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CDC - Item 3 - Adoption Of Tax Allocation Bonds IssuesRosemead Community Development Commission TO: HONORABLE MAYOR AND CITY COUNCIL. AND HONORABLE CHAIRMAN AND COMMUNITY DEVELOPMENT COMMISSIONERS, AND HONORABLE CHAIRMAN AND MEMBERS OF THE ROSEMEAD FINANCI FROM: BILL CRO �'!GAUTHORITY , CITY MANAGER AND EXECUTIVE DIRECTOR DATE: FEBRUARY 14. 2006 SUBJECT: ADOPTION OF RESOLUTIONS AUTHORIZING THE ISSUANCE OF TAX ALLOCATION BONDS, SERIES 2006 AND THE EXECUTION OF RELATED DOCUMENTS TO REFUND EXISTING BONDS AND GENERATE NEW MONEY PROCEEDS. AND AUTHORIZING CREATION OF AND CERTAIN ACTIONS OF THE ROSEMEAD FINANCING AUTHORITY At its November 8, 2005 meeting, the CDC selected the firm of Piper Jaffray to serve as senior managing underwriter, and authorized staff to pursue the refunding of the Series 1993A Tax Allocation Bonds. At that time, the Commission also directed staff to pursue a new money component of this transaction, in accordance xvith the new debt capacity made available by the refunding. Since then, the financing team and staff have been engaged in the development of the financing documents and reviewing various structuring options. As a result of this effort, based on market conditions on January 27, 2006, and subject to the limitations under'the Redevelopment Law, the Commission can refund $9.335 million of its outstanding 1993A bonds and expect to generate approximately $5.67 million in new money for eligible capital projects. The refunding produces a present value savings of 5.86% of the refunded principal amount. This would reduce debt service by approximately $180,000 annually. Government Finance Officers Association ( "GFOA "), guidelines generally suggest present value savings in excess of 3% indicate an appropriate level for a refunding. CONI-1:1- AGENDA e P 8838 East Valley Boulevard, CA 91770 Tel 626.569.2100 Fax 626.307.9218 • TO: HONORABLE MAYOR AND CITY COUNCIL, AND HONORABLE CHAIRMAN AND COMMUNITY DEVELOPMENT COMMISSIONERS, AND HONORABLE CHAIRMAN AND MEMBERS OF THE ROSEMEAD FINANCIIAUTHORITY FROM: BILL CRO E, CITY MANAGER AND EXECUTIVE DIRECTOR DATE: FEBRUARY 14, 2006 SUBJECT: ADOPTION OF RESOLUTIONS AUTHORIZING THE ISSUANCE OF TAX ALLOCATION BONDS, SERIES 2006 AND THE EXECUTION OF RELATED DOCUMENTS TO REFUND EXISTING BONDS AND GENERATE NEW MONEY PROCEEDS, AND AUTHORIZING CREATION OF AND CERTAIN ACTIONS OF THE ROSEMEAD FINANCING AUTHORITY At its November 8, 2005 meeting, the CDC selected the firm of Piper Jaffray to serve as senior managing underwriter, and authorized staff to pursue the refunding of the Series 1993A Tax Allocation Bonds. At that time, the Commission also directed staff to pursue a new money component of this transaction, in accordance with the new debt capacity made available by the refunding. Since then, the financing team and staff have been engaged in the development of the financing documents and reviewing various structuring options. As a result of this effort, based on market conditions on January 27, 2006, and subject to the limitations under the Redevelopment Law, the Commission can refund $9.335 million of its outstanding 1993A bonds and expect to generate approximately $5.67 million in new money for eligible capital projects. The refunding produces a present value savings of 5.86% of the refunded principal amount. This would reduce debt service by approximately $180,000 annually. Government Finance Officers Association ( "GFOA "), guidelines generally suggest present value savings in excess of 3% indicate an appropriate level for a refunding. CO MISSION AGENDA ;ITEM No. 3 0 Of particular note in this transaction is the fact that Standard & Poor's has upgraded the bonds from BBB to BBB +. This reflects the improved fiscal health of the project area and reduced concern over the financial condition of the Southern California Edison Company, the project area's major taxpayer. The financing team was also successful in obtaining multiple bond insurance bids, with Ambac being the winning bidder. In addition to providing its bond insurance policy, Ambac has agreed to provide a debt service reserve fund surety policy in an amount equal to one half of the reserve requirement. This allows the release of a portion of the current reserve to reduce the size of the bond transaction. Although documenting the transaction and obtaining bond insurance and rating commitments was delayed over the Christmas holidays, the Commission has benefited by a decline in the interest rate environment between November 8, 2005, and early February. During this time, rates declined approximately 15 basis points. More recently, rates have begun to move higher again. Assuming approval by the City, Authority and Commission on February 14, the Commission would proceed to distribute the Preliminary Official Statement on February 15 to potential bond investors, with the expectation of pricing the transaction on February 23. This will allow us to close the transaction on March 9, refund the existing bonds at that date and have access to the new money proceeds. The Commission /Council has before it two resolutions with documents related to the transaction: Resolution No. 2006 -02 (RCDC) and Resolution No. 2006 -04 (City) authorizes the execution and delivery of the Bonds and includes the following documents: The First Supplemental Indenture sets forth the terms and conditions of this series of bonds. The Purchase Contract is the agreement that will be executed among the Commission, the Rosemead Financing Authority and Piper Jaffray at the time the bonds are sold. Additional documents include a Continuing Disclosure Agreement and Escrow Agreement. The Escrow Agreement is related to the custody of the bond proceeds that will be used to refund the outstanding bonds. The Preliminary Official Statement is the primary disclosure and offering document which is made available to potential bond investors. Resolution No. 2006 -03 (RCDC) and Resolution No. 2006 -05 (City) approves a Joint Powers Agreement, creating a Joint Power Authority to be known as the Rosemead 0 Financing Authority which is necessary to comply with state law requirements for a negotiated sale of the bonds. Following authorization by the Commission and the Council, the Joint Powers Agreement is to be executed, thereby creating the Rosemead Financing Authority. The Authority has before it one resolution and one document for approval related to the transaction: Resolution No. 2006 -01 which authorizes the execution and delivery of a Purchase Contract by and among itself, the Commission and the Underwriter and includes the following document: The Purchase Contract is the agreement that will be executed among the Commission, the Rosemead Financing Authority and Piper Jaffray at the time the bonds are sold. RECOMMENDATION CDC Actions It is recommended that the Community Development Commission adopt Resolution No. 2006 -02 to effect the execution and delivery of bonds and adopt Resolution No. 2006 -03 to form the Rosemead Finance Authority. Council Actions It is recommended that the City approve Resolution No. 2006 -04, authorizing the CDC to sell the bonds and Resolution No. 2006 -05 to form the Rosemead Financing Authority. Financing Authority Action It is recommended that the Rosemead Financing Authority approve the Resolution No: 2006 -01, approving the Purchase Agreement. RESOLUTION NO. 2006-02 RESOLUTION OF THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $16,000,000 OF THE COMMISSION'S REDEVELOPMENT PROJECT NO. 1 TAX ALLOCATION BONDS, SERIES 2006A AND THE EXECUTION AND DELIVERY OF A FIRST 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 intends to provide for the issuance of 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 proposes to sell the Series 2006A Bonds to the Rosemead Financing Authority (the "Authority "), which will in turn sell the Series 2006A Bonds to Piper Jaffray, as underwriter (the "Underwriter "), pursuant to a Purchase Contract (the "Purchase Contract "), among the Commission, the Underwriter and the Authority and pursuant to the DOCSLA1:509388.2 41555 -8 Marks -Roos Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code; WHEREAS, the purchase by the Underwriter of the Series 2006A 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 2006A 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 2006A 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 2006A 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 $16,000,000 aggregate principal amount of Rosemead Community Development Commission, Redevelopment Project No. 1, Tax Allocation Bonds, Series 2006A is.hereby approved. Section 3. The form of the First 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 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 First Supplemental Indenture in 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. DOCSI.A I :5093882 2 41555 -8 0 0 Section 4. The form of Purchase Contract relating to the Series 2006A Bonds among the Authority, 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 2006A Bonds as reflected in the Purchase Contract and to execute and deliver the Purchase Contract in 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 the execution and delivery of the Purchase Contract; provided, however, that such additions, changes or insertions in the Purchase Contract shall not specify a true interest cost of the Series 2006A Bonds in excess of 5.40% with respect to Series 2006A Bonds. Section 5. The form of Continuing Disclosure Agreement relating to the Series 2006A 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 2006A 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 2006A 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 2006A Bonds. 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 a portion 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 DOCSLA1:509388.2 3 41555 -8 desirable to accomplish the lawful issuance, sale and delivery of the Series 2006A Bonds in accordance with the Original Indenture, the First Supplemental Indenture, the Official Statement, this Resolution and all related documents. Section 8. This Resolution shall become effective immediately upon its passage. 