000,000 (unaudited) as of December 31, 2005. Statutory capital consists of Ambac Assurance's policyholders' surplus and statutory contingency reserve. Standard & Poor's Credit Markets Services, a Division of The McGraw -Hill Companies, Moody's Investors Service and Fitch Ratings have each assigned a triple -A financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of a Series 2006B Bond by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such Bond and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its financial guaranty insurance policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the Obligor of the Series 2006B Bonds. OHS WEST:260116199.3 41555 -8 MKH 14 Ambac Assurance makes no representation regarding the Series 2006B Bonds or the advisability of investing in the Series 2006B Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by Ambac Assurance and presented under the heading `BOND INSURANCE." Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company "), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act "), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC "). These reports, proxy statements and other information can be read and copied at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1- 800 - SEC -0330 for further information on the public reference room. The SEC maintains an internet site at http: /hvww.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the "NYSE "), 20 Broad Street, New York, New York 10005. Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Antbac Assurance's administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York, 10004 and (212) 668 -0340. Incorporation of Certain Documents by Reference The following documents filed by the Company with the SEC (File No. 1- 10777) are incorporated by reference in this Official Statement: I. The Company's Annual Report on Form 10 -K for the fiscal year ended December 31, 2004 and filed on March 15, 2005; 2005; 2. The Company's Current Report on Form 8 -K dated April 5, 2005 and filed on April 3. The Company's Current Report on Form 8 -K dated and filed on April 20, 2005; 4. The Company's Current Report on Form 8 -K dated May 3, 2005 and filed on May 5, 2005; 5. The Company's Quarterly Report on Form 10 -Q for the fiscal quarterly period ended March 31, 2005 and filed on May 10, 2005; 6. The Company's Current Report on Form 8 -K dated and filed on July 20, 2005; 7. The Company's Current Report on Form 8 -K dated July 28, 2005 and filed on August 2, 2005; 8. The Company's Quarterly Report on Form 10 -Q for the fiscal quarterly period ended June 30, 2005 and filed on August 9, 2005; 9. The information furnished and deemed to be filed under Item 2.02 contained in the Company's Current Report on Form 8 -K dated and filed on October 19, 2005; 01 IS WEST:260116199.3 41555 -8 MKI I 15 9 0 10. The Company's Quarterly Report on Form 10 -Q for the fiscal quarterly period ended September 30, 2005 and filed on November 9, 2005; 11. The Company's Current Report on Form 8 -K dated November 29, 2005 and filed on December 5, 2005; 12. The Company's Current Report on Form 8 -K dated and filed on January 25, 2006; and 13. The Company's Current Report on Form 8 -K dated January 23, 2006 and filed on January 27, 2006. All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information." RISK FACTORS The following information should be considered by prospective investors in evaluating an investment in the Series 2006B Bonds. The following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in the Series 2006B Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. Real Estate and General Economic Risks The Commission's ability to make payments on the Series 2006B Bonds will depend upon the economic strength of the Project Area. The general economy of the Project Area will be subject to all the risks generally associated with real estate and real estate development. Projected redevelopment of real property within the Project Area by the Commission as well as private development in the Project Area, may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development within the Project Area could be adversely affected by future governmental policies, including governmental policies to restrict or control certain kinds of development. If development and redevelopment activities in the Project Area encounter significant obstacles of the kind described herein or other impediments, the economy of the Project Area could be adversely affected, causing reduction of the Pledged 'rax Revenues available to repay the Series 2006B Bonds. In addition, if there is a decline in the general economy of the region, the City or the Project Area, the owners of property within the Project Area may be less able or less willing to make timely payments of property taxes, causing a delay or stoppage of Pledged Tax Revenues received by the Commission from the Project Area. OHS WEST260116i99.3 41555 -8 MKH 16 0 0 Reduction in Assessed Value Pledged Tax Revenues allocated to the Commission are determined in part by the amount by which the assessed valuation of property in the Project Area exceeds the respective base year assessed valuation for such property, as well as by the current rate at which property in the Project Area is taxed. The Commission itself has no taxing power with respect to property, nor does it have the authority to affect the rate at which property is taxed. Assessed valuation of taxable property within the Project Area may be reduced by economic factors beyond the control of the Commission or by substantial damage, destruction or condemnation of such property. At least three types of events that are beyond the control of the Commission could occur and cause a reduction in Pledged Tax Revenues, thereby impairing the ability of the Commission to make payments of principal and interest and premium (if any) when due on the Series 2006B Bonds on a timely basis. First, a reduction of the assessed valuation of taxable property in the Project Area caused by economic factors or other factors beyond the Commission's control, such as relocation out of the Project Area by one or more major property owners; successful appeals by property owners for a reduction in a property's assessed valuation; a reduction of the general inflationary rate (see "Reduction in Inflationary Rate" below); a reduction in transfers of property or construction activity; or the destruction of property caused by natural or other disasters (see "Risk of Earthquake" below); or other events that permit reassessment of property at lower values or could result in a reduction of tax increment revenues. Second, substantial delinquencies in the payment of property taxes by the owners of taxable property within the Project Area could impair the timely receipt by the Commission of Pledged Tax Revenues. Third, the State electorate or legislature could adopt further limitations with the effect of reducing tax increment revenues. A limitation already exists under Article XIIIA of the California Constitution, which was adopted pursuant to the initiative process. The State electorate could adopt additional similar limitations with the effect of reducing Pledged Tax Revenues. For a further description of Article XIIIA, see "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Property Tax Rate and Appropriation Limitations" herein. To estimate the total revenues available to pay debt service on the Series 2006B Bonds, the Commission has made certain assumptions with regard to the availability of tax increment revenues. The Commission believes these assumptions to be reasonable, but to the extent tax increment revenues are less than anticipated, the total revenues available to pay debt service on the Series 2006B Bonds or to refinance the Series 2006B Bonds may be less than those projected herein. Unless mentioned herein, no independent third party has reviewed the estimates or assumptions made by the Commission. See "TAX INCREMENT REVENUES — Debt Service and Estimated Coverage" herein. Assessment Appeals Property taxable values may be reduced as a result of a successful appeal of the taxable value determined by the County Assessor. An appeal may result in a reduction to the County Assessor's original taxable value and a tax refund to the applicant property owner. At the time of reassessment, after a change of ownership or completion of new construction, the assessee may appeal the base assessment value of the property. Under an appeal of a base assessment value, the assessee appeals the actual underlying market value of the sales transaction or the recently completed improvement. A successful appeal of the base assessment value of a parcel has significant future revenue impacts, because a reduced base year assessment will reduce the compounded future value of the property prospectively. Except for the 2% inflation factor, OHS WEST: 260116199.3 41555 -8 MKH 17 0 0 the base year value of the property cannot be increased until a change in ownership occurs or additional improvements are added. [DISCUSS: There is currently _ appeal currently pending on property within the Project Area. However, the Commission cannot predict whether such appeal or any future appeals will be successful, or whether the number of appeals may increase in the Project Area. Future reductions in taxable values in the Project Area resulting from successful appeals by property owners will reduce the amount of Pledged Tax Revenues available to pay the principal of and interest on the Series 2006B Bonds. See "TAX INCREMENT REVENUES — Assessment Appeals" herein.] Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the California Constitution provides that the full cash value basis of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. This measure is computed on a calendar year basis. The California State Department of Finance has indicated that such inflationary factor is 1.867% for Fiscal Year 2004 -05. For Fiscal Year 1996 -97, the inflationary factor as determined under Article XIIIA resulted in an increase in assessed valuation of 1.11 %. For Fiscal Year 1995 -96, the inflationary factor was L 19 %. Projected Pledged Tax Revenues to be received by the Commission are based, among other things, upon 2% inflationary increases. Should the assessed valuation of taxable property in the Project Area not increase at the projected annual rate of 2 %, the Commission's receipt of future Pledged Tax Revenues may be adversely affected. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Property Tax Rate and Appropriation Limitations" herein. Real Estate and General Economic Risks The Coin inission's ability to make payments on the Series 2006B Bonds will depend upon the economic strength of the Project Area. The general economy of the Project Area will be subject to all the risks generally associated with real estate and real estate development. Projected redevelopment of real property within the Project Area by the Commission as well as private development in the Project Area, may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development within the Project Area could be adversely affected by future governmental policies, including governmental policies to restrict or control certain kinds of development. If development and redevelopment activities in the Project Area encounter significant obstacles of the kind described herein or other impediments, the economy of the Project Area could be adversely affected, causing reduction of the Pledged Tax Revenues available to repay the Series 2006B Bonds. In addition, if there is a decline in the general economy of the region, the City or the Project Area, the owners of property within the Project Area may be less able or less willing to make timely payments of property taxes, causing a delay or stoppage of Pledged Tax Revenues received by the Commission from the Project Area. State Budget Deficit and Its Impact on Pledged Tax Revenues Since Fiscal Year 1993 -94, the State Legislature has authorized the reallocation of property tax revenues from redevelopment agencies multiple times in an effort to assist the State in balancing its General Fund budget. Each time the State reallocates property tax revenues from redevelopment agencies, it reduces the amount of revenues that can use in the payment of debt service, such as the Commission's payment of debt service on the Series 2006B Bonds. Further, Proposition IA (see "Proposition IA" below), which was approved by the California electorate in November 2004 and which placed restrictions in the State Constitution on the ability of the State Legislature to reallocate property tax revenues from local agencies, OHS WEs x260116199.3 41555 -8 MKFI 18 0 0 does not restrict or prevent the State Legislature from reallocating property tax revenues from redevelopment agencies, including the Commission. As such, no assurances can be made that the State will not make further reallocations in property tax revenues that would reduce the amount of property tax revenues to which the Commission is entitled. The following is a list of recent actions taken by the State Legislature which reallocated property tax revenues from redevelopment agencies: In connection with its approval of its budget for the 1993 -94 fiscal year, the State Legislature enacted Senate Bill 1135 which, among other things, reallocated approximately $65 million from redevelopment agencies to school districts by shifting approximately 5.675% of each agency's tax increment, net of amounts due to other taxing agencies, to school districts for the then current and next following fiscal years. The amount required to be transferred by a redevelopment agency to the county auditor for deposit in the Educational Revenue Augmentation Fund ("ERAF") under such legislation was apportioned among all of such county's redevelopment areas on a collective basis, and was not allocated separately to individual project areas. The amount of tax revenues which the Commission was required to pay under the legislation during the two -year period was approximately $175,000 for each of the 1993 -94 and 1994 -95 fiscal years. In connection with its approval of a budget for the 2002 -03 fiscal year, the State Legislature enacted California State Assembly Bill ( "AB ") 1768, effective September 30, 2002, which included a one -time ERAF shift of $75 million from redevelopment agencies to school districts during the 2002 -03 fiscal year in order to meet State budget deficits. Each agency's proportionate share of such amount was required to be transferred to the county auditor for deposit in the ERAF prior to May 10, 2003. The Commission's ERAF obligation for Fiscal Year 2002 -03 was $122,487, which was paid to the County as required prior to such date. In connection with its approval of a budget for the 2003 -04 fiscal year, the State Legislature enacted Senate Bill 1045, effective September 1, 2003, which again introduced a one -time ERAF shift and reallocated $135 million from redevelopment agencies to school districts during the 2003 -04 fiscal year to meet ongoing State budget deficits. Each agency's proportionate share of such amount was required to be transferred to the county auditor for deposit in the ERAF prior to May 10, 2004. The Commission's ERAF obligation for the 2003 -04 fiscal year was $207,391. Subsequent to Senate Bill 1045, the State Legislature adopted SB 1096 which established an ERAF shift of $250,000,000 for the 2004 -05 and 2005 -06 fiscal years to meet the ongoing State budget deficits. The Commission's ERAF obligation for the 2004 -05 fiscal year was $342,811 and for the 2005 -06 fiscal year was [$342,811 (unaudited).] No other future ERAF obligations have been drafted or adopted, but it is possible that the State Legislature could shift property tax allocations or require additional redevelopment payments in future years. Since the ERAF shifts are subordinate to new and existing bond obligations, the ERAF payments are not included in the projections of tax increment revenues herein. The Commission cannot predict whether State Legislature