1, 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 February 14, 2006, by the following vote, to wit: AYES: NOES: ABSENT: Secretary of the Rosemead Community Development Commission ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION am Authorized Officer ATTEST: City Clerk DOCSLAI: 509388.2 4 41555 -8 0 0 SECRETARY'S CERTIFICATE I, Nina Castruita, Secretary of the Rosemead Community Development Commission, do hereby certify as follows: The foregoing resolution is a full, true and correct copy of a resolution duly adopted by a vote of a majority of the members of the Rosemead Community Development Commission at a regular meeting of said Commission duly and regularly and legally held at the City of Rosemead, California, on February 14, 2006, of which all of such members had due notice, as follows: AYES: NOES: ABSENT: An agenda of said meeting was posted at least 72 hours before said meeting at 8838 E. Valley Boulevard, Rosemead, California, a location freely accessible to members of the public, and a brief description of said resolution appeared on said agenda. I have carefully compared the foregoing with the original minutes of said meeting on file and of record in my office, and the foregoing is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes. Said resolution has not been amended, modified or rescinded since the date of its adoption and the same is now in full force and effect. Dated: .2006. Secretary of the Rosemead Community Development Commission DOCSLA1:509388.2 41555 -8 0 FIRST SUPPLEMENT TO INDENTURE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION TO U.S. BANK NATIONAL ASSOCIATION as Trustee Dated as of March 1, 2006 Relating to $xx,000,000 Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A DOCSLAI: 509332.3 41555 -5 W W B/ W W B • 0 FIRST SUPPLEMENT TO INDENTURE THIS FIRST SUPPLEMENT TO INDENTURE (this "First Supplement') is dated as of March 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 late 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. I 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 hrdenture"), between the Trustee and the Commission: and WHEREAS, the Commission, by Resolution No. 2006 -02, adopted on February 14, 2006 (the "Resolution "), authorized the issuance of not to exceed $16,000,000 aggregate principal amount of its Redevelopment Project Area No. 1, Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds ") for the purpose of financing and refinancing the redevelopment project; and WHEREAS, the Commission has determined to issue the Series 2006A Bonds pursuant to the Original Indenture and this First Supplement, which Original Indenture, as supplemented by this First Supplement, and as hereinafter supplemented, is referred to as the "Indenture"; and DOCSLA 1 :5093323 41555 -8 W WB /W WB 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 2006A 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 2006A Bonds, when authenticated by the Trustee and issued as in this First Supplement and the Original Indenture provided, to be legal, special obligations of the Commission, enforceable in accordance with their terms, and to constitute this First Supplement and the Original Indenture 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 First Supplement and the creation, execution and issuance of the Series 2006A Bonds, subject to the terms hereof, have in all respects been duly authorized; NOW THEREFORE, THIS FIRST 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 XII SERIES 2006A BONDS; AMENDMENTS; MISCELLANEOUS SECTION 12.01 Authorization and Terms of Series 2006A Bonds A series of Bonds to be issued under the Indenture is hereby created and such Bonds are designated as the "Rosemead Community Development Commission, Redevelopment Project Area No. 1, Tax Allocation Bonds, Series 2006A" (herein called the "Series 2006A Bonds "). The aggregate principal amount of Series 2006A Bonds which may be issued and outstanding under this Indenture shall not exceed $16,000,000. The Series 2006A 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 October 1, 2006), and shall mature and become payable on October 1 in each of the years as to principal in the amounts set forth below: DOCSLA I :509332.3 41555 -8 W WB /W WB Maturity Date Principal Interest (October 1) Amount Rate Interest on the Series 2006A Bonds shall be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2006A Bonds shall be issued as fully registered bonds in Authorized Denomination. The Series 2006A Bonds shall be numbered as determined by the Trustee. The Series 2006A 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 September 15, 2006, in which event they shall bear interest from their Dated Date; provided, however, that if, at the time of registration of any Series 2006A Bond, interest is then in default on the Outstanding Series 2006A Bonds, such Series 2006A 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 2006A Bonds. Payment of interest on the Series 2006A Bonds due on or before the maturity or prior redemption of such Series 2006A 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 appeals 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 2006A Bonds, by wire transfer in immediately available funds to an account within the continental United States designated by such Owner. Principal and redemption premiums, if any, on the Series 2006A 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. SECTION 12.02 Form of Series 2006A Bonds The Series 2006A 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 12.03 Terms of Redemption of Series 2006A Bonds. (a) Optional Redemption. -3- DOCSLA I :509332.3 41555 -5 WWB /WN'B [Series 2006A Bonds due on or before October 1, 2015 shall not be subject to redemption before their respective stated maturities. Series 2006A Bonds maturing on or after October 1, 2016 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 Bonds of a single 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, 2015, from funds derived by the COlnnnission from any source, at the redemption price of the principal amount of Series 2006A Bonds called for redemption, together with interest accrued thereon to the date fixed for redemption.] (b) Sinking Account Redemption. Series 2006A 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 12.05 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 2006A 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 2006A 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): Series 2006A Bonds Sinking Payment Date (October 1) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 * Maturity Principal Amount to be Redeemed -4- DOCSLA 1:509332.3 41555 -8 W WB /W WB • 0 (c) Purchase in Lieu of Redemption. In lieu of redemption of any Term Bond pursuant to the provisions of Sections 12.03(a), 12.03(b) and 12.05 hereof, 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 Written Request of the Commission, 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 Account) as the Commission may in its discretion determine, but not in excess of the principal amount thereof plus accrued interest to the purchase 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. SECTION 12.04 Application of Proceeds of Series 2006A Bonds Upon receipt of payment for the Series 2006A 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 2006A Expense Account in the Expense Fund an amount equal to $ to pay costs incurred in connection with the issuance of the Series 2006A Bonds. (ii) The Trustee shall deposit the amount of $ in the Reserve Account. (iii) The Trustee shall transfer $ of the proceeds of the Series 2006A Bonds to the Commission for deposit into the Redevelopment Fund. (iv) The Trustee shall deposit the amount of $ in the refunding escrow established.under the Escrow Agreement. In order to verify the use of and the remaining available amount of the Series 2006A 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 2006A Bonds. SECTION 12.05 Series 2006A Sinking Account On or before September 15 of each year, commencing September 15, 20_; the Trustee shall set aside from the Debt Service Fund and deposit in the Sinking Account an amount of money equal to the amount required to redeem Series 2006A Bonds on the next succeeding October 1, .pursuant to Section 12.03(b) hereof. All such moneys in the Term Bond Sinking Account shall be used by the Trustee to redeem the Series 2006A Bonds in accordance with Section 12.03(b) hereof. SECTION 12.06 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. -5- DOCS LA I :509332.3 415554 WWBIWWB Bond Insurer The term "Bond Insurer" means with respect to Series 2006A Bonds, Ambac Assurance: Commission The term "Commission" means the Rosemead Community Development Commission, formerly known as the Rosemead Redevelopment Agency, a pubic body, corporate and politic, duly organized and existing under and pursuant to the Law. Commission Indebtedness 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 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. (iii) Commission Indebtedness bearing interest at a variable rate of interest shall be deemed to accrue interest at the lesser of the maximum rate specified or 12% per annum. Dated Date The term "Dated Date" means with respect to Series 2006A Bonds the date of initial issuance and delivery thereof. Escrow Agreement The term "Escrow Agreement" means the Escrow Agreement, dated as of March 1, 2006 Between the Commission and U.S. Bank National Association, as escrow agent thereunder. Financial Guaranty Insurance Policy The tens "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 2006A Bonds The term "Series 2006A Bonds" means the Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A. Surety Bond The term "Surety Bond' means the surety bond issued by Ambac Assurance guaranteeing certain payments into the Reserve Account with respect to the Bonds as provided therein and subject to the limitations set forth therein. -6- DOCSLA 1:509332.3 41555 -8 W WB /WRB (b) The following definitions are amended in the following manner: The definition of Bond Insurance Policy contained in Section 1.01 of the Indenture is amended to read as follows: The term 'Bond Insurance Policy" means, the municipal bond insurance policy, if any, issued by the applicable Bond Insurer and guaranteeing, in whole or in part, the payment of principal of and inferest on a Series of Bonds, and means with respect to the Series 2006A Bonds, the Financial Guaranty Insurance Policy. The definition of Pledged Tax Revenues contained in Section 1.01 of the Indenture is amended to read as follows: 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 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 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 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. (c) Section 4.03 of the Indenture is amended to read as follows: The Commission covenants with the Owners of all of the Bonds at any time Outstanding that it will not enter into any Commission Indebtedness or make any expenditure payable from taxes allocated to the Commission under the 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 Law and the Redevelopment Plan. In furtherance of the covenant set forth in this Section 4.03, 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,herein as, all monies allocated to the Commission pursuant to Section 33670 of the 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, herein defined) and -7- DOCS LA 1:509332.3 41555-8 WWB /WWB • • 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 audited financial statements and the pro forma statement shall be accompanied by a written certificate of the Commission stating that the Commission is in compliance with its obligations hereunder. The Trustee shall not be responsible for the review of such financial statements. The pro forma statement shall be prepared on or before March I of each year or as soon thereafter as practicable, commencing March 1, 2007, and shall set forth: (1) 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 (2) 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 $5,0,00) 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 Tax Revenues from the Redemption Account to the Special Fund. ARTICLE XIII ADDITIONAL PROVISIONS RELATING TO BOND INSURER AND SURETY BOND SECTION 13.01 Additional Notice Requirements The following notices shall be given to Ambac Assurance as Bond Insurer for the Series 2006A Bonds: In DOCKA 1:5093323 41555 -8 W WB /WRB 0 0 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: (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 13.02 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 13.03 No Defeasance if 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 2006A Bonds shall be paid by the Bond Insurer pursuant to the Financial Guaranty Insurance Policy, the Bonds shall remain Outstanding for all purposes, not be -9- DOCSLA1:509332.3 41555 -8 W WB /W WB 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. SECTION 13.04 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 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 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 Bonds entitled to receive full or partial interest payments from Ambac Assurance and (ii) to pay principal upon Bonds surrendered to the Insurance Trustee by the registered owners of 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 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 Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such 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, -10- DOCSLA 1:509332.3 41555 -8 W WB /W AB they must surrender their Bonds for payment thereon first to the Trustee who shall note on such 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. (e) in the event that the Trustee has notice that any,payment of principal of or interest on an 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 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 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 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 Bonds by the registered owners thereof together with proof of the payment of principal thereof. SECTION 13.05 Pavment Procedure Pursuant to the Surety Bond As long as the Surety Bond shall be in full force and effect, the Commission and the Trustee, as appropriate, agree to comply with the following provisions: (a) hi the event and to the extent that moneys on deposit in the Interest Account and the Principal Account or the Sinking Account, plus all amounts on deposit in and credited to the Reserve Account in excess of the amount of the Surety Bond, are insufficient to pay the amount of principal and interest coming due, then upon the later of: (i) one (1) day after receipt by the General Counsel of Ambac Assurance of a demand for payment in the form attached to the Surety Bond as Attachment 1 (the "Demand for Payment'), duly executed by the Trustee certifying that payment due under the Indenture has not been made to the Trustee; or (ii) the payment date of the Bonds as specified in the Demand for Payment presented by the Trustee to the General Counsel of Ambac Assurance, Ambac Assurance will make a deposit of funds in an account with the Trustee or its successor, in New York, New York, sufficient for the payment to the Trustee, of amounts which are then due to the Trustee under the Indenture (as specified in the DOCSLA I :509332.3 41555 -8 W WB /W WB • 0 Demand for Payment) up to but not in excess of the Surety Bond Coverage, as defined in the Surety Bond; provided, however, that in the event that the amount on deposit in, or credited to, the Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, Surety Bond or other such funding instrument (the "Additional Funding Instrument "), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. (b) the Trustee shall, after submitting to Ambac Assurance the Demand for Payment as provided in (a) above, make available to Ambac Assurance all records relating to the Funds and Accounts maintained under this Indenture. (c) the Trustee shall, upon receipt of moneys received from the draw on the Surety Bond, as specified in the Demand for Payment, credit the Reserve Account to the extent of moneys received pursuant to such Demand. (d) the Reserve Account shall be replenished in the following priority: (i) principal and interest on the Surety Bond . and on any. Additional Funding Instrument shall be paid from first available Pledged Tax Revenues on a pro rata basis; (ii) after all such amounts are paid in full, amounts necessary to fund the Reserve Account to the required level, after taking into account the amounts available under the Surety Bond and any Additional Funding Instrument shall be deposited from next available Pledged Tax Revenues. SECTION 13.06 Third Partv Beneficiary To the extent that this Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of this Indenture, the bond Insurer is hereby explicitly recognized as being a third -party beneficiary hereunder and_ may enforce any such right, remedy or claim conferred, given or granted hereunder. ARTICLE XIV MISCELLANEOUS SECTION 14.01 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 2006A 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 2006A 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 2006A Bonds may, take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. _17_ DOCSLA15093323 41555 -8 W W B/W WB SECTION 14.02 Terms of Series 2006A Bonds Subject to the Indenture Except as in this First Supplement expressly provided, every term and condition contained in the Indenture shall apply to this First Supplement and to the Series 2006A Bonds with the same 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 First Supplement. This First 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 14.03 Due Authorization The Commission has reviewed all proceedings heretofore taken relative to the authorization of the Series 2006A 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 2006A Bonds in the manner and upon the terms in the Indenture and this First 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 2006A 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 2006A Bonds. SECTION 14.04 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 14.05 Governin>? Law This First Supplement shall be governed and construed in accordance with the laws of the State of California. -13- DOCSLA I :509332.3 41555 -8 W WB /W WB 6 IN WITNESS WHEREOF. the ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION has caused this First 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 First 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: IC Chairperson Secretary U.S. BANK NATIONAL ASSOCIATION, as - Trustee By Authorized Officer -14- DOCSLA I ; 509332.3 41555 -5 W W B/W W B E APPENDIX A [Form of Series 2006A Bond] 0 No. A -I $ ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION BOND, SERIES 2006A RATE OF INTEREST: MATURITY DATE: DATED DATE: CUSIP: % October 1, _ March —, 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 September 15, 2006 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 October 1, 2006 and semiannually thereafter on April 1 and October 1 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 Los Angeles California. 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 persons 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 Bonds, Series 2006A (the "Bonds'), limited in aggregate principal amount to $ , all of like DOCSLAI:509332.3 41555 -5 WWB /WWB A -I 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, 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 anv 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. 