will enact any other legislation requiring additional or increased future shifts in tax increment revenues to the State and /or to schools, whether through an arrangement similar to ERAF or by other arrangements, and, if so, the effect on future Pledged Tax Revenues. Given the level of the State of California's deficit problems, tax increment available for payment of Series 2006B Bonds could be substantially reduced in the future. Information about the State budget and State spending is available at various State - maintained websites. Text of the budget may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading, "California Budget" An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition,. various State of California official statements for its various debt obligations, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. Each of such websites are provided for general informational purposes only and the material on such sites is in no way incorporated into this Official Statement. Of IS WEST:260116199.3 41555 -8 MKH 19 0 Proposition IA is Proposition IA, a State ballot proposition, was approved on the November 2, 2004 ballot. Proposition IA prohibits the State from reducing local governments' property tax proceeds, and protects revenues collected by local governments (cities, counties, and special districts) from being transferred to the State government for statewide use. The provisions may be suspended if the Governor declares a fiscal necessity and two - thirds of the Legislature approve the suspension. Suspended funds must be repaid within three years. Proposition I was first effective in 2006. Limited Obligations The Series 2006B Bonds are limited obligations of the Commission and are payable, as to interest thereon and principal thereof, exclusively from the Pledged Tax Revenues, and the Commission is not obligated to pay them except from the Pledged Tax Revenues. All of the Series 2006B Bonds are equally secured by a pledge of, and charge and lien upon, all of the Pledged Tax Revenues, and the Pledged Tax Revenues constitute a trust fund for the security and payment of the interest on and the principal of the Series 2006B Bonds. The Series 2006B Bonds are not a debt of the City of Rosemead, the State of California or any of its political subdivisions, and neither the City, the State nor any of its political subdivisions is liable therefor, nor in any event will the Series 2006B Bonds be payable out of any funds or properties other than those of the Commission. The Series 2006B Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction, and neither the members of the Commission nor any persons executing the Series 2006B Bonds are liable personally on the Series 2006B Bonds by reason of their issuance. Hazardous Substances An environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Project Area. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required 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 property within the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition. Certain Bankruptcy Risks The enforceability of the rights and remedies of the owners of the Series 2006B Bonds and the obligations of the Commission may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit the specific enforcement under state law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the Series 2006B Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation, or modification of their rights. OHS WEST:260116199.3 41555 -8 MKH 20 0 Secondary Market 0 There can be no guarantee that there will be a secondary market for the Series 2006B Bonds, or, if a secondary market exists, that such Series 2006B Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price. Loss of Tax Exemption As discussed under the caption "TAX MATTERS" herein, interest on the Series 2006B Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date such Series 2006B Bonds were issued as a result of future acts or omissions of the Commission in violation of its covenants contained in the Indenture. Should such an event of taxability occur, the Series 2006B Bonds are not subject to special redemption or any increase in interest rate and will remain outstanding until maturity. Risk of Earthquake The City, like most regions in California, is an area of significant seismic activity and, therefor, is subject to potentially destructive earthquakes. The Los Angeles basin has experienced significant earthquakes in the past. Most recently in the vicinity of the Project Area, on October 1, 1987, a 5.9 magnitude earthquake occurred on a previously unknown, concealed thrust fault approximately 11 miles east of downtown Los Angeles, California, approximately 6 miles southeast of Pasadena and approximately I mile southeast of the City. The earthquake resulted in eight fatalities and approximately $358 million in property damage. Severe damage was confined mainly to communities east of Los Angeles and near the epicenter in the City of Whittier. Significant structural damage to property within the Project Area was reported and repairs were completed within one year of the earthquake. No severe structural damage to high -rise structures in downtown Los Angeles was reported. If an earthquake were to substantially damage or destroy taxable property within the Project Area, the assessed valuation of such property would be reduced. Such a reduction of assessed valuations could result in a reduction of the Pledged Tax Revenues that secure the Series 2006B Bonds, which in turn could impair the ability of the Commission to make payments of principal of and /or interest on the Series 2006B Bonds when due. Teeter Plan Certain counties in the State of California operate under a statutory program entitled Alternative Method of Distribution of Tax Levies and Collections and of Tax Sales Proceeds (the "Teeter Plan "). Under the Teeter Plan, local taxing entities receive 100% of their tax levies, net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County of Los Angeles has not adopted the Teeter Plan, and consequently the Teeter Plan is not available to local taxing entities within the County, such as the Commission. The Commission's receipt of property taxes is therefore subject to delinquencies in the Project Area. Concentration of Land Ownership [Based upon Fiscal Year 2005 -06 assessed value data as of June 30, 2005, 21.56% of the total net secured assessed property value in the Project Area is owned by the ten largest taxpayers.] In addition, a substantial portion of Pledged Tax Revenues are derived from unitary property taxes. This is primarily OHS Wes'' 1:260116199.3 41555 -8 MKH 21 0 • because the headquarters of Southern California Edison are located within the Project Area. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Unitary Property" herein. Reductions in Pledged Tax Revenues received by the Commission may result from declining tax rates, property tax administrative costs and refunds resulting from successful appeals of assessed values. The inability or unwillingness of such taxpayers to pay property taxes on their property in the Project Area might have an adverse effect on the Commission's ability to repay the Series 2006B Bonds. In addition, as a result of the high concentration of land ownership in the Project Area, decreases in the assessed value of one or more parcels of land may have a significant impact on the Pledged Tax Revenues. See "THE REDEVELOPMENT PROJECT AREA NO. 1 — Ten Largest Secured Taxpayers" herein. TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT Introduction The Redevelopment Law and the California Constitution provide a method for financing and refinancing redevelopment projects based upon an allocation of taxes collected within a project area. First, the assessed valuation of the taxable property in a project area last equalized prior to adoption of the redevelopment plan is established and becomes the base roll. Thereafter, except for any period during which the assessed valuation drops below the base year level, the taxing agencies on behalf of which taxes are levied on property within the project area will receive the taxes produced by the levy of the then current tax rats upon the base roll. Except as discussed in the following paragraph, taxes collected upon any increase in the assessed valuation of the taxable property in a project area over the levy upon the base roll may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing the redevelopment project. Redevelopment agencies themselves have no authority to levy taxes on property and must look specifically to the allocation of taxes produced as above indicated. The State Legislature placed on the ballot for the November 1988, general election Proposition No. 87 (Assembly Constitutional Amendment No. 56) pertaining to allocation of tax increment revenues. This measure, which was approved by the electorate, authorized the State Legislature to cause tax increment revenues attributable to certain increases in tax rates occurring after January 1, 1989, to be allocated to the entities on whose behalf such increased tax rates are levied rather than to the Commission, as would have been the case under prior law. The measure applies to tax rates levied to pay principal of and interest on general obligation bonds approved by the voters on or after January 1, 1989. AB 89 (Statutes of 1989, Chapter 250), which implements this Constitutional Amendment, became effective on January 1, 1990. The Commission's projection of tax revenues to be allocated to the Commission does not assume any increase in the tax rate applicable to properties within the Project Area. Property Tax Rate and Appropriation Limitations Arlicle XIIIA of State Constitution On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the California Constitution ( "Article XIIIA "). Article XIIIA limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and (as a result of an amendment to Article XIIIA approved by California voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978, by two- thirds of the voters voting on such indebtedness. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975 -76 tax bill under `full cash value,' or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has OHS WEST 260116199.3 41555 -8 MKH 22 o • occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in various other minor or technical ways. The Commission has no power to levy and collect taxes. Any further reduction in the tax rate or the implementation of any constitutional or legislative property tax de- emphasis will reduce tax increment revenues, and, accordingly, would have an adverse impact on the ability of the Commission to pay debt service on the Series 2OO6B Bonds. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter - approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1978. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. Article XIIIB of State Constitution An initiative to amend the California constitution entitled "Limitation of Government Appropriations," was approved on September 6, 1979, thereby adding Article XIIIB.to the California Constitution ( "Article XIIIB "). Under Article XIIIB, as amended, state and local governmental entities have an annual "appropriations limit" and are not permitted to spend certain moneys which are called "appropriations subject to limitation" (consisting of tax revenues, state subventions and certain other funds) in an amount higherthan the "appropriations limit". The State Legislature, by Statutes of 1980, Chapter 1342 enacted a provision of the Redevelopment Law (Health and Safety Code Section 33678) providing that the allocation and payment of taxes to an agency for the purpose of paying principal of or interest on loans, advances or indebtedness incurred for redevelopment activity as defined in the statute will not be deemed the receipt by the Commission of proceeds of taxes levied by or on behalf of an agency within the meaning or for the purpose of Article XIIIB of the State Constitution, nor will such portion of taxes be deemed receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public body within the meaning or for the purposes of Article XIIIB of the State Constitution or any statutory provision enacted in implementation of Article XIIIB. Unitary Property AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization ( "Unitary Property "), commencing with the 1988 -89 fiscal year, will be allocated as follows: (1) each jurisdiction, including the Project Area, will receive up to 102% of its prior year State - assessed revenue; and (2) if county -wide revenues generated from Unitary Property are less than the previous year's revenues or greater than 102% of the previous year's revenues, each jurisdiction will OHS WesT260116199.3 41555 -8 MKH 23 ® • share the burden of the shortfall or excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas. To administer the allocation of unitary tax revenues to redevelopment agencies, the County no longer includes the taxable value of utilities as part of the reported taxable values of the project area, therefore, the base year of project areas have been reduced by the amount of utility value that existed originally in the base year. The provisions of AB 454 do not constitute an elimination of the assessment of any State - assessed properties nor a revision of the method of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county. Unitary tax revenues make up a substantial portion of the tax increment revenues received by the Commission. This is primarily because the headquarters of Southern California Edison are located within the Project Area. However, the revenues allocated to the Commission come from several sources and are allocated based on the statutory method described above and do not reflect the current unitary assessed value within the Project Area. Within the Project Area, the Auditor Controller allocated $1,173,352 in unitary tax revenue to the Commission for 2004 -05. This amount is reasonably consistent with the unitary revenue allocations made to the Commission in prior years. However, the Commission's unitary revenues have fallen by approximately 23% since 1992 -1993. According to the California State Board of Equalization, there have been two primary causes of the decrease unitary assessed valuation in the County of Los Angeles. The first was the privatization of power generation facilities in the late' 1990s. When a power generation facility was sold to a private entity it became locally assessed and was attributed to the TRA in which it is located. Assessment of these facilities moved back to the State in 2003, but the value is associated with specific TRAs according to California Revenue and Taxation Code Section 100.9. The second primary cause of a decrease in unitary valuations within the County was due to a decrease in the assessed valuation of telecommunication companies during the period 2002 through 2005. For purposes of projection, it is assumed herein that unitary tax revenue will continue to be allocated in similar amounts over the life of the Project Area, and that unitary tax will remain constant through the life of the project. The portion of Pledged Tax Revenues allocable to the Commission with respect to the Project Area and attributable to unitary property is projected to constant at $1,173,352 for Fiscal Year 2005 -06. The Commission cannot predict the effect of any future litigation or settlement agreements concerning these matters on the amount of Pledged Tax Revenues received or to be received by the Commission. Property Tax Administrative Costs In 1990, SB 2557, and in 1992, SB 1559, authorized county auditors to determine property tax administrative costs proportionately attributable to local jurisdictions and to charge agencies for such costs. For Fiscal Year 2004 -05, the amount of County collection charges attributed to the Project Area is $69,875.11. For purposes of projection, it is assumed herein that such charge will be 1.52% percent of the gross revenues of the Project Area. Contained in the estimate of this charge is a fee levied by the County since before the passage of the legislative administrative charge. The County continues to apply this offset to revenue as a designated part of the charge mandated by the legislation. The payments made as property tax administrative charges are considered tax increment for purposes of computation of the housing set -aside or the determination of compliance with tax increment limits in the numerical information set forth herein. OHS WES 1260116199.3 41555.8 MKH 24 • • Property Tax Collection Procedures For assessment and collection purposes, property is classified either as "secured" or "unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing state - assessed public utilities property and property the taxes on which are a lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll." A tax levied on unsecured property does not become a lien against the unsecured property but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has a priority over all other liens arising pursuant to California law on the secured property, regardless of the time of creation of the other liens. Property taxes on the secured roll are due in two installments, on July I and February I of each Fiscal Year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is sold to the State on or about June 30 of the Fiscal Year. Such property may thereafter be redeemed by payment of the delinquent taxes and delinquent penalty, plus a redemption penalty of 1 -1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County Tax Collector. Current law provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on the following August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1 -1/2% per month begins to accrue on the first day of the third month following the delinquency date. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recording in the County Recorder's office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Current tax payment practices by the County provide for payment to the Commission of approximately 45% of the secured taxes by the mid - January of each year, an additional 30% of the secured taxes by mid -April of each year, and the balance of the secured tax collections (excluding delinquency collections which are paid to the Commission during July and August each year) by mid August. Approximately 80% of the unsecured taxes are paid to the Commission by the end of November of each year, and substantially all of the unsecured taxes are paid to the Commission in August of each year. Plan Limitations Not including the one year extension permitted by SB 1045 to mitigate the impacts of ERAF payments, Redevelopment Law limits the period in which redevelopment activities can be undertaken for plans adopted prior to January 1, 1994, to 40 years from the date of adoption or January 1, 2009, whichever is later, and limits the period within which a redevelopment project area may receive tax increment to 50 years following the adoption. If redevelopment plans with shorter time frames were adopted, legislative bodies were allowed to extend their limits to conform to these requirements through the adoption of an ordinance prior to December 31, 1999. For projects adopted subsequent to 1994, redevelopment activities can be undertaken for 30 years and tax increment received for 45 years. A redevelopment plan adopted prior to January 1, 1994 is required to include a limitation on tax increment dollars that may be allocated to the redevelopment agency; a time limit on incurring indebtedness to be repaid with tax increment; and a limit on the amount of bonded indebtedness to be repaid OFIS WesT:260116199.3 41555 -8 MKH 25 o • with tax increment that can be outstanding at one time. These limits can be extended only by an amendment of the redevelopment plan. The legislative body, by adoption of an ordinance, can eliminate the time limit on the establishment of loans, advances, and indebtedness required prior to January 1, 2002. Pursuant to California State Senate Bill 1045, which became effective September I, 2003, redevelopment agencies may amend the redevelopment plan to extend by one year the time limit on the effectiveness of the plan and the time limit to receive property taxes and repay indebtedness. The City Council has adopted a series of ordinances conforming the time limits of the Redevelopment Plan to the maximum allowed under law. Additionally, the Commission eliminated the timeframe to incur debt under state legislation SB 211. The original Redevelopment Plan has been amended four times since its adoption. The Redevelopment Plan was first amended on December 9, 1986, by City Council Ordinance 592, to increase the number of dollars allocated to the Commission and re- establish eminent domain. The Redevelopment Plan was further amended on December 20, 1994 by City Council Ordinance 752 to bring the Redevelopment Plan into conformity with AB 1290. The Redevelopment Plan was amended a third time by City Council Ordinance 822 on June 22, 2002, to extend the duration of the Redevelopment Plan's effectiveness. In connection with the adoption of Senate Bill 1045, redevelopment agencies were permitted to extend the effective date of their redevelopment plans and the date to receive tax increment revenues by one year. The Redevelopment Plan was amended on July 27, 2004 by City Council Ordinance 832 to extend the life of the project by one year pursuant to Senate Bill 1045. The Commission may not receive and may not repay indebtedness with the proceeds from property taxes received pursuant to Section 33670 of the Redevelopment Law and the Plan beyond the dates indicated in Table I below, except to repay debt to be paid from the Housing Fund established pursuant to Section 33334.3 of the Redevelopment Law and the Plan, or debt established in order to fulfill the Commission's obligations under Section 33413 of the Redevelopment Law and the Plan. Pursuant to California State Senate Bill 1045, which became effective September 1, 2003, redevelopment agencies may amend the redevelopment plan to extend by one year the time limit on the effectiveness of the plan and the time limit to receive property taxes and repay indebtedness. The Redevelopment Plan was amended on July 27, 2004 by City Council Ordinance 832 to extend the life of the project by one year pursuant to Senate Bill 1045. The City Council has adopted a series of ordinances conforming the time limits of the Redevelopment Plan to the maximum allowed under law as described herein. Additionally, the Commission eliminated the timeframe to incur debt under state legislation Senate Bill 211. Table 1 Rosemead Community Development Commission Redevelopment Project Area No. 1 Redevelopment Plan Limits Last Date to Limit on total Tax Last Date to Incur Repay Debt with Tax Increment Increment Bond Plan Effectiveness New Debt Tax Increment in Limit (') Debt 6/27/2013 No Limit 6/27/2023 $249,245,938 No Limit to Such final date does not apply to repayment of the Series 1993 Bonds. (2) The tax increment limit is net of any tax increment which is paid to an affected taxing agency pursuant to the Redevelopment Law. Source: Rosemead Community Development Commission. [According to County records, the Commission has received approximately $78,579,553 in total cumulative tax increment from the Project Area as of January 1, 2006. Based on the projected tax increment OHS WesT260116199.3 41555 -8 MKH 26 0 0 revenues to be received by the Commission, the limit on tax increment funds that the Commission may receive for the Project Area will not be exceeded within the term of the Bonds.] Low and Moderate Income Housing Fund Chapter 1337 Statutes of 1976, added Section 33334.2 and 33334.3 to the Redevelopment Law requiring redevelopment agencies to set aside 20 percent of all tax increment derived from redevelopment project areas adopted after December 31, 1976, into a Low and Moderate Income Housing Fund. This low and moderate income housing requirement can be reduced or eliminated if a redevelopment agency finds that: (1) no need exists in the community to improve, increase or preserve the supply of low and moderate income housing, including housing for very low income households; (2) that some stated percentage less than 20 percent of the tax increment is sufficient to meet the housing needs of the community, including its share of the regional housing needs of persons and families of low or moderate income and very low income households; or (3) that other substantial efforts, including the obligation of funds from state, local and federal sources for low and moderate income housing of equivalent impact are being provided for in the community. Chapter 1135, Statutes of 1985 amended Section 33334.3 and added Sections 33334.6 and 33334.7 to extend the requirement for redevelopment agencies to set aside into a Low and Moderate Income Housing Fund, 20 percent of tax increment to redevelopment project areas adopted prior to January 1, 1977, beginning with Fiscal Year 1985 -86 revenues. Pursuant to Chapter 1135, an agency may make the same findings described above to reduce or eliminate the low and moderate income housing requirement. However, Chapter 997, Statutes of 1989, added Section 33334.14 to the Redevelopment Law which provides that a redevelopment agency with merged project areas may not make the findings described above as to avoid or reduce its obligations to deposit taxes from merged project areas in the Low and Moderate Income Housing Fund. No such findings as described in the two paragraphs above have been made by the Commission. However, on October 9, 1991 the Commission prepaid its housing obligation in the amount of $6,813,849.62. As a result, the Commission's housing obligation has been reduced by $469,142 per year through the 2021 -22 fiscal year. This annual reduction was based on a present value factor determined by the yield on the Commission's outstanding bonds. In addition, the Commission has made findings that, for the years ended June 30, 1986 through 1991, it was allowed to defer funding of the set - aside. The set -aside amounts incurred during the fiscal years ended June 30, 1994, 1995 and 1996 were also deferred until the fiscal year ending June 30, 2023, as provided by the Commission's adoption of the housing deficit repayment plan. As of June 30, 2005, the accumulated set - aside amount not yet funded was approximately $4,947,000. As required by law, the Commission devised a plan to fund the accumulating amount. To help fund the completion of the Senior Citizen Housing project construction, the Capital Projects Fund transferred an additional $849,863 to the Low - Moderate Income Housing Set -Aside Fund during the Fiscal year ended June 30, 2002, over and above the 20% requirement of $299,993, and an additional $1,279,548 to the Low - Moderate income Housing Set -Aside Fund during the fiscal year ended June 30, 2003, over and above the 20% requirement of $290,868. These additional amounts, which total $2,129,411, are considered an advance on future set -aside requirements and will be deducted from future transfers for the set - aside over future years. During the fiscal years ended June 30, 2005 and 2004, the 20% requirements of $448,578 and $394,533 were funded using the cumulative advance. As of June 30, 2005, the remaining advance was $1,286,301. 01 IS WEST 260116199.3 41555 -8 MICH 27 0 0 Assembly Bill 1290 Assembly Bill 1290 (being Chapter 942, Statutes of 1993) ( "AB 1290 ") became law on January I, 1994. AB 1290 contains several significant changes in the Redevelopment Law, including time limitations for incurring and repaying loans, advances and indebtedness repayable from tax increment revenues. The Commission is of the opinion that the provisions of AB 1290, including these new time limitations as they apply to the Project Area, will not have an adverse impact on the payment of debt service on the Series 2006B Bonds on a timely basis, and the Commission does not expect that the provisions of AB 1290 will have an adverse impact on the undertaking by the Commission of future redevelopment activities within the Project Area. Pass- Through Arrangements The County of Los Angeles (the "County") and the Commission entered into a certain agreement for reimbursement of tax increment funds with the County, the Consolidated Fire Protection District, and the County Public Library District (the "County Agreement "). The elements of the County Agreement include the following: (i) the Commission is to provide for a pass - through of a portion of its tax increment revenues received after July 1, 1988 for the Consolidated Fire Protection District; and (ii) the Commission is to allow an additional pass - through of tax increment revenues for the Los Angles County Public Library District at such time that the Commission or the City constructs a replacement facility. The reimbursement of the Consolidated Fire Protection District is approximately 17% of Gross Tax Revenues (as defined in the County Agreement) and the reimbursement to the Los Angeles County Public Library District is 4% of Gross Tax Revenues. The 4% of Gross Tax Revenues obligation is contingent upon the Commission's construction of such a replacement facility. However, neither the Commission nor the City has any obligation to construct a replacement facility. See " " for projections of the pass - through payments to be made to other taxing entities. Such pass - through payments will not be available to the Commission to pay debt service on the Series 2006B Bonds. When the Commission extended the time frame to incur debt pursuant to SB 211, it initiated statutory pass throughs to all affected tax agencies that do not currently have tax sharing agreements. The general levy share of all agencies that do not currently possess tax - sharing agreements is 83% of every $1.00 of property tax generated. Pursuant to SB 211, these pass throughs may be subordinated to bond debt if the Commission makes the finding that the issuance of the debt will not impact the Commission's ability to make the statutory payments. The Commission has made the appropriate findings, and therefore it is assumed herein that these payments are subordinated to bond indebtedness accordingly. Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, the so- called "Right to Vote on Taxes Act." Proposition 218 added Articles X111C and X111D to the State Constitution, which contain a number of provisions affecting the ability of the local governments to levy and collect both existing and future taxes, assessments, fees and charges, and extended the initiative power giving the voters the power to reduce or repeal local taxes, assessments, fees and charges. Because the Series 2006B Bonds are not payable from or secured by any such sources of revenue, the Commission believes that Proposition 218 does not affect the issuance or sale of, or the security for, the Series 2006B Bonds. 