1 Area of the Commission, a duly adopted redevelopment project in the city of Rosemead, California, as more particularly described in Indenture. The I3onds 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 Tax Revenues (as that term is defined in the Indenture and herein called the "Tax Revenues "), and the Commission is not obligated to pay them except from the Tax Revenues. The Bonds are equally secured by a pledge of, and charge and lien upon, the Tax Revenues, and the 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 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 Tax Revenues shall be deposited, and as an irrevocable charge the Commission has allocated the 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 flue 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. 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 DOCSLA I :509332.3 41555 -8 W W B/W W B A -2 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 terns 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 evet 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. 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. DOCSLA1:509332.3 41555 -8 W W B/ W W B A -3 P 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 Attest: Secretary Chairperson DOCSLA I :509332.3 41555 -8 WWB/WWB A -4 This is one of the Bonds described in the within - mentioned Indenture which has been authenticated and registered on 1 2006. U.S. BANK NATIONAL ASSOCIATION, as Trustee C Authorized Signatory DOCSLA I :509332.3 41555 -8 WWB /WRB A -5 s � BOND INSURANCE 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 hrsurai ce 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 DOCSLA 1:509332.3 a 1555 -s W W B/W W B 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. DOCSLAI: 5093323 41555 -8 W W BM' W B A -7 0 0 $ ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION BONDS SERIES 2006A PURCHASE CONTRACT February _,2006 Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Rosemead Financing Authority 8838 E. Valley Boulevard Rosemead, California 91770 Ladies and Gentlemen: Piper .laffray & Co. (the "Underwriter ") hereby offers to enter into this Purchase Contract (the "Purchase Contract ") with the Rosemead Community Development Commission (the "Commission") and the Rosemead Financing Authority (the "Authority ") for the purchase by the Underwriter of the Commission's Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "). Capitalized terms not otherwise defined herein shall have the meaning assigned such terms in the First Supplement, hereinafter defined. This offer is made subject to acceptance thereof by the Commission and the Authority 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 and the Authority 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, the Authority and the Underwriter. 1. Purchase and Sale of Bonds Upon the terns and conditions and upon the basis of the representations herein set forth, (i) the Authority hereby agrees to purchase from the Commission but only to the extent the Underwriter is obligated hereunder to purchase from the Authority, for offering to the Underwriter and the Commission hereby agrees to sell to the Authority for such purpose, and (ii) the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell to the 'Underwriter, all (but not less than all) of the Series 2006A Bonds in the aggregate principal amount of S *, at the purchase price of $ DOCSLAI:515200.3 41555 -8 WWB /WWB • (representing the par amount of the Series 2006A Bonds, less original issue discount of $ and an underwriting discount of $ The Series 2006A Bonds will be issued pursuant to a First Supplement to Indenture, dated as March 1, 2006 (the "First Supplement ") by and between the Commission and U.S. Bank National Association, as trustee (the "Trustee "). The Series 2006A 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 First Supplement and the Official Statement (as hereinafter defined) and in Appendix I attached hereto. The Series 2006A Bonds shall be authorized to be issued by a resolution duly adopted by the Commission (the "Bond Resolution ") and by the First Supplement, 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 Series 2006A Bonds will be purchased and sold by the Authority pursuant to the Marks -Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5, Division 7 of Title,l (commencing with Section 6584) of the California Government Code (the "JPA Act "). The Underwriter agrees to make a bona fide public offering of the Series 2006A 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 2006A 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 2006A Bonds, dated_ February , 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 2006A 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 2006A 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 2006A Bonds. 3. Delivery of Bonds At 9:00 a.m., applicable California time, on March , , 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 DOCSLA 1; 515200.3 41555 -8 WWB /WWB 2 i • behalf of the Commission, at a location or locations to be designated by the Underwriter, on behalf of the Commission and the Authority, in New York, New York (or such other place as may be designated by the Underwriter prior to the Closing Date), the Series 2006A 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 2006A Bonds as set forth in Section 1 hereof by same day funds (such delivery and payment being herein referred to as the "Closing "). The Series 2006A 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 Authority The Authority represents that: (a) The Authority is a joint powers authority, duly organized and existing, and authorized to transact business and exercise powers under and pursuant to the provisions of the Constitution and the laws of the State of California and has, and at the date of the Closing will have, full legal right, power and authority to enter into this Purchase Contract, and to carry out and to consummate the transactions contemplated by this Purchase Contract and the Official Statement; (b) The Authority has complied, and will at the Closing be in compliance, in all respects, with the JPA Act and any other applicable laws of the State of California: (c) By official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in this Purchase Contract; (d) The execution and delivery of this Purchase Contract, and compliance with the provisions 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; (c) All approvals, consents and orders of any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to execution and delivery by the Authority of this Purchase Contract and the purchase from the Commission and sale to the Underwriter of the Series 2006A Bonds have been obtained or will be obtained prior to the Closing (provided the Authority shall not be responsible for state blue sky filings); (f) 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 Authority, threatened against the Authority, affecting the existence of the Authority or the titles of its members or officers, or seeking to enjoin the purchase and sale of the Series 2006A Bonds by the Authority, or in any way contesting or affecting the validity or enforceability of the Series 2006A Bonds 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 DOCSLA 1:515200.3 41555 -8 WWB /WWB J of the Authority to purchase and sell the Series 2006A Bonds, or to execute and deliver this Purchase Contract nor is there any basis therefor wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Series 2006A Bonds or this Purchase Contract; and (g) Any certificate signed by an authorized officer of the Authority and delivered to the Underwriter shall be, Oeemed a representation and warranty of the Authority to the Underwriter as to the statements made therein. 5. 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 2006A Bonds to the Underwriter as provided herein, and (D) to carry out and to consummate the transactions contemplated by the Bond Resolution, the First Supplement, 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 2006A Bonds to the Underwriter or (ii) the date the Underwriter does not retain an unsold balance of the Series 2006A Bonds for sale to the public; DOCKA 1:515200.3 41555 -8 WWB /WWB 4 . • (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 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 o£ and the performance by the Commission of the obligations on its part contained, in the Bond Resolution, the First Supplement, the Series 2006A Bonds and this Purchase Contract; (h) The adoption of the Bond Resolution and the execution and delivery of the Series 2006A Bonds, the First Supplement 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 First Supplement; (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 First Supplement and the issuance, sale and delivery of the Series 2006A Bonds have been obtained or will be obtained prior. to the Closing (provided the Commission shall not be responsible for state blue sky filings); (j) The Series 2006A Bonds when issued, authenticated and delivered in accordance with the Bond Resolution and the First Supplement 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 First Supplement 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 DOCSLA 1:515200.3 41555 -8 WWB /WWB 5 • • 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); 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 enjoin the sale, issuance or delivery of the Series 2006A 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 2006A Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Series 2006A Bonds, the Bond Resolution, the First Supplement 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 2006A Bonds, to adopt the Bond Resolution or to execute and deliver the Purchase Contract or the First Supplement nor is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Series 2006A Bonds, the Bond Resolution, the First Supplement or this Purchase Contract; (in) 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 2006A Bonds shall be secured in the manner and to the extent set forth in the Bond Resolution and the First Supplement, 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 2006A Bonds are being used to (1) refund a portion of the Commission's outstanding Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993A Bonds ") scheduled to mature on October 1, 2006 through October 1, 2018; (2) to finance redevelopment activity in the Redevelopment Project Area No. 1; (3) to pay the fees associated with a surety which will be used to fund a debt service reserve account; and (4) to pay costs of issuance related to the Series 2006A 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 DOCSLA I :515200.3 41555 -8 WWB /W WB 6 • • I Commission Resolution 93 -27, adopted on October 13, 1993. The final audit report of the Department accepted the Commission's prepayment methodology. 6. Representations of the Underwriter The Underwriter represents that it has full right, power, and authority to enter into this Purchase Contract. 7. 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. 8. Conditions to Obligations of Underwriter The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties and agreements of the Commission and the Authority 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 2006A Bonds on the Closing Date is subject to the performance by the Commission and the Authority of their respective obligations hereunder at or prior to the Closing. The parties hereto expressly understand that the obligations to purchase the Series 2006A 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 and the Authority contained. herein shalI 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 2006A 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 2006A Bonds or with respect to the security pledged to pay debt service on the Series 2006A Bonds, that, in the Underwriter's reasonable judgment, materially adversely affects the market for the Series 2006A Bonds, or the market price generally of obligations of the general character of the Series 2006A 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 DOCSLAI:515200.3 41555 -8 WWB /WWB 7 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 2006A Bonds or enforce contracts for the sale of the Series 2006A Bonds, or (iv) there 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 2006A Bonds or enforce contracts for the sale of the Series 2006A 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 2006A Bonds or enforce contracts for the sale of the Series 2006A 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 2006A Bonds, any obligations of the general character of the Series 2006A Bonds or the Bond Resolution or the First Supplement 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 2006A Bonds or obligations of the general character of the Series 2006A 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 2006A 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 2006A Bonds; and (c) At or prior to the Closing, the Underwriter shall receive the following: DOCSLAI. 515200.3 41555 -8 W WBIW WB 8 (1) The unqualified approving opinion of Orrick, Herrington & Sutcliffe LLP ( "Bond Counsel ") with respect to the Series 2006A 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 2006A Bonds, addressed_ to the Underwriter, Bond Counsel and the 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 Second Supplement and the First 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 First Supplement, 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 First Supplement, the Escrow Agreement and the Continuing Disclosure Agreement; (iii) compliance with the provisions on the Trustee's pant contained in the Bond Resolution, the First Supplement, 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 First Supplement, 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 DOCSLA 1:511200.3 41555 -8 W WB /W WB 9 0 0 properties or assets held by the Trustee pursuant to the lien created by the Bond Resolution, the First Supplement, 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 First Supplement, the Escrow Agreement and the Continuing Disclosure Agreement; and (iv) the Trustee has not been served in any action, suit, proceeding, inquiry or inyestigation, 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 their respective offices or seeking to prohibit, restrain or enjoin the issuance, sale and delivery of the Series 2006A Bonds or the collection of revenues pledged or to be pledged to pay the principal of, premium, if any, and interest on the Series 2006A 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 First Supplement, 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 First Supplement, 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 First Supplement; (9) Two copies of the Escrow Agreement; (10) Two copies of the Continuing Disclosure Agreement; (1 1) Two certified copies of the Bond Resolution; (12) Receipt of a municipal bond insurance policy guaranteeing payment of principal and interest on the Series 2006A 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, the Reserve Surety Bond and the Policy contained in the Official Statement, and the enforceability of the Reserve Surety Bond and 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 2006A Bonds have been DOCSI_A I :515200.3 41555 -8 WWB /WWB 10 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) The consent of GRC Associates, Inc. to the use of their report dated L _, 2006], in the Preliminary Official Statement and the Official Statement; (15) A certificate of GRC Associates, Inc., dated the Closing Date, to the effect that, the Fiscal Consultant affirms the accuracy of the data in the tables in the Preliminary Official Statement and the Official Statement which references such Fiscal Consultant and any statements and assumptions attributed to the Fiscal Consultant appearing in the Preliminary Official Statement and the Official Statement; (16) 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; (17) The opinion of counsel to the Trustee, in form and substance acceptable to the Underwriter; and (18) 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 and the Authority with this Purchase Contract, legal requirements (including tax exemption), and the performance or satisfaction by the Commission and the Authority at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Commission and the Authority. 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 or the Authority 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 none of the Underwriter, the Commission nor the Authority shall have any further obligations hereunder, except as provided its 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. 9. Expenses DOCSLA1:515200.3 41555 -8 W WB /W WB • • 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 2006A 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 2006A 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 2006A Bonds; (v) the disbursements of the Commission and the Authority in connection with the Series 2006A 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 2006A 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 First Supplement and the Series 2006A Bonds and the preparation and adoption of the Bond Resolution. 10. Qualification under Securities Laws The Commission and the Authority agree to cooperate with the Underwriter in any endeavor to qualify the Series 2006A 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 neither the Commission nor the Authority shall 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 and the Authority consents to the use of the Preliminary Official Statement and Official Statement by the Underwriter in obtaining such qualifications. 11. Notice Any notice or other communication to be given to the Commission or the Authority 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 12. 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] DOCSLA 1:515200.3 41555 -8 WWB /WWB 12 0 0 13. 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 2006A Bonds and (b) any termination of this Purchase Contract. Very truly yours, PIPER JAFFRAY & CO. By: Accepted and to as of the date first written above: ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION IC Authorized Officer ROSEMEAD FINANCING AUTHORITY IC Attest: Authorized Officer Secretary Authorized Representative DOCSLA1:51 5200.3 41555 -5 WWB /WWB 13 APPENDIX MATURITY SCHEDULE Series 2006A Bonds Maturity (October 1) Interest Amount Rate Yield S — % Series 2006A Term Bonds due October 1, 2022 — Yield — DOCSLA 1: 5152003 41555 -8 WWB /WWB I -1 EXHIBIT A /Form of Opinion of Disclosure 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 Bonds Revenue Refunding Bonds, Series 2006A Ladies and Gentlemen: We have acted as disclosure counsel to the Rosemead Community Development Commission (the "Agency "), as the Commission on this date of $ * aggregate principal amount of Redevelopment ]'reject Area No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "). In that cormection, we have reviewed a printed copy of the official statement of the Commission, dated February _, 2006, with respect to the Series 2006A Bonds (the "Official Statement "), the Purchase Contract, dated February _, 2006 (the "Purchase Contract'), among the Commission, the Rosemead Financing Authority and Piper Jaffray & Co., as underwriter (the "Underwriter "), certificates and opinions of the Commission, the Authority, the County of San Diego 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 2006A Bonds and the exclusion of interest thereon from gross income for federal income tax purposes, and the legality, validity and enforceability of the First Supplement, the Master Pledge Agreement, the Second Supplement, and any laws, documents or instruments that may be related to the issuance, payment or security of the Series 2006A 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 DOCSLA I :i 15200.3 41555-8 WW6IWWB A -I 9 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 Authority and their respective counsel, Public Financial Management, Inc., as financial advisor, GRC Associates, Inc., as fiscal consultant, 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 2006A 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 or the Authority maybe 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 the Authority, 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 DOCSLA I :515200.3 41555 -8 WWB/N'WB - A -2 EXHIBIT B [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. I Tax Allocation Bonds Series 2006A Ladies and Gentlemen: We have acted as counsel to the Rosemead Community Development Commission (the "Commission ") in connection with its sale of its Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "). The Series 2006A Bonds are being issued pursuant to Resolution No. , adopted by the Commission on February 14, 2006 (the 'Bond Resolution "), a First Supplement to Indenture, dated as of March 1, 2006 (the "First Supplement ") between the Commission and U.S. Bank National Association, as trustee (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 2006A Bonds, dated as of March 1, 2006 (the "Continuing Disclosure Agreement') between the Commission and the Trustee, the Escrow Agreement, dated as of March 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 February _, 2006 (the "Official Statement') relating to the Series 2006A Bonds. The First Supplement, the Continuing Disclosure Agreement and the Escrow Agreement are collectively referred to herein as the "Issuing Documents." 