01 IS WF.sr260116199.3 41555 -8 MKF1 28 • • Future Initiatives Articles XIIIA, XI11B, X111C and XI11D were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting Commission revenues or the Commission's ability to expend revenues. THE COMMISSION Organization The Commission, formerly known as the Rosemead Redevelopment Agency, was activated in 1972 by City Ordinance. Since 1975, the City Council Members have acted as the Members of the Commission. The Commission is a separate public body which plans and implements projects in accordance with the requirements of the Redevelopment Law. The Commission has two active project areas, Redevelopment Project Area No. I and Redevelopment Project No. 2. The Series 2006B Bonds are being issued to refinance redevelopment activity for Redevelopment Project Area No. 1. Tax increment generated in Redevelopment Project Area No. 2 is NOT available to pay debt service on the Series 2006B Bonds. All powers of the Commission are legally vested in its five members, who are elected to the City Council for four year terms. The Commission exercises governmental functions in carrying out projects and has sufficiently broad authority to acquire, develop, administer and sell or lease property. The Mayor of the City, Gary A. Taylor, also serves as Chairperson of the Commission. The Commission's Vice - Chairperson, John H. Nunez, is Mayor Pro -Tem of the City. Other members of the City Council and Commission Board are shown below. Andrew Lazzaretto, the City Manager and Executive Director of the Commission was appointed City Manager on March 1, 2006. Mr. Wagner was hired in 1983, and has served as Assistant City Manager since that time. Commission Member Gary A. Taylor John H. Nunez Margaret Clark Jay T. Imperial John Tran Powers Term Expires 2007 2009 2009 2007 2009 All powers of the Commission are vested in its five members. The Commission exercises governmental functions in carrying out projects, and has sufficiently broad authority to acquire, develop, administer and sell or lease property, including the right of eminent domain and the right to issue bonds, notes and other evidences of indebtedness and to expand their proceeds. The Commission can clear buildings and other improvements and develop as a building site any real property owned or acquired, and in connection with such development, cause streets, highways and sidewalks to be constructed or reconstructed and public utilities to be installed. Redevelopment in the State may be carried out pursuant to the Redevelopment Law. Section 33020 of the Redevelopment Law defines redevelopment as the planning, development, replanning, redesign, clearance, reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and the provision of such residential, commercial, industrial, public or other structures or spaces as may be 01 IS WISs'r:260116199.3 41555 -8 MKH 29 s • appropriate or necessary in the interest of the general welfare, including recreational and other facilities incidental or appurtenant to them. The Commission may, out of the funds available to it for such purposes, pay for all or part of the value of land and the cost of buildings, facilities, structures or other improvements to be publicly owned, to the extent that such improvements are of benefit to the relevant project area and no other reasonable means of financing is available. The Commission must sell or lease remaining property within a project for redevelopment by others in strict conformity with the redevelopment plan, and may specify a period within which such redevelopment must begin and be completed. THE REDEVELOPMENT PROJECT AREA NO. 1 Redevelopment Project Area No. 1 evolved from a City Council study commenced in 1967. The study determined areas in the City which were blighted within the meaning of the California Community Redevelopment Law, and were therefore qualified for redevelopment. The Redevelopment Plan for the Redevelopment Project Area No. 1 (the "Project Area ") was adopted by Ordinance No. 340 of the City Council on June 27, 1972. Project Area Description The Project Area encompasses an area of 511 acres. The Project Area is roughly triangular with Garvey Avenue, San Gabriel Boulevard and Walnut Grove Avenue being the major thoroughfares traversing the area. The Project Area is within a few miles of the City's Civic Center and is located between the San Bernardino and Pomona Freeways to the north and south, respectively. The area contains a complete cross section of the City's existing land uses. At the time of the adoption of the Redevelopment Plan, major sections were composed of deteriorating commercial strips along Garvey Avenue and San Gabriel Boulevard, industrial uses in the east Garvey area, large vacant areas surrounding the Southern California Edison headquarters, several schoolyards, segments of the Alhambra Wash, Southern California Edison rights -of -way, and residential areas with some deterioration present. In accordance with the Redevelopment Plan, the land uses by acreage and assessed valuation in the Project Area are set forth in Table No. 2 below. It should be noted with respect to Table No. 2 below that the figures below exclude the value of exempt parcels such as those owned by the City, Commission, State or other governmental agencies that do not contribute to Commission revenues. OHS WEST 260116199.3 41555 -8 MKH 30 0 0 Table 2 Rosemead Community Development Commission Present Land Uses Within Redevelopment Project Area No. 1 (I) Values assigned to other parcels and use categories. Source: California Municipal Statistics, Inc. Assessed Values Taxable values are prepared and reported by the County Auditor - Controller each fiscal year and represent the aggregation of all locally assessed properties within the Project Area. The assessments are assigned Tax Rate Areas (TRA) that are coterminous to the boundaries of the project area in the first year that an agency is eligible to receive tax increment revenue. The Project Area consists of 12 individual TRAs. Historic taxable values since 2000 -01 were utilized to determine the historical growth rate of property values within the Project Area. Property values within the Project Area have steadily grown at a compounded rate of 10.5% per year between the years 2001 -02 and 2005 -06. Total assessed property values did not decline for any fiscal period between 2000 -01 and 2005 -06. Also, at no time during this period did property tax values grow at a rate of less than 2 %. The historic taxable values for the Project Area are shown in Table 4 below. The historical average reduction in value for allowed appeals is 25.31 percent. There is one appeal currently pending on property within the Project Area. These owners have appealed valuations totaling $789,000. Based on the above historical averages, the Commission expects a 42.4 percent chance that the outstanding appeal will be successful, with an average reduction in value of 25.31 percent. This would result in a loss of assessed value of $84,718. The projected assessed value for 2005 -06 has been adjusted for this estimated loss of value. A number of the appeals in the Project Area that were allowed resulted in a reduction in value were based on Section 51 of the Revenue and Taxation Code. This section requires that for each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Significant reductions took place in some counties during the mid- 1990's due to declining real estate values. Reductions made under this code section may be initiated by the Assessor or requested by the property owner. After a roll reduction is granted under this section, the property is reviewed on an annual basis to determine it's full cash value and the valuation is adjusted accordingly, which may result in either further reductions in or increases in assessed value. Such increases shall be in accordance with the actual full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other 01 IS WEST: 260116199.3 41555 -8 MKH 31 Percent of Uses Parcels Assessed Value Assessed Value Residential 775 $165,381,310 44.61% Commercial 157 107,539,554 29.01 Industrial 66 35,576,839 9.60 Vacant Land 54 17,465,444 4.71 Government owned 15 1,315,041 0.35 Institutional 3 2,358,583 0.64 Miscellaneous 32 1,167,991 0.32 Public Utility 18,218,894 4.91 Unsecured (t> 21,723,756 5.86 Total 1102 $386,379,908 55.85% (I) Values assigned to other parcels and use categories. Source: California Municipal Statistics, Inc. Assessed Values Taxable values are prepared and reported by the County Auditor - Controller each fiscal year and represent the aggregation of all locally assessed properties within the Project Area. The assessments are assigned Tax Rate Areas (TRA) that are coterminous to the boundaries of the project area in the first year that an agency is eligible to receive tax increment revenue. The Project Area consists of 12 individual TRAs. Historic taxable values since 2000 -01 were utilized to determine the historical growth rate of property values within the Project Area. Property values within the Project Area have steadily grown at a compounded rate of 10.5% per year between the years 2001 -02 and 2005 -06. Total assessed property values did not decline for any fiscal period between 2000 -01 and 2005 -06. Also, at no time during this period did property tax values grow at a rate of less than 2 %. The historic taxable values for the Project Area are shown in Table 4 below. The historical average reduction in value for allowed appeals is 25.31 percent. There is one appeal currently pending on property within the Project Area. These owners have appealed valuations totaling $789,000. Based on the above historical averages, the Commission expects a 42.4 percent chance that the outstanding appeal will be successful, with an average reduction in value of 25.31 percent. This would result in a loss of assessed value of $84,718. The projected assessed value for 2005 -06 has been adjusted for this estimated loss of value. A number of the appeals in the Project Area that were allowed resulted in a reduction in value were based on Section 51 of the Revenue and Taxation Code. This section requires that for each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Significant reductions took place in some counties during the mid- 1990's due to declining real estate values. Reductions made under this code section may be initiated by the Assessor or requested by the property owner. After a roll reduction is granted under this section, the property is reviewed on an annual basis to determine it's full cash value and the valuation is adjusted accordingly, which may result in either further reductions in or increases in assessed value. Such increases shall be in accordance with the actual full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other 01 IS WEST: 260116199.3 41555 -8 MKH 31 0 0 properties under Article XIIIA of the State -Constitution. Once the property has regained its prior value, adjusted for inflation it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. Project Status Several significant private developments have occurred within the Project Area since its inception in 1972. The Project Area's largest property owner, Southern California Edison Company ( "SCE ") relocated its corporate headquarters from downtown Los Angeles to the City of Rosemead, within the Project Area. The principal office structure completed in 1972, has 660,000 square feet of space and occupies 34 acres of its 75- acre site. In addition to these corporate offices, SCE completed in 1975 a 766,000 square foot computer center used to process utility bills. In 1979, SCE constructed a three - story, 231,500 square foot structure which serves as headquarters for its engineering and construction departments. In July 1986, SCE completed its general office 4 complex. The facility has an assessed valuation of approximately $16,860,000. Altogether the utility has developed 92 acres with overall total employment in the facilities of approximately 3,500. In 1982, Ticor Title Insurance Company completed a 180, 000 square foot office record storage. Ticor was subsequently acquired by Chicago Title and Trust Company in April 1991 and sold the property to the Panda Restaurant Group in 2002. Other commercial developments which have occurred in the Project Area include a branch office of Bank of America National Trust and Savings Association which was completed in October of 1972. This property was purchased in 2004 by Golden Security Bank and is assessed at $1,530,000. In addition, from 1973 to 1977, Owens Manufacturing Company, a warehouse manufacturing company, and Marge Carson, Inc. each added warehouse or office space to existing facilities within the Project Area. In 1983, California Federal Bank completed construction of a 247,000 square foot automated data processing facility within the Project Area. The property is currently leased by Countrywide which is a national leader in home mortgages. The facility has an assessed valuation of $12,152,732 and employs approximately I,100people. ABC Plaza, located at 8819 -21 Garvey Avenue, was completed in September 1988. Composed of 30,016 square feet of retail and light industrial space, the 1.24 -acre development is one of the few to combine these uses in one site. In April 1992, the Diamond Square shopping center, located at 8150 Garvey Avenue, was completely renovated into a multi - tenant commercial complex. Over 25,000 square feet of new retail space was added, including a new restaurant bringing the total square footage to 102,542. The property transferred ownership in 2004 and has a current assessed valuation $29,750,000. Several projects were completed in the early 1990's which were financed with proceeds of the Series 1993A Bonds, and included projects described in the Infrastructure Management Report adopted by the City and the Commission. Such proceeds were principally applied to make infrastructure improvements, such as street repairs within the Project Area, and deposited to the Commission's Low and Moderate Income Housing Fund. In 1994, the Commission completed the construction of the Angelus Senior Housing project, a 50 unit low income senior housing project located within the Project Area. In 2003, the Commission completed the construction of its Garvey Senior Housing project, a 72 unit low income senior housing facility also located within the Project Area. Both projects were approved by the voters, pursuant to Article 34 of the OHS WEST 260116199.3 41555 -8 MKH 32 0 0 California Constitution, which requires voter approval for low- income housing projects. Related to the completion of its Garvey Senior Housing project, the Commission also completed construction in 2003 of its Community Center, located at 9108 Garvey Avenue. Proceeds of the Series 1993A Bonds facilitated the completion of these projects. The sale to Wal -Mart of an SCE owned 23 -acre site at the southwest corner of Walnut Grove Avenue and Rush Street was completed in December of 2005. Wal -Mart purchased the development site at a purchase price of approximately $10,000,000. In September 2006, the company opened its Wal -Mart Supercenter on the site. The County Assessor has not yet reflected an increase in assessed value to reflect value associated with sale or improvement of this property. Based upon the City's building permit for an approximately 230,000 square foot retail building, the Commission expects not less than a total building valuation of $10,401,590, for a total valuation of approximately $21,000,000. [The Supercenter is expected to result in an increase in tax increment revenues of approximately $ ] In addition, within this property, there are two additional outpads which Wal -Mart is expected to sell to another developer for a fast food restaurant and a stand alone commercial structure. Development of the Supercenter has been the subject of vigorous local opposition and litigation by neighboring residents and the United Food and Commercial Workers Union operating through an organization named Save our Community ( "SOC "). At the March 2005 municipal election two of the three incumbent councilmembers running for re- election were defeated and replaced by candidates opposed to the Wal -Mart project. Having failed to secure a majority of the seats on the Council in that election, SOC initiated recall campaigns against two other incumbent councilmembers. The recall petitions were qualified and, following a Federal District Court proceeding which was resolved by consent decree, an election was set for September 19, 2006. On that date, the attempt to recall the two councilmembers was rejected by the voters. SOC is also pursuing two lawsuits challenging the Wal -Mart project's compliance with the California Environmental Quality Act. Litigation is pending and any resolution, mitigation measures or further action on the Environmental Impact Report concerning the property cannot be predicted with certainty at this time. Additionally, significant building renovations within the project area include major remodeling of the former Chicago Title building, former California Federal building, and the Southern California Edison General Office building. The relocation of Panda Restaurant Group's corporate headquarters from South Pasadena to the vacant Chicago Title building in 2002 included a complete interior and exterior renovation of the Structure located at 1638 Walnut Grove Avenue. The estimated value of the improvements completed during 2002 was $1,826,000 for a current total valuation of $8,211,589. The Countrywide interior renovation project completed in 2000 was valued at 4,050,000 for a total valuation of $12,152,732. Southern California Edison has completed a number of major interior renovations of their General Office buildings over the past ten years with a total remodel valuation of approximately $21,000,000. Recently, two new office buildings and one new multi- tenant commercial retail center have been constructed. The commercial center included a new 14,000 square foot drug store and a 6,000 square foot market, for a combined building value of $2,400,000 and a total value of $3,000,000, located at the intersection of Garvey Avenue and San Gabriel Boulevard with a building valuation of $937,627 and a total valuation of $1,748,250. A new two -story office building is currently under construction at 8653 Garvey Avenue with a valuation of $615,000. There are also preliminary proposals being discussed with developers for the redevelopment of two Marge Carson properties along the east end of Garvey Avenue. The current proposal is for a large [nixed -use residential /commercial condominium project, adjacent to the Garvey Community Center. No specific scope of design has been agreed upon between the City and the developer. OHS WE5T260116199.3 41555 -8 MKH 33 0 0 Controls, Land Use and Building Restrictions All real property in the Project Area is subject to the controls and restrictions of the Redevelopment Plan. The Redevelopment Plan requires that new construction shall comply with all applicable State Statues and local law in effect, including City zoning ordinances and City codes for building, electrical, heating, ventilating, and plumbing. The Redevelopment Plan allows for commercial, industrial, residential, and public uses within the Project Area, but specified the particular area in which each of these uses is permitted. The Commission may permit an existing but non- conforming use to remain so long as the existing building is in good condition and is generally compatible with a non - conforming use, the owner is willing to enter into a participation agreement with the Commission and the owner agrees to the imposition of such reasonable restrictions as are necessary to protect the development and use of the Project Area. Within the limits, restrictions and controls established in the Redevelopment Plan, the Commission is authorized to establish land coverage, setback requirements, design criteria, and other development and design controls necessary for proper development of both private and public segments within the Project Area. Ten Largest Secured Taxpayers Table 3 below sets forth the ten largest secured taxpayers in the Project Area during Fiscal Year 2005 -06. The cumulative secured net assessed value of the ten largest secured taxpayers totals $75,257,352; which represents approximately 21.56% of the total secured net assessed value of Redevelopment Project Area No. 1. The following is restricted to only locally assessed tax payers, and does not include state assessed properties. Southern California Edison, which owns a significant amount of property within the Project Area, is a public utility and therefore its properties are state assessed and is, accordingly, not included in the following table of top ten property owners. See "Unitary Property" above for a description of unitary revenues. There are currently no pending appeals on properties owned by the following top ten taxpayers. Of IS WEST260116199.3 41555 -8 MKH 34 0 0 Table 3 Rosemead Community Development Commission Redevelopment Project Area No. I Largest Secured Tax Payers Fiscal Year 2006 -07 $105,549,094 (1) 2006 -07 Local Secured Assessed Valuation: $354,433,230 Source: California Municipal Statistics, Inc. [Includes only locally assessed properties.] Percent of Project Area Secured Net Assessed ValueM 8.56% 3.57 2.41 1.72 1.67 1.05 0.99 0.98 0.91 0.89 0.84 0.83 0.83 0.75 0.68 0.66 0.65 0.64 0.61 0.52 29.78% Among these ten largest secured tax payers for Fiscal Year 2005 -06, the Rosemead Hwang LLC ownership consists of the Diamond Square shopping center, which includes 235,000 square feet of retail, restaurant, and grocery store within the 7 acre property. The California Federal Savings and Loan property consists of a 250,000 square foot, four story office building that is currently being sublet to Countrywide Financial Corporation, which currently employees in excess of 1,100 persons at this site. Panda Restaurant Group Inc. owns and operates an approximately 180,000 square foot group headquarters building and currently employs approximately 300 persons at this site. TAX INCREMENT REVENUES The Redevelopment Project Area No. 1's base year assessed valuation is $25,162,672, of which $27,798,092 is attributable to secured assessed value and $3,364,580 is attributable to the unsecured assessed value. The total assessed valuation for Fiscal Year 2006 -07 is $386,379,908 which produces a total incremental value of approximately $345,580,740. Pledged Tax Revenues consist primarily of tax increment revenues generated from the application of appropriate tax rates to the incremental taxable value of the Redevelopment Project Area No. 1. An additional significant source of Pledged Tax Revenue includes unitary property taxes. Unitary tax revenues make up a substantial portion of the tax increment revenues received by the Commission. This is primarily because the headquarters of Southern California Edison are located within the Project Area. See "TAX OHS WEST 260116199.3 41555 -8 MKH 35 Secured Net Owner Name Land Use Assessed Value I. Rosemead Hwang LLC Shopping Center $30,345,000 2. California Federal Savings and Loan Association Office Building 12,643,700 3. 1683 Walnut Grove LLC Office Building 8,543.336 4. Irish Communication CoArish Construction Industrial 6,110,635 5. Toni C. and Nancy Y. Yeh Commercial 5,935,013 6. Jung Chen Hotel 3,719,873 7. Diamond Flower Investment Group Rosemead Commercial 3,506,527 8. Raymond K. Chiang Industrial 3,468,000 9. Phillip'r. Thong Commercial 3,215,740 10, Peter W. Bahan Industrial 3,171,603 11, Beach Grocery Co. IV Commercial 2,981698 12. Shi Yin Wong Commercial 2,958,000 13. River Rosemead LLC Industrial 1943,888 14. Hung M. and Ching M. Phan Hotel 2,668,387 15. Autoland LLC Commercial 2,425,000 16. San Gabriel Plaza Inc. Commercial 2,333,921 17. Capriccio Family LP Industrial 2,293,984 18. CB and A Investments LLC Mobile Home Park 2,271,874 19. Edmond and Loretm Cheng Industrial 2,155,176 20. Kevin and Nugyet M. "Fran Industrial 1,855,739 _ $105,549,094 (1) 2006 -07 Local Secured Assessed Valuation: $354,433,230 Source: California Municipal Statistics, Inc. [Includes only locally assessed properties.] Percent of Project Area Secured Net Assessed ValueM 8.56% 3.57 2.41 1.72 1.67 1.05 0.99 0.98 0.91 0.89 0.84 0.83 0.83 0.75 0.68 0.66 0.65 0.64 0.61 0.52 29.78% Among these ten largest secured tax payers for Fiscal Year 2005 -06, the Rosemead Hwang LLC ownership consists of the Diamond Square shopping center, which includes 235,000 square feet of retail, restaurant, and grocery store within the 7 acre property. The California Federal Savings and Loan property consists of a 250,000 square foot, four story office building that is currently being sublet to Countrywide Financial Corporation, which currently employees in excess of 1,100 persons at this site. Panda Restaurant Group Inc. owns and operates an approximately 180,000 square foot group headquarters building and currently employs approximately 300 persons at this site. TAX INCREMENT REVENUES The Redevelopment Project Area No. 1's base year assessed valuation is $25,162,672, of which $27,798,092 is attributable to secured assessed value and $3,364,580 is attributable to the unsecured assessed value. The total assessed valuation for Fiscal Year 2006 -07 is $386,379,908 which produces a total incremental value of approximately $345,580,740. Pledged Tax Revenues consist primarily of tax increment revenues generated from the application of appropriate tax rates to the incremental taxable value of the Redevelopment Project Area No. 1. An additional significant source of Pledged Tax Revenue includes unitary property taxes. Unitary tax revenues make up a substantial portion of the tax increment revenues received by the Commission. This is primarily because the headquarters of Southern California Edison are located within the Project Area. See "TAX OHS WEST 260116199.3 41555 -8 MKH 35 O O ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Unitary Property" herein. Reductions in Pledged Tax Revenues received by the Commission may result from declining tax rates, property tax administrative costs and refunds resulting from successful appeals of assessed values. Table 4 Rosemead Community Development Commission Redevelopment Project Area No. 1 Historical Values Securedu� 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 Land $130,981,056 $155,175,638 $169,590,663 $203,769,318 $219,014,554 Improvements 121,189,983 128,977,977 135,434,124 148,698,519 154,473,118 Personal Property 2,042,074 1,843,772 1,586,980 1,917,867 2,166,085 Exemptions 5,663,775 5,045,427 5,252,907 5,362,048 Total Secured $248,549,338 $280,951,960 $301,358,860 $349,023,656 $370,292,629 Unsecured Improvements S 5,117,181 $ 4,830,503 $ 3,261,252 $ 8,081,798 $ 3,874,339 Personal Property 9,580,847 12,558,449 15,215,984 13,641,958 12,212,940 Total Unsecured S 14,698,028 $ 17,388,952 $ 18,477,236 $ 21,723,756 S 16,087,279 GRAND TOTAL $263,247,366 $298,340,912 $319,836,096 $370,747,412 $386,379,908 Annual Change 3.56% 13.33% 7.20% 15.92% Incremental Value: 5238,084,694 $273,178,240 $294,673,424 $345,584,740 $360,431,236 1'7 Secured values include state assessed non - unitary utility property. Source: California Municipal Statistics, Inc. and Los Angeles County Assessment Roll, 2000 -2005. Projected Tax Revenues Table 5 below shows the projected Pledged Tax Revenues for Redevelopment Project Area No. 1 for the Fiscal Years 2006 -07 through 2015 -16. While the projections are based on assumptions which are believed by the Commission to be reasonable, there can be no assurance that such projections will be realized. See "RISK FACTORS" herein. The projections of Pledged Tax Revenues are based on the following assumptions: (1) Taxable values as reported by the County for the 2006 -07 fiscal year. Projections inflate Land, Improvements and Exemptions 2% per year. No inflationary trend is applied to personal property value and the personal property assessed valuation is assumed in each Fiscal Year presented below to remain at the 2006 -07 fiscal year level. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT— Property Tax Rate and Appropriation Limitations" herein. OHS WEST:260116199.3 41555 -8 MKH 36 0 0 (2) Projected Gross Tax Increment is based upon incremental taxable values factored against an assumed project tax rate and adjusted for indebtedness approved by voters prior to 1988. The assumed future tax rates remain at $1.0052 per $100 of taxable value as reported by the County Auditor Controller. According to the redevelopment plan, the last day to receive tax increment is June 27, 2023. (3) Unitary tax amount is as reported by the County and held constant at the 2006 -07 level. (4) Housing Set aside requirement is calculated at 20% of Adjusted Gross Revenue. In 1991, the Commission pre -paid $6.8 million from proceeds from its 1987 tax allocation notes. This pre - payment was restructured in 1993 along with the 1993 series tax allocation bonds. These actions have resulted in a decrease of $469,142 on annual housing set -aside requirement until fiscal year 2021 -22. This decrease has been reflected in the projections. (5) Property tax rates are assumed to be 1.052 %. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Property Tax Rate and Appropriation Limitations" herein. Unitary tax amount as reported by the County. Unitary tax is held constant at the 2006- 07 level. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Unitary Property." (6) [Taxable values are as reported by the County for the 2006 -07 fiscal year. The 2006 improvement value has been decreased by $84,718 to reflect potential losses due to assessment appeals.] (7) With respect to pass - throughs, the Los Angeles County Fire Department receives approximately 17% of gross tax increment pursuant to an agreement with the Commission. Statutory pass throughs to agencies that do not have a current tax sharing agreement began 2004 -05 at a rate of 20% of incremental growth from base year 2003 -04. An additional pass through will begin in 2014 -15 at 16.8% of incremental growth. These taxing agencies receive a combined share of 82.99% of general levy property tax. This assumes the City of Rosemead has elected to receive a pass - through under SB 211. These pass throughs are subordinate to debt service on the Bonds. Growth in real property land and improvement values have been limited to an assumed rate of growth of real property taxable values of two percent annually as allowed under Article XIIIA of the state Constitution. The State Board of Equalization has directed county assessors to use an inflation adjustment of 1.867% in preparing the 2004 -05 assessment rolls. Should the future growth of taxable value in the project areas be less than two percent, the resultant Gross Tax Increment Revenues would be reduced proportionately. Future values will also be impacted by changes of ownership and new construction not reflected in our projections. In addition, the values of property previously reduced in value due to assessment appeals based on reduced market values could increase more than two percent when real estate values increase more than two percent. The Commission, the City of Rosemead and the Underwriter are unable to make any representation that taxable values will actually grow at the rate projected. 01 IS WEST: 2601161993 41555 -8 MKH 37 E 0 x � � N r w v ,b onv v w e a c.� o W b d d_ VI ty �O VI 69 M G N r > E O n u v G 6 b v m M N N N v b P N N W v.' y L v v EEV 9 U � P d^ h GE b Q m M y R W e GC Q N O e V M 1� b O N D? d ° r ° o���a < vri�n m o w vroi G d NN ` A N v d V dv o�n p �na n moo .o rn o b — b vl N M b n M b e b M O � A c u N O v � Q^ P N_ M r'1 b O 0 O� M b O O N ti u u G M M O< O Q F� 15 w y C j O Q V 64 - a > b a0 T M r Q _" V >` G O V . (5 ` o t M M u G T yN v Qr`o - N e o v V :2 y N r W t L ✓� � �J� V /n o W E 0 rM_oe M vnoo a h o m N N O• W O. � � - b r R W P VI • N o?m M e _ a - _ �n m b r en C' G G f� Q C C p w N O U O U O Zi m 0. v O L O' M 6 O 0 � t� o� Fu O O U V] c V E N 7_ C U G v s m Il l C C rmN�nm �o rm �n M r v� e V' OMNJ, vl T Ili L' V :E O � M O• n K C ry r O N b N R C Cl N b� Q O � M _• V M G o > u U V d fl O n b r b Q� L r O O t P O O T N r M O m r W V Dq b_ OC Yl m Q ba 7 O H _ V w V > 9 n G E 0 ti P b O b - N Y h � r� n O d 2 N r w G G N v Es t o T v w F c.� o G > E n u v G 6 N N W v.' y L EEV 9 U � G d NN ` A dv A c u v 7 c v o$ < E < ou O O N ti u u G M M O< O Q F� 15 w y C j O Q V 64 - a > O >` G O V . (5 ` o t M u G T yN v '�Z V :2 y N r W t L ✓� � �J� V /n o W E 0 E N E� O E U Zi N� ly J w G y N X y en C' G G V0 .w. N O U O U O Zi m 0. v O L O' M 6 O 0 � t� o� Fu O O U V] c V E N 7_ C U G v s m ti P b O b - N Y h � r� n O d 2 0 0 Table 6 provides a summary of Redevelopment Project Area No. 1 Projection of Tax Increment Revenues for Fiscal Years 2005 -06 through 2022 -23. Revenues or revenue reductions resulting from Supplemental Assessments are not included in the projections set forth herein. Table 6 Rosemead Community Development Commission Redevelopment Project Area No. 1 Projected Taxable Values and Tax Increment Revenues "' See Table 5 above. Source: Rosemead Community Development Commission and Piper Jaffray & Co., as Underwriter of the Series 2006B Bonds. Assessment Appeals [DISCUSS: There are currently [number of] [no] material appeals of the taxable value for assessments within the Project Area that could potentially materially lower taxable values, as currently reported, thereby reducing Pledged Tax Revenues.] Debt Service and Estimated Coverage Table 7 sets forth the debt service and estimated coverage on the Series 20O6B Bonds and the Series 1993 Bonds to remain outstanding after the defeasance of the Refunded Bonds. The following assumptions were made in creating the table: 1. The projections of net Pledged Tax Revenues as summarized in Table 5 and as set forth herein are realized through Fiscal Year 2005 -06. As above, projections inflate Land, Improvements and Exemptions 2% per year. No inflationary trend is applied to personal property value and the personal property assessed valuation is assumed in each Fiscal Year presented below to OHS Misr 2601 16199.3 41555 -8 MKH 39 Adjusted Projected Incremental Gross Pledged Tax Fiscal Year Taxable Value Revenues 111 Revenues 2005 -06 $345,500,000 $4,646,000 $3,325,000 2006 -07 352,602,000 4,718,000 3,369,000 2007 -08 359,846,000 4,791,000 3,414,000 2008 -09 367,235,000 4,865,000 3,459,000 2009 -10 374,772,000 4,941,000 3,506,000 2010 -11 382,459,000 5,018,000 3,553,000 2011 -12 390,301,000 5,097,000 3,602,000 2012 -13 398,299,000 5,177,000 3,651,000 2013 -14 406,457,000 5,259,000 3,702,000 2014 -15 414,778,000 5,343,000 3,753,000 2015 -16 423,266,000 5,428,000 3,806,000 2016 -17 431,923,000 5,515,000 3,859,000 2017 -18 440,753,000 5,604,000 3,914,000 2018 -19 449,761,000 5,694,000 3,969,000 2019 -20 458,948,000 5,787,000 4,026,000 2020 -21 468,319,000 5,881,000 4,084,000 2021 -22 477,877,000 5,997,000 4,143,000 2022 -23 487,627,000 6,075,000 3,734,000 "' See Table 5 above. Source: Rosemead Community Development Commission and Piper Jaffray & Co., as Underwriter of the Series 2006B Bonds. Assessment Appeals [DISCUSS: There are currently [number of] [no] material appeals of the taxable value for assessments within the Project Area that could potentially materially lower taxable values, as currently reported, thereby reducing Pledged Tax Revenues.] Debt Service and Estimated Coverage Table 7 sets forth the debt service and estimated coverage on the Series 20O6B Bonds and the Series 1993 Bonds to remain outstanding after the defeasance of the Refunded Bonds. The following assumptions were made in creating the table: 1. The projections of net Pledged Tax Revenues as summarized in Table 5 and as set forth herein are realized through Fiscal Year 2005 -06. As above, projections inflate Land, Improvements and Exemptions 2% per year. No inflationary trend is applied to personal property value and the personal property assessed valuation is assumed in each Fiscal Year presented below to OHS Misr 2601 16199.3 41555 -8 MKH 39 w • remain at the 2005 -06 fiscal year level. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT — Property Tax Rate and Appropriation Limitations" herein. 2. Debt service is based on the maturity schedule and interest rates, subject to prior redemption or acceleration, for the Series 2006B Bonds as set forth on the inside cover page hereof and the Series 1993 Bonds to remain outstanding after the defeasance of the Refunded Bonds. The Commission will not incur any additional debt for the Project Area during the years shown. Table 7 Estimated Tax Increment, Debt Service and Coverage (Bond Year Ending October 1) Year Estimated Estimated Ending Pledged Series 2006A Series 20068 Total 10 /1 Revenues Bond Debt Service Debt Service Debt Service Debt Service Coverage 2007 $3,407,826 $1,347,994 $ 844,263 $1192,257 1.55% 2008 3,407,826 1,350,594 1,091,047 1441,641 1.40 2009 3,407.826 1,348,131 1,091,048 2,439,179 1.40 2010 3,407,826 1,349,856 1,091,048 2,440.904 1.40 2011 3,407,826 1,349,481 1,091,048 2,440,529 1.40 2012 3,407,826 1,351,931 1,091,048 2,442,979 1.39 2013 3,407,826 1,353,156 1,091,048 2,444,204 1.39 2014 3,407,826 1,348,156 1,091,048 2,439,204 1.40 2015 3,407,826 1,351,406 1,091,048 2,442,454 1.40 2016 3,407,826 1,351,906 1,091,048 2,442,954 1.39 2017 3,407,826 1,349,656 1,091,048 2,440,704 1.40 2018 3,407,826 1,351,656 1,091,048 2,442,704 1.40 2019 3,407,826 328,531 2,256,048 2,584,579 1.32 2020 3,407,826 327,331 2,257,700 2,585,031 1.32 2021 3,407,826 325,369 2,256,670 2,582,039 1.32 2022 3,407,826 327,994 2,262,275 2,590,269 1.32 2023 2.938,684 -- 2,259,638 2,259,638 1.30 2024 2,938,684 -- 2,253,918 2,253,918 1.30 2025 2,938,684 •- 2,255,060 2,255,060 1.30 2026 2,938,684 -- 2,257,560 2,257,560 1.30 2027 2,938,684 -- 2,256,125 2,256,125 1.30 2028 2,938,684 -- 2,264,865 2,264,865 1.30 2029 2,938,684 -- 2,259,653 2,259,653 1.30 2030 2,938,684 -- 2,260,953 2,260,953 1.30 2031 2,938,684 -- 2,263,300 2,263,300 1.30 2032 2,938,684 -- 2,261,463 2,261,463 1.30 2033 2,938,684 -- 2,260,440 2,260,440 1.30 * Preliminary, subject to change. Source: Rosemead Community Development Commission, with debt service schedules provided by Piper Jaffray & Co. OHS WesT:260116199.3 41555 -8 MKH 40 0 1 0 CERTAIN INFORMATION CONCERNING THE CITY Certain general information concerning the City of Rosemead is included herein as Appendix A hereto. Such information is provided for informational purposes only. The General Fund of the City is not liable for the payment of the Series 2006B Bonds or the interest thereon, nor is the taxing power of the City pledged for the payment of the Series 20068 Bonds or the interest thereon. CERTAIN LEGAL MATTERS Legal matters incident to the delivery of the Series 2006B Bonds are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel. A complete copy of the proposed form of opinion of Bond Counsel is contained in Appendix B. As Bond Counsel, Orrick, Herrington & Sutcliffe LLP undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Commission in connection with the Series 2006B Bonds by Wallin, Kress, Reisman & Kranitz LLP, Santa Monica, California, as counsel to the Commission, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of 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 Series 2006B Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code ") and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2006B Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix B hereto. Bond Counsel expects to deliver an opinion at the time of issuance of the Series 2006B Bonds substantially in the form set forth in APPENDIX B — "FORM OF OPINION OF BOND COUNSEL," subject to the matters discussed below To the extent the issue price of any maturity of the Series 2006B Bonds is less than the amount to be paid at maturity of such Series 2006B Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2006B Bonds), the difference constitutes `original issue discount," the accrual of which, to the extent properly allocable to each beneficial owner thereof, is treated as interest on the Series 2006B Bonds, which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2006B Bonds is the first price at which a substantial amount of such maturity of the Series 2006B 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 Series 2006B Bonds accrues daily over the term to maturity of such Series 2006B 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 Series 2006B Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 20068 Bonds. Beneficial Owners of the Series 2006B Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2006B Bonds with original issue discount, including the treatment of beneficial owners who do not purchase such Series 2006B Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2006B Bonds is sold to the public. OHS WEST 260116199.3 41555 -8 MKH 41 0 Series 2006B Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier 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, the amount of tax - exempt interest received, and a Beneficial Owner's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series 2006B Bonds. The Commission has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2006B Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Series 2006B Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series 2006B Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel's attention after the date of issuance of the Series 2006B Bonds may adversely affect the value of, or the tax status of interest on, the Series 2006B Bonds. Certain requirements and procedures contained or referred to in the Indenture, the Sublease, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Orrick, Herrington & Sutcliffe LLP. Although Bond Counsel is of the opinion that interest on the Series 2006B Bonds is excluded from gross income for federal income tax purposes and that interest on the Bonds is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Beneficial Owner's federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Future legislation, if enacted into law, or clarification of the Code may cause interest on the Series 2006B Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the Series 2006B Bonds. Prospective purchasers of the Series 20068 Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment of the Series 2006B Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ( "IRS ") or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the City or the Commission, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The City and the Commission have covenanted, however, to comply with the requirements of the Code. OHS W2sr260116199.3 41555 -8 MKH 42 0 0 Bond Counsel's engagement with respect to the Bonds ends with the issuance of the Series 20068 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the City, the Commission or the Beneficial Owners regarding the tax - exempt status of the Series 2006B Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the City, the Commission and their appointed counsel, including the Beneficial 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 IRS positions with which the City or the Commission legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Series 2006B 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 Series 2006B Bonds, and may cause the City, the Commission or the Beneficial Owners to incur significant expense. LITIGATION At the time of delivery of and payment for the Series 2006B Bonds, the Commission will certify that, except as disclosed herein, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the Commission, threatened against the Commission in any way affecting the existence of the Commission or the titles of its officers to their respective offices or seeking to restrain or to enjoin the issuance, sale or delivery of the Series 2006B Bonds, the application of the proceeds thereof in accordance with the Indenture, or the collection or application of Pledged Tax Revenues pledged or to be pledged to pay the principal of and interest on the Series 2006B Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Series 20068 Bonds, the Resolution, the Indenture or any action of the Commission contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or the powers of the Commission or its authority, or which would adversely affect the exclusion of interest paid on the Series 2006B Bonds from gross income for Federal income tax purposes or the exemption of interest paid on the Series 2006B Bonds from California personal income taxation, nor, to the knowledge of the Commission, is there any basis therefor. RATINGS Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. ( "S &P ") has assigned its municipal bond rating of "[AAA]" to the Series 2006B Bonds based on the issuance by Ambac Assurance of the Financial Guaranty Insurance Policy. The Series 2006B Bonds have also been assigned an underlying rating of "[BBB +]" by S &P. Such ratings reflects only the views of the rating agencies and an explanation of the significance of such rating and any rating of the Commission's outstanding obligations may be obtained from such rating agency as follows: Standard & Poor's Ratings Group, 55 Water Street, New York, New York 10041 -0003. There is no assurance that such ratings will continue for any given period or that they will not be revised downward or withdrawn entirely by such rating agencies, if in their judgment, circumstances so warrant. The Commission, the Bond Insurer and the Trustee undertake no responsibility either to notify the owners of the Series 2006B Bonds of any revision or withdrawal of the rating or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Series 2006B Bonds. UNDERWRITING The Series 2006B Bonds are to be purchased from the Commission by Piper Jaffray & Co., as Underwriter, pursuant to a Purchase Contract by and between the Commission and the Underwriter. The Underwriter will purchase the Series 2006B Bonds at a price of $ , which reflects the par amount of Of IS WEST260116199.3 41555 -8 MKI 1 43 the Series 2006B Bonds, plus net original issue premium of $ less an underwriter's discount of $ . The Underwriter is committed to purchase all the Series 2006B Bonds if any are purchased. "rhe Underwriter may offer and sell the Series 2006B Bonds to certain dealers (including depositing the Series 2006B Bonds into investment trusts) and others at prices lower than the offering prices stated on the inside cover of this Official Statement. After the initial public offering, the public offering prices of the Series 20068 Bonds may be changed from time to time by the Underwriter. VERIFICATION The Arbitrage Group, Inc., certified public accountants (the "Verification Agent "), will verify as to the Escrow Agreement, the mathematical accuracy as of the date of the closing on the Series 2006B Bonds of the computations contained in the provided schedules to determine that the anticipated receipts from the investment of cash and direct obligations of the United States will be sufficient to pay on April I, 2006, the scheduled interest on the outstanding Series 1993 Bonds and on the Redemption Date, the principal of the Refunded Bonds at a redemption price of 100% plus accrued and unpaid interest thereon. The report of the Verification Agent will include the statement that the scope of their engagement was limited to verifying the mathematical accuracy of the computations contained in such schedules provided to them and that they have no obligation to update their report because of events occurring, or data or information coming to their attention, subsequent to the date of their report. MISCELLANEOUS All of the preceding summaries of the Series 2006B Bonds, other applicable legislation, agreements and other documents are made subject to the provisions of the Series 2006B Bonds and such documents, respectively, and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Commission for further information in connection therewith. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. OHS WEST 2601161993 41555 -8 MKH 44 0 0 The execution and delivery of this Official Statement by the Executive Director of the Commission has been duly authorized by the Commission. Concurrently with the delivery of the Series 2006B Bonds, the Commission will furnish to the Underwriter a certificate of the Commission to the effect that this Official Statement, as of the date of this Official Statement and as of the date of delivery of the Series 2006B Bonds, does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements herein, in the light of the circumstances under which they were made, not misleading. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ATTEST: Secretary 0 Chairperson OHS WEST: 260116199.3 41555 -8 MKt1 45 0 APPENDIX A 0 SUPPLEMENTAL INFORMATION CONCERNING THE CITY OF ROSEMEAD This Appendix contains principally economic and demographic information relating to the City of Rosemead and the County of Los Angeles. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision thereof is pledged to the payment of the Series 2006B Bonds. The Series 2006B Bonds are special tar obligations of the Commission payable solely from a portion of the Special Tares and other amounts pledged under the Indenture, cis more fully described in the Official Statement to which this Appendix is appended The information set forth herein that has been obtained from sources, other than the City is believed to be reliable, but such information is not guaranteed as to accuracy or completeness. Statements contained herein which involve estimates, forecasts, or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. INTRODUCTION Location The City of Rosemead (the "City "), encompassing approximately 5 %z square miles, is located in the central northwestern section of Los Angeles County approximately 12 miles east of the central business district of Los Angeles. The City shares common boundaries with the municipalities of San Gabriel, Temple City, El Monte, Montebello, Monterey Park and Alhambra. Municipal Government Incorporated in August 4, 1959, the City operates as a general law city. It has a council- manager form of government, with five council members elected at large for four -year overlapping terms. The Council selects a major and major pro -tem each year from its membership. The Council is responsible for enacting local legislation, establishing general policy for the City and adopting the annual budget. The Council's duties also include the appointment of a City Manager, City Attorney, City Clerk and City Treasurer and the selection of citizens to serve of the City's various advisory commissions. The City contracts with the Los Angeles County Sheriff's Department for sheriff services. Fire protection is provided through the Los Angeles County Fire Protection District. Two fire stations are located in the City. ECONOMIC AND DEMOGRAPHIC INFORMATION Data contained under this caption is intended to portray economic, demographic, and business trends within the City and the County of Los Angeles (the "County'q. While not constituting direct revenue sources as such, these trends help explain changes in revenue sources such as property taxes, sales tares, and transient occupancy tares, which could be affected by changes in econon de conditions. All the information presented in the following tables and other specific data references is the latest information available frone the respective data sources. OHS WEST: 260116199.3 41555 -8 MKH A-1 Population Between 2001 and 2005, the population of the City increased by nearly 5 %. The table below displays population changes and other demographic data for the City and the County for the past five years. POPULATION DATA FOR THE CITY OF ROSEMEAD WELLS AND THE COUNTY OF LOS ANGELES Year City of Rosemead County of Los Angeles 2001 2002 2003 2004 2005 Population % Change 54,582 2.0 55,314 1.3 56,238 1.7 56,732 0.9 57,189 0.8 Source: State Department of Finance. Population % Change 9,662,859 1.5 9,828,805 1.7 9,979,361 1.5 10,107,451 1.3 10,226,506 1.2 OHS Wesr:260116199.3 41555 -8 MKI I A -2 0 Personal Income 0 The table below summarizes the total effective buying income and median household effective buying income for the City of Rosemead, the Los Angeles Metropolitan Statistical Area (MSA), the State of California and the United States for the period 2000 through 2004. Los Angeles MSA, State of California, and United States Total Effective Buying Income Calendar Years 2000 through 2004 Total Effective Buying Median Household Effective Year and Area Income(in thousands) Buying Income 2000 City of Rosemead $ 594,960 $36,286 Los Angeles MSA 169,417,226 41,627 State of California 652,190,282 44,464 United States 5,230,824,904 39,129 2001 City of Rosemead $ 567,536 $33,978 Los Angeles MSA 170,440,432 40,789 State of California 650,251,407 43,532 United States 5,303,481,498 38,365 alTI i City of Rosemead $ 554,088 $32,946 Los Angeles MSA 162,413,790 37,983 State of California 647,879,427 42,484 United States 5,340,682,818 38,035 POOR City of Rosemead $ 563,060 $32,973 Los Angeles MSA 233,020,235 41,237 State of California 674,721,020 42,924 United States 5,466,880,008 38,201 2004 City of Rosemead $ 579,423 $33,845 Los Angeles MSA 244,048,095 42,269 State of California 705,108,410 43,915 United States 5,692,909,567 39,324 Source: "Survey of Buying Power," Sales and Marketing Management Magazine 01 IS WEST 260116199.3 41555 -8 MKII A -3 • s Labor Force The following chart provides information concerning the annual average total labor force, employment, and unemployment for Los Angeles County, the State of California and the United States for the years 2000 through 2004. Los Angeles County, State of California and United States Labor Force, Employment, and Unemployment Annual Averages from 2000 through 2004 Year and Area Labor Force Employment Unemployment Unemployment Rate 2000 Los Angeles County 4,681,300 4,427,800 253,500 5.4 State of California 16,869,700 16,034,100 835,600 5.0 United States 142,864,000 137,613,000 5,251,000 3.7 2001 Los Angeles County 4,752,900 4,483,000 269,900 5.7 State of California 17,150,100 16,217,500 932,600 5.4 United States 144,030,000 136,508,000 7,522,000 5.2 2002 Los Angeles County 4,769,900 4,446,100 323,800 6.8 State of California 17,326,900 16,165,100 1,161,800 6.7 United States 144,994,000 136,945,000 8,049,000 5.6 2003 Los Angeles County 4,782,000 4,447,800 334,200 7.0 State of California 17,414,000 16,223,500 1,190,500 6.8 United States 146,753,000 138,625,000 8,128,000 5.5 2004 Los Angeles County 4,809,700 4,494,000 315,700 6.6 State of California 17,552,300 16,459,900 1,092,400 6.2 United States 148,034,000 140,435,000 7,598,000 5.1 "' Unemployment rate is based on unrounded data. Source: California State Employment Development Department, Labor Market Information Division; U.S. Department of Labor, Bureau of Labor Statistics for United States statistics. OHS WE5r:260116199.3 41555 -8 MKH A -4 0 Business and Industry A sample of the major employers in the City of Rosemead are shown below, together with the approximate number of persons employed by each. CITY OF ROSEMEAD Major Employers Employer of Business Number of Employees So. California Edison Countrywide Home Loans Garvey School District Rosemead School District Hermetic Seal Corp. La Victoria Foods (Seasonal) Marge Carson Inc. Irish Construction Panda Restaurant Group Don Bosco Technical Institute Source: Rosemead Chamber of Commerce. Commercial Activity Utility— Regional headquarters Finance Education Education Hermetic seal manufacturing Food manufacturing Furniture manufacturing Underground utility contractor Restaurant management Education 3,000 — 4,000 2,500 1,000 375 260 50-250 225 220 220 200 Taxable transactions in Rosemead totaled $281,489 in 2003, nearly a 20% increase over 1999. The following table details taxable permits and transactions in the City of Rosemead for the years 1999 through 2003. CITY OF ROSEMEAD Taxable Transactions Calendar Years 1999 through 2003 (Taxable Transactions in $000's) Source: State Board of Equalization, Research & Statistics Section Construction Activity In the past five years for which complete information is available, Rosemead issued building permits totaling approximately $143,583,211. Approximately 37% of this total consisted of permits for non- residential construction. Permits for new housing included 321 units, of which 80 were for multi- family occupancy. The following table details building permit activity in Rosemead for the years 2000 through 2004: OHS WEST:260116199.3 41555 -8 MKH A -5 1999 2000 2001 2002 2003 Retail Stores Permits 491 499 537 562 565 Taxable Transactions $201,007 $217,764 $213,234 $230,327 $236,929 Total Outlets Permits 1,260 1,272 1,291 1,257 1,233 Taxable Transactions $234,959 $251,144 $246,755 $263,947 $281,489 Source: State Board of Equalization, Research & Statistics Section Construction Activity In the past five years for which complete information is available, Rosemead issued building permits totaling approximately $143,583,211. Approximately 37% of this total consisted of permits for non- residential construction. Permits for new housing included 321 units, of which 80 were for multi- family occupancy. The following table details building permit activity in Rosemead for the years 2000 through 2004: OHS WEST:260116199.3 41555 -8 MKH A -5 0 0 CITY OF ROSEMEAD Building Permit Valuations Calendar Years 2000 through 2004 Source: Construction Industry Research Board Utilities Electricity is provided by Southern California Edison Company and gas is supplied by the Southern California Gas Company. Telephone services are provided by AT &T (successor to SBC and Pacific Bell). Water is supplied by four water companies: Californ ia - American, San Gabriel Valley, Southern California and San Gabriel County Water District. The majority of these organizations obtain water from the Metropolitan Water District of Southern California, while the San Gabriel County Water District and locally drilled wells provide the balance. Sewage treatment services are provided by the County of Los Angeles Sanitation District. Transportation The City's location near several interstate freeways affords residents immediate access to the extensive Southern California freeway network. This network links Rosemead to a number of diverse commercial and recreation activities located throughout Orange, Los Angeles and San Bernardino Counties. Two main east -west thoroughfares pass through the City. The San Bernardino Freeway (Interstate 10) traverse the central portion of the City and the Pomona Freeway (State Route 60) crosses the southern extremity of the City. Rosemead Boulevard (State Route 19) intersects these major routes and continues north to Pasadena, and south to Orange County. Major airports in the Los Angeles Basin are easily accessible by means of the highly developed freeway network in the West San Gabriel Valley. Air cargo and passenger facilities include those at the Los Angeles International Airport, Burbank - Glendale- Pasadena Airport, Long Beach International Airport and Ontario International Airport. All are less than 35 miles from the City. El Monte Airport, located two miles to the east, has facilities to service private aircraft. OHS WEST: 260116199.3 41555 -8 MKH A-6 2000 2001 2002 2003 2004 Valuation (S000's) Residential $14,887,453 $16,358,607 $12,413,924 $22,253,442 $24,193,125 Non - Residential 8,592,852 13,256,252 8,249,041 13,024,000 10,354,515 Total $23,480,305 $29,614,859 $20,662,965 $35,277,442 $34,547,640 New Housima Units Single Units 51 29 30 65 66 Multiple Units 0 72 0 0 8 Total 51 101 30 65 74 Source: Construction Industry Research Board Utilities Electricity is provided by Southern California Edison Company and gas is supplied by the Southern California Gas Company. Telephone services are provided by AT &T (successor to SBC and Pacific Bell). Water is supplied by four water companies: Californ ia - American, San Gabriel Valley, Southern California and San Gabriel County Water District. The majority of these organizations obtain water from the Metropolitan Water District of Southern California, while the San Gabriel County Water District and locally drilled wells provide the balance. Sewage treatment services are provided by the County of Los Angeles Sanitation District. Transportation The City's location near several interstate freeways affords residents immediate access to the extensive Southern California freeway network. This network links Rosemead to a number of diverse commercial and recreation activities located throughout Orange, Los Angeles and San Bernardino Counties. Two main east -west thoroughfares pass through the City. The San Bernardino Freeway (Interstate 10) traverse the central portion of the City and the Pomona Freeway (State Route 60) crosses the southern extremity of the City. Rosemead Boulevard (State Route 19) intersects these major routes and continues north to Pasadena, and south to Orange County. Major airports in the Los Angeles Basin are easily accessible by means of the highly developed freeway network in the West San Gabriel Valley. Air cargo and passenger facilities include those at the Los Angeles International Airport, Burbank - Glendale- Pasadena Airport, Long Beach International Airport and Ontario International Airport. All are less than 35 miles from the City. El Monte Airport, located two miles to the east, has facilities to service private aircraft. OHS WEST: 260116199.3 41555 -8 MKH A-6 E Education L Most of the City is located in the Garvey School District and the Rosemead School District. Rosemead has I 1 elementary schools, 3 junior high schools and 1 high school. Continuing education is available through the Los Angeles City Community College District. Los Angeles County is the location of many colleges and universities, both public and private, including such well known institutions as the University of California at Los Angeles, the University of Southern California, Occidental College, Claremont College and the California Institute of Technology. State University campuses are located in Los Angeles, Long Beach, Northridge, Pomona and Dominguez Hills. Community Facilities Health care services are provided by medical centers in Alhambra, San Gabriel and other neighboring communities. Located within the City are 2 fully- equipped mental health centers and a convalescent center. Religious and cultural facilities include 22 churches of various denominations and two libraries. Financial institutions include 9 banks and two savings and loan institutions. Recreational facilities for area residents include the City's own community parks and outdoor recreation offered in the surrounding areas. City facilities include 6 major public parks, 10 playgrounds, two municipal swimming pools, tennis and shuffleboard courts, several baseball diamonds and 2 community centers. Southeast of the City is the Whittier Narrows Dam Recreation Area which includes the Whittier Narrows Golf Course. The San Gabriel Mountains and the Angeles National Forest, both located north of the City, provide additional outdoor recreation opportunities. Rosemead's proximity to the San Bernardino and Pomona Freeways bring the cultural and recreational advantages of Los Angeles and Orange Counties within convenient driving distance. 01 IS Wesr260116199.3 41555 -8 MKI I A -7 0 0 APPENDIX B FORM OF OPINION OF BOND COUNSEL Upon the issuance and sale of the Series 2006B Bonds, Orrick Herrington & Sutcliffe LLP, Los Angeles, California, proposes to render its final approving opinion with respect to the Series 2006B Bonds in substantially the following form: [Date of Delivery] Rosemead Community Development Commission Rosemead, California Re: Rosemead Community Development Commission (Los Angeles County, California) Redevelopment Project Area No. 1 Tax Allocation Bonds Series 2006B (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the Rosemead Community Development Commission (the "Commission ") of $ aggregate principal amount of bonds designated Rosemead Community Development Commission (Los Angeles County, California) Redevelopment Project Area No. 1 Tax Allocation Bonds Series 2006B (the "Bonds "), issued pursuant to the provisions of the Community Redevelopment Law of the State of California (being Part I of Division 24 of the Health and Safety Code of the State of California), as amended, and a Indenture, dated as of October 1, 1993 (the "Original Indenture "), by and between the Commission and U.S. Bank National Association, as successor in interest to State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee "), as amended and supplemented to date, including by that Second Supplement to Indenture, dated as of December 1, 2006 (the "Second Supplement to Indenture," together with the Original Indenture, the "Indenture "). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture. In such connection, we have reviewed the Indenture, the Tax Certificate of the Commission, dated the data hereof (the "Tax Certificate "), opinions of counsel to the Commission, the Trustee, certificates of the Commission, the Trustee, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate and other relevant documents may be changed and certain actions (including, without limitation, the defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves. 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 OHS WEST: 2601161993 41555 -8 MKH B -1 0 0 to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Commission. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture and the Tax Certificate including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against redevelopment agencies in the State of California. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum or waiver 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. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: The Bonds constitute valid and binding limited obligations of the Commission. 2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Commission. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Pledged Tax Revenues and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and upon the terms and conditions set forth in the Indenture. 3. The Bonds are not a lien or charge upon the funds or property of the Commission except to the extent of the aforementioned pledge. Neither the faith and credit nor the taxing power of the State of California or of any political subdivision thereof is pledged to the payment of the principal of or interest on the Bonds. The Bonds are not a debt of the City of Rosemead, the State of California or any of its political subdivisions, and neither said City, said State nor any of its political subdivisions is liable therefor, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Commission. OFIS We5T:260116199.3 41555 -8 MKH B -2 E 0 4. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP Per OHS WES'r:260116199.3 41555 -8 MKr1 B -3 0 0 APPENDIX C DTC AND BOOK -ENTRY ONLY SYSTEM The description that follows of the procedures and recordkecping with respect to beneficial ownership interests in the Series 2006B Bonds, payment of principal of and interest on the Series 2006B Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2006B Bonds, and other Series 2006B Bonds - related transactions by and between DTC Participants and Beneficial Owners, is based on information furnished by DTC which the Commission believes to be reliable, but the Commission takes no responsibility for the completeness or accuracy thereof. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the securities (the "Bonds "). The Bonds will be issued as fully- registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Bond will be issued for the Bonds in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest 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 2.2 million issues of U.S. and non -U.S. equity, corporate and municipal debt issues, and money market instrument 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at wwwAtce,com and www.dtc.org. The information on such websites is not incorporated herein by such reference or otherwise. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on, the books of Direct and Indirect Participants acting on 01 IS WEST 2601161993 41555 -8 MKH C-1 behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds 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. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Commission as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Commission or the Trustee 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, nor its nominee, the Trustee, or the Commission, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Commission or the Trustee, 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. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Commission or the Trustee. Under such circumstances, in the OHS WEST 260116199.3 41555 -8 MKI -I C-2 0 0 event that a successor securities depository is not obtained, Bonds are required to be printed and delivered. The Commission may decide to discontinue use of the system of book - entry-only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. The information herein concerning DTC and DTC's book -entry system has been obtained from sources that the Commission believes to be reliable, but the Commission takes no responsibility for the accuracy thereof. 014S Wesr260116199.3 41555 -8 MKH C -3 APPENDIX D DEFINITIONS AND SUMMARY OF INDENTURE OHS WEST: 260116199.3 41555 -8 MKI I D -1 0 0 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT OI IS WEST: 260116199.3 41555 -8 MKI I E-1 APPENDIX F FORM OF BOND INSURANCE POLICY OHS WEST:260116199.3 41555 -8 MKH F-1 .0 • TABLE OF CONTENTS Page INTRODUCTORYSTATEMENT ................................................................................. ...................I........... I TheSeries 2006B Bonds .................................................................................... ............................... 1 The Commission and Redevelopment Project Area No. I ................................. ............................... 2 TaxAllocation Financing ................................................................................... ............................... 2 BondInsurance ................................................................................................... ............................... 2 TaxExemption .................................................................................................... ..............................2 ContinuingDisclosure ........................................................................................ ............................... 3 AdditionalInformat ion ....................................................................................... ............................... 3 PLANOF FINANCE ...................................................................................................... ............................... 3 General............................................................................................................... ............................... 3 Planof Refunding ............................................................................................... ............................... 3 ESTIMATED SOURCES AND USES OF FUNDS ....................................................... ............................... 4 THESERIES 2006B BONDS ......................................................................................... ............................... 4 Description of the Series 2006B Bonds .............................................................. ............................... 4 DTC and Book -Entry Only System .................................................................... ............................... 5 Redemption........................................................................................................ ............................... 5 Noticeof Redemption ........................................................................................ ............................... 6 DEBT SERVICE SCHEDULES FOR THE SERIES 2006B BONDS AND THE SERIES 1993 BONDS.. 6 SECURITY FOR THE SERIES 2006B BONDS ............................................................ ............................... 7 Pledge and Allocation of Taxes .......................................................................... ............................... 7 ReserveAccounts ............................................................................................... ............................... 9 Issuance of Additional Bonds ........................................................................... ............................... 10 Series 2006B Bonds Not a Debt of the City or the State .................................. ............................... 13 BONDINSURANCE .................................................................................................... ............................... 13 Payment Pursuant to Financial Guaranty Insurance Policy .............................. ............................... 13 Ambac Assurance Corporation ......................................................................... ............................... 14 AvailableInformation ...................................................................................... ............................... 15 Incorporation of Certain Documents by Reference .......................................... ............................... 15 RISKFACTORS ........................................................................................................... ............................... 16 Real Estate and General Economic Risks ........................................................ ............................... 16 Reduction in Assessed Value ........................................................................... ............................... 17 AssessmentAppeals ......................................................................................... ............................... 17 Reductionin Inflationary Rate ......................................................................... ............................... 18 Real Estate and General Economic Risks ........................................................ ............................... 18 State Budget Deficit and Its Impact on Pledged Tax Revenues ....................... ............................... 18 Proposition1 A .................................................................................................. ............................... 20 LimitedObligations .......................................................................................... ............................... 20 HazardousSubstances ...................................................................................... ............................... 20 CertainBankruptcy Risks ................................................................................. ............................... 20 SecondaryMarket ............................................................................................. ............................... 21 Lossof Tax Exemption .................................................................................... ............................... 21 Riskof Earthquake ........................................................................................... ............................... 21 TeeterPlan ........................................................................................................ ............................... 21 Concentration of Land Ownership ................................................................... ............................... 21 OHS WesT260116I99.3 41555 -8 MKI I i 0 TABLE OF CONTENTS (continued) 0 Page TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT ........ 22 Introduction...................................................................................................... ............................... 22 Property Tax Rate and Appropriation Limitations ........................................... ............................... 22 UnitaryProperty ............................................................................................... ............................... 23 Property Tax Administrative Costs .................................................................. ............................... 24 Property Tax Collection Procedures ................................................................. ............................... 25 PlanLimitations ................................................................................................. .............................25 Low and Moderate Income Housing Fund ....................................................... ............................... 27 AssemblyBill 1290 .......................................................................................... ............................... 28 Pass - Through Arrangements ............................................................................ ............................... 28 Proposition218 ................................................................................................. ............................... 28 FutureInitiatives ............................................................................................... ............................... 29 THECOMMISSION ..................................................................................................... ............................... 29 Organization..................................................................................................... ............................... 29 Powers............................................................................................................. ............................... 29 THE REDEVELOPMENT PROJECT AREA NO. 1 ................................................... ............................... 30 ProjectArea Description .................................................................................. ............................... 30 AssessedValues ............................................................................................... ............................... 31 ProjectStatus .................................................................................................... ............................... 32 Controls, Land Use and Building Restrictions ................................................. ............................... 34 Ten Largest Secured Taxpayers ....................................................................... ............................... 34 TAXINCREMENT REVENUES ................................................................................. ............................... 35 ProjectedTax Revenues ................................................................................... ............................... 36 AssessmentAppeals ......................................................................................... ............................... 39 Debt Service and Estimated Coverage ............................................................. ............................... 39 CERTAIN INFORMATION CONCERNING THE CITY ........................................... ............................... 41 CERTAINLEGAL MATTERS .................................................................................... ............................... 41 TAXMATTERS ........................................................................................................... ............................... 41 LITIGATION................................................................................................................ ............................... 43 RATINGS...................................................................................................................... ............................... 43 UNDERWRITING........................................................................................................ ............................... 43 VERIFICATION........................................................................................................... ............................... 44 MISCELLANEOUS...................................................................................................... ............................... 44 APPENDIX A - SUPPLEMENTAL INFORMATION CONCERNING THE CITY OF ROSEMEAD.. A -1 APPENDIX B - FORM OF OPINION OF BOND COUNSEL ...................................... ............................B -I APPENDIX C - DTC AND BOOK -ENTRY ONLY SYSTEM .... : ............................................................ C -1 APPENDIX D - DEFINITIONS AND SUMMARY OF INDENTURE .................... ............................... D -I APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT ................ ............................E -1 APPENDIX F - FORM OF BOND INSURANCE POLICY ....................................... ............................... F -I OHS WEST. 260116199.3 41555 -8 MKH 11 TABLE OF CONTENTS (continued) Page Elid of TOC - Donot_ delete •tlii§� "raphl OFIS WEST: 260116199.3 41555 -8 MKH 111