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: DOCSLA I :515200.3 41555 -8 WWBM'WB C-1 0 (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 Issuing Documents 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 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 2006A Bonds or the Issuing Documents or seeking to restrain or enjoin the repayment of the Series 2006A Bonds or in any way contesting or affecting the validity of the Series 2006A Bonds or the Issuing Documents or any of the transactions referred to therein or contemplated thereby or contesting the authority of the Commission DOCSLA 1:515200.3 41555 -8 W W B/ W W B C-2 ! ! to enter into or perform its obligations under any of the Series 2006A 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 2006A Bonds or affects in any manner the right or ability of the Commission to enter into the Series 2006A Bonds or to collect or pledge the Pledged Tax Revenues for repayment of the Series 2006A 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 DOCSLAI:i I5 ?00.3 41555 -8 W WB /W Wn C -3 CONTINUING DISCLOSURE AGREEMENT RELATING TO THE SERIES 2006A BONDS . THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement'), is executed and entered into as of January 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, pursuant to the First Supplement to Indenture, dated as of January 1. 2006, by and between the Commission and.the.Trustee (the "First Supplement'), the Commission has issued the Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (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 Disclosure 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 I. Definitions Capitalized undefined terms used herein shall have the meanings ascribed thereto in the First Supplement. ]n addition, the following capitalized terms shall have the following meanings: "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. DOCSLA IS 152011 41555 -8 • "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 February _, 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 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. (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: DOCSLA1:515202.1 41555 -8 2 0 • (i) determine each year prior to the date for providing the Annual Report the name atnd 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 [and using the same assumptions]. (iv) An update of the information contained in Table [61 of the Official Statement for the most recently completed fiscal. year. (v) An update of the information contained in Table [7] of the Official Statement for the most recently completed fiscal year.. (vi) An update of the information contained in Table [8] of the .Official Statement for the most recently completed fiscal year. (vii) 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 hnpact on Pledged Tax Revenues" in the Official Statement. DOCSLAI 515202.1 41555 -8 3 0 (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. (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 DOCS LA I :515202.1 41555 -8 4 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. 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 First Supplement. 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, 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 DOCSLA 1 .515202.1 41555 -a 5 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 Altent 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 First Supplement for amendments to the First Supplement 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. 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 DOCSLA I :515202.1 41555 -8 6 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(f) 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 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 Amival Report or notice of occurrence of a Listed Event. Section 10. Default In the event of a failure of the Commission or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee may (and, 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), or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Commission or the Trustee, as the case may be, 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 First Supplement, 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 VII of the First Supplement] is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the First Supplement, 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 infonnation 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 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 First Supplement. 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 Agenct may conclusively rely upon the Annual Report DOCSLA I :515202.1 41555 -8 7 • 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 First _Supplement 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. DOCSLA I :5I 5202.1 41555 -8 .8 E IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ATTEST: City Clerk By: Chairperson U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent By: Authorized Officer DOCSLAI: 515202.1 41555-8 9 EXHIBIT A 0 NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Rosemead Comiunity Development Commission Name of Bond Issue: Rosemead Community Development Commission Redevelopment Project Area No. I Tax Allocation Bonds, Series 2006A Date of Issuance: February _, 2006 NOTICE IS HEREBY GIVEN that the Rosemead Community Development Commission (the "Commission ") has not provided an Amoral Report with respect to the above - named Bonds as required by the Continuing Disclosure Agreement, dated as of January 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 .1 Dated: cc: Rosemead Community Development Commission U.S. Bank National Association, as Trustee, on behalf of the Rosemead Community Development Commission By: DocSLA I 515202.1 41555 -8 A -1 0 ESCROW AGREEMENT by and between ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION and U.S. BANK NATIONAL ASSOCIATION as Trustee Dated as of March 1, 2006 Relating to Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds Series 1993A DOCSLA 1:515201.2 41555 -8 W14B /WWB ESCROW AGREEMENT This ESCROW AGREEMENT, (the "Agreement "), made and entered into as of March 1, 2006, by and between the Rosemead Community . Development Commission (the "Commission"), and U.S. Bank National Association, a national banking association organized and existing under the laws of the United States of America, having a corporate trust office located in Los Angeles, California, aqd being qualified to accept and administer the trusts hereby created, as successor trustee (the "Trustee ") and acting as escrow agent hereunder (in such capacity, the "Escrow Agent "), WITNESSETH: WHEREAS, the Commission has heretofore issued its Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993 Bonds "), pursuant to the terms of an Indenture, dated as of October 1, 1993 (the "Original Indenture "), by and between the Commission and U.S. Bank National Association (as successor to State Street Bank and Trust. Company of California, N.A.), as successor trustee; WHEREAS, the Commission has determined to issue its Rosemead Community Development Commission Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (the "Refunding Bonds ") in the aggregate principal amount of $ *pursuant to the terms of a First Supplement to Indenture, dated as of March 1, 2006 (the "First Supplement'), by and between the Commission and the Trustee; WHEREAS, the Refunding Bonds are being issued for the purpose of providing moneys which will, among other things, be sufficient (together with other moneys and interest earnings thereon) to redeem the Series 1993 Bonds scheduled to mature on October 1, 2006 through October 1, 2018 (the "Refunded Bonds "), on April 10, 2006, at a redemption price equal to 100% of the principal amount of the Refunded Bonds plus accrued interest thereon to the redemption date, such amount hereinafter referred to as the "Redemption Price"; WHEREAS, the First Supplement contemplates the setting aside of a portion of the proceeds of the Refunding Bonds in order to provide for the payment of the Redemption Price of the Refunded Bonds and that such proceeds shall be deposited in a special escrow fund to be created hereunder to be known as the Refunding Escrow to be maintained by the Escrow Agent (the "Refunding Escrow "); and WHEREAS, the Commission has taken action to cause to be issued or delivered to the Escrow Agent for deposit in or credit to the Refunding Escrow certain securities and investments consisting of non - callable direct obligations of, or non- callable obligations guaranteed by, the United States of America (the "Investment Securities "), all as listed on Schedule I attached hereto and made a part hereof, in an amount which, together with income or increment to accrue on such securities, have been certified by The Arbitrage Group, Inc. to be sufficient to pay when and as due the Redemption Price of the Refunded Bonds; NOW, THEREFORE; the Commission and the Escrow Agent hereby agree as follows: DOCSLA1:5152012 41555 -8 WWBAMB C� Section 1. Establishment Funding and Maintenance of Refunding Escrow; Notice of Redemption (a) Pursuant to the First Supplement, the Commission has caused the Trustee to transfer to the Escrow Agent the slim of S from the proceeds of the`Refunding Bonds. The Escrow Agent hereby accepts and acknowledges receipt of such monies. The Escrow Agent agrees to establish aqd maintain until the Redemption Price of the Refunded Bonds has. been paid in full a fund designated as the "Refunding Escrow," and to hold the securities, investments and moneys therein at all times as a special and separate trust fund (wholly segregated from all other securities, investments or moneys on deposit with the Escrow Agent). All securities, investments and moneys in the Refunding Escrow are hereby irrevocably pledged, subject to the provisions of Section 2 hereof, to secure the payment of the Redemption Price of the Refunded Bonds. (b) The Escrow Agent is hereby further irrevocably instructed to give notice of the redemption of the Refunded Bonds scheduled for redemption on April 10, 2006 at the time and in the manner provided in the Original Indenture in substantially the form attached hereto as Exhibit A and otherwise in conformity with any applicable requirements of the Original Indenture. Section 2. Investment of the Refunding Escrow (a) The Commission hereby directs the Escrow Agent to accept in the name of the Commission, for the account of the Refunding Escrow, the Investment Securities listed on Schedule I hereto. Except as otherwise provided in this Section, the Escrow Agent shall not reinvest any remaining portion of the Refunding Escrow and shall hold such portion uninvested in the Refunding Escrow. (b) Upon the written direction of the Commission, but subject to the conditions and limitations herein . set forth, the Escrow Agent shall purchase substitute Investment Securities with the proceeds derived from the sale, transfer, redemption or other disposition of Investment Securities then on deposit in the Refunding Escrow in accordance with the provisions of this Section 2(b). Such sale, transfer, redemption or other disposition of such Investment Securities then on deposit in the Refunding Escrow and substitution of other Investment Securities of the Commission are permitted hereunder but only by a simultaneous transaction and only if: (i) a nationally recognized firm of Independent Certified Public Accountants (the "Independent Certified Public Accountants ") or such other qualified 'firm selected by the Commission shall certify that (A) the Investment Securities to be substituted, together with the Investment Securities which will continue to be held in the Refunding Escrow, will mature in such principal amounts and earn interest in such amounts and, in each case, at such times so that sufficient moneys will be available from maturing principal and interest on such Investment Securities held in the Refunding Escrow together with any uninvested moneys, to make all payments required by Section 3 hereof which have not previously been made, and (B) the amounts and dates of the anticipated payments by the Escrow Agent of the Redemption Price will not be diminished or postponed thereby; and (ii) the Escrow Agent shall receive an opinion of nationally recognized bond counsel to the effect that the sale, transfer, redemption or other disposition and substitution of Investment Securities will not adversely affect the exclusion DOCSLAI .515201.2 41555 -8 WWB/ WWB3 of interest on the Refunding Bonds.or the Refunded Bonds from gross income for federal income tax purposes. (c) Upon the written direction of the Commission, but subject to the conditions and limitations herein set forth, the Escrow Agent will apply any moneys received from the maturing principal of or interest or other investment income on any Investment Securities held in the Refunding Escrow, or the proceeds from any sale, transfer, redemption or other disposition of hrvestment Securities pursuant to Section 2(b) not required for the purposes of said Section, as follows: (1) to the extent such moneys will not be required at any time for the purpose of making a payment required by Section 3 hereof, as shall be certified to the Escrow Agent by a nationally recognized firm of Independent Certified Public Accountants or such other qualified firm selected by the Commission, such moneys shall be paid over to the Commission upon the written direction of the Commission as received by the Escrow Agent, free and clear of any trust, lien, pledge or assignment securing the Refunded Bonds or' otherwise existing hereunder, after provision for payment of amounts due the Escrow Agent pursuant to Sections 4 and 11 hereof, and (2) to the extent such moneys will be required for such purpose at a later date, such moneys shall, to the extent practicable and at the written direction of the Commission, be invested or reinvested in Investment Securities maturing at times and in amounts sufficient to pay when due the Redemption Price (provided that (A) the amount of the funds to be realized from time to time from such investment or reinvestment shall be certified by a nationally recognized firm of Independent Certified Public Accountants or such other qualified firm selected by the Commission, and (B) the Commission shall deliver to the Escrow Agent an opinion of nationally recognized bond counsel to the effect that such investment or reinvestment will not adversely affect the exclusion of interest on the Refunding Bonds or the Refunded Bonds from gross income for federal income tax purposes) and interest earned from such investments or reinvestment shall be retained by the Escrow Agent for such purpose. (d) The Escrow Agent shall not be liable or responsible for any loss resulting from any reinvestment made pursuant to this Agreement and in full compliance with the provisions hereof. Section 3. Payment and Redemption of the Refunded Bonds Except as otherwise provided in Section 2, the Commission hereby requests and irrevocably instructs the Escrow Agent to deposit - in the Refunding Escrow the principal of and interest on the Investment Securities held for the account of the Refunding Escrow promptly as such principal and interest become due and, subject to the provisions of Section 2 hereof, to transfer amounts from the Refunding Escrow to the Trustee to pay when due the Redemption Price of the Refunded Bonds on April 10, 2006. Upon payment in full of the Redemption Price of the Refunded Bonds, the Escrow Agent shall transfer any moneys or securities remaining in the Refunding Escrow to the Commission after provision for payment of amounts due the Escrow Agent pursuant to Section 4 and 11 hereof, and this Agreement shall terminate. The Refunding Escrow cash flow is set forth in Schedule 11 attached hereto. DOCSLA I :515201.2 41555 -5 WWB/ WWB4 0 Section 4. Fees and Costs (a) The Commission shall pay to the Escrow Agent from time to time reasonable compensation for all services rendered under this Agreement. The parties hereto agree that the duties and obligations of the Escrow Agent shall be as expressly provided herein, and no implied duties or obligations shall be read into this Agreement against the Escrow Agent. (b) The Commission shall pay to the Escrow Agent additional fees and reimbursements for costs incurred, including but not limited to legal and accountants' services, involving this Agreement. (c) The fees of and the costs incurred by the Escrow Agent shall in no event be deducted or payable from, or constitute a lien against, the Refunding Escrow, except as otherwise provided herein. Section 5. Merger or Consolidation Any company into which the Escrow Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under this Agreement, shall be the successor of such Escrow Agent without the execution or filing of any paper or any further act, notwithstanding anything herein to the contrary. Section 6. Resignation of Escrow Ate The Escrow Agent may at any time resign by giving written notice to the Commission of such resignation. The Commission shall promptly appoint a successor Escrow Agent upon receipt of such notice. Resignation of the Escrow Agent will be effective only upon acceptance of appointment of a successor Escrow Agent. If the Commission does not appoint a successor, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, after such notice, if required by law, appoint a successor Escrow Agent. After receiving a notice of resignation of an Escrow Agent, the Commission may appoint a temporary Escrow Agent to replace the resigning Escrow Agent until the Commission appoints a successor Escrow Agent. Any such temporary Escrow Agent so appointed by the Commission shall immediately and without further act be superseded by the successor Escrow Agent so appointed. Section 7. Severability If any section, paragraph, sentence, clause or provision of this Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause or provision shall not affect any of the remaining provisions of this Agreement. Section 8. Execution of Counterparts This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. Section 9. Applicable Law This Agreement shall be governed by and construed in accordance with the laws of the State of California. DOCSLA1: 515201.2 41555 -8 WWB/ WWB5 Section 10. Definitions Any capitalized term used but not otherwise defined in this Agreement shall have the meaning- assigned to such term in the Original Indenture. Section 11. Indemnification The Commission agrees to indemnify, hold harmless and defend the Escrow Agent and its officers, directors, employees and agents to the maximum extent permitted by law against any and all losses, damages, claims, actions, liabilities, costs and expenses of whatever nature, kind or character (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) which may be imposed on, or incurred by or asserted against the Escrow Agent directly or indirectly arising out of or related to the acceptance and performance by the Escrow Agent of its duties hereunder. This indemnification shall apply whether any such claim, suit, investigation, proceeding or action is based upon (i) the interference with or breach of or alleged interference with or alleged breach of any existing contract in connection with the Refunded Bonds, (ii) any untrue statement or alleged untrue statement of a material fact or omission of a material fact required to be stated in any offering document with respect to the Refunded Bonds necessary to make the statements therein, in light of the circumstances under which,they were made, not misleading, or (iii) any other wrongful act or alleged wrongful act of the Commission related to the redemption of the Refunded Bonds; provided, however, that this indemnification shall not cover any losses or expenses incurred by the Escrow Agent as a result of its negligence or willful misconduct. In addition to the foregoing, the prevailing party in any lawsuit shall be entitled to attorneys' fees and costs incurred in any judgment proceeding to collect or enforce the judgment. This provision is separate and severable and shall survive the merger of this Agreement into any judgment on this Agreement. The agreements of the Commission hereunder shall survive termination of this Agreement. Section 12. Immunities and Liabilitv of Escrow Agent (a) The Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in this Agreement and no implied duties or obligations shall be read into this Agreement against the Escrow Agent. (b) The Escrow Agent shall not have any liability hereunder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Agent be liable for any special, indirect or consequential damages, even if the Escrow Agent or the Commission knows of the possibility of such damages. The Escrow Agent shall have no duty or responsibility under this Agreement in the case of any default in the performance of the covenants or agreements contained in the Original Indenture. The Escrow Agent is not required to resolve conflicting demands to money or property in its possession under this Agreement. (c) The Escrow Agent may consult with counsel of its own choice (which may be counsel to the Commission) and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action hereunder in accordance with such opinion of counsel. DOCSLA1:515201.2 41555 -8 WWB/ WWBE) (d) The Escrow Agent shall not be responsible for any of the recitals or representations contained herein or in the Original Indenture, other than recitals or representations specifically made by the Escrow Agent. - (e) The Escrow Agent may become the owner of, or acquire any interest in, any of the Refunding Bonds with the same rights that it would have if it were not the Escrow Agent and may engage or be interested in any financial or other transaction with the Commission. (f) The Escrow Agent shall not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys or securities deposited with it to pay the principal of or interest or premium on the Refunded Bonds. (g) The Escrow Agent shall not be liable for any action or omission of the Commission under this Agreement or the Original Indenture. (h) Whenever in the administration of this Agreement the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be deemed to be conclusively proved and established by a certificate of any authorized representative of the Commission, and such certificate shall, in_ the absence of negligence or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for any action taken or suffered by it under the provisions of this Agreement upon the faith thereof. (i) The Escrow Agent may conclusively rely as to the truth and accuracy of the statements and correctness of the opinions and the calculations provided to it in connection with this Agreement and shall be protected in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Escrow Agent in connection with this Agreement and reasonably .believed by the Escrow Agent to have been signed or presented by the proper party, and it need riot investigate any fact or matter stated in such notice, instruction, request, certificate or opinion. 0) No provision of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. Section 13. Termination of Agreement Upon payment in full of the principal of and interest on the Refunded Bonds and all of the fees and expenses of the Escrow Agent as described above, all obligations of the Escrow Agent under this Agreement shall cease and terminate, except for the obligation of the Escrow Agent to pay or cause to be paid to the owners of the Refunded Bonds not presented for payment all sums due thereon and the obligation of the Commission to pay to the Escrow Agent any amounts due and owing to the Escrow Agent hereunder; provided, however, the obligations of the Escrow Agent with respect to the payment of the Refunded Bonds shall cease and terminate two years after the date on which the same shall have become due as described hereunder and in accordance with the Original Indenture. DOHA 1:515201.2 41555 -8 WWB/ WWB7 IN WITNESS WHEREOF, the Rosemead Community Development Commission and U.S. Bank National Association, have caused this Agreement to be executed each on its behalf as of the day and year first above written. ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ATTEST: City Clerk Chairperson U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent C Authorized Officer DOCSLA 1515201.2 41555 -8 WRB/ WWB8 0 SCHEDULEI INVESTMENT SECURITIES 0 A description of the Investment Securities is set forth on Exhibit "to the Verification Report prepared by The Arbitrage Group, Inc., attached hereto and incorporated herein by reference as though fully set forth herein and made a part hereof, relating to the Refunding Bonds. DOGS LA I :515201.2 41555 -8 WWB/ WWBI SCHEDULEII REFUNDING ESCROW CASH FLOW The cash flow for the Refunding Escrow is set forth on Exhibit [_] to the Verification Report prepared by The Arbitrage Group, Inc., attached hereto and incorporated herein by reference as though fully set forth herein and made a part hereof, relating to the Refunding Bonds. DOCSLA 1: 515201.2 41555 -8 WWB/ WWBI EXHIBIT A FORM OF NOTICE OF REDEMPTION ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION REDEVELOPMENT PROJECT AREA NO. I TAX ALLOCATION BONDS, SERIES 1993A NOTICE IS HEREBY GIVEN pursuant to the terms of the Indenture, dated as of October 1, 1993 (the "Original Indenture "), between the Rosemead Community Development Commission (the "Agency ") and U.S. Bank National Association (as successor trustee to State Street Bank and Trust Company of California, N.A.), as Trustee or Agent, that the bonds listed below (the "Bonds ") have been selected for redemption on April 10, 2006 (the "Redemption Date ") at a redemption price (the "Redemption Price ") equal to 100% of the principal amount of such Bonds together with interest accrued to the Redemption Date. CUSIP* Maturity Rate Amount Price Payment of the Redemption Price on the Bonds called for redemption will be paid only upon presentation and surrender thereof in the following manner: If by Mail : (REGISTERED BONDS) If by Mail, (BEARER BONDS) If by Hand or Overnight Mail.' Bondholders presenting their bonds in person for same day payment must surrender their bond(s) by 1:00 P.M. on the Redemption Date and a check will be available for pick up after 2:00 P.M. Checks not picked up by 4:30 P.M. will be mailed out to the bondholder via first class mail. If payment of the Redemption Price is to be made to the registered owner of the Bond, you are not required to endorse the Bond to collect the Redemption Price. Interest on the principal amount designated to be redeemed shall cease to accrue on and after the Redemption Date. - IMPORTANT NOTICE Under the Economic Growth and Tax Relief Reconciliation Act of 2003 (the "Act'), 28% will be withheld if tax identification number is not properly certified. *The Trustee shall not be held responsible for the selection or use of the CUSIP number, nor is any representation made as to its correctness indicated in the Redemption Notice. It is included solely for the convenience of the Holders. By: U.S. Bank National Association as Trustee or Agent Dated: March , 2006. DOCSLAl: 515201.2 41555 -8 WWB/ WWB] OH &S 02/06/06 Draft PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY_, 2006 NEW ISSUE— FULL BOOK -ENTRY Ratings (Insured): S &P: "AAA" Underlying Rating: S &P: "BBB +" (See "RATINGS" herein) In the opinion of Orrick, Ilerringion .Sutcliffe LLP, Bond Counsel, based upon an analvsis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracv of certain representations and compliance with certain covenants, int on the Series 2006A 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. In the further opinion of Bond Counsel, interest on the Series 2006A 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 2006A Bonds. See "TAX MATTERS" herein. $14,300,000" ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION (LOS ANGELES COUNTY, CALIFORNIA) REDEVELOPMENT PROJECT AREA NO. 1 TAX ALLOCATION BONDS SERIES 2006A Dated: 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 2006A BONDS. INVESTORS MUST READ THE ENTIRE. OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. The Series 2006A Bonds xvill be issued in denominations of $5.000 at any integral multiple Otcreof as shown on the inside cover page of this Official Statement. Interest on the Series 2006A Bonds is payable on April I and, October I of each year, commencing October 1, 2006. The Series 2006A Bonds will be issued in book -entry form, without coupons, initially registered in the name of Cede R Co., as nominee of The Depository Trust Company, New York, New York ( "DTC "). Purchasers of the Series 2006A Bonds will not receive physical certificates from the Commission representing their interests in the Series 2006A Bonds purchased. DTC will act as securities depository for the Series 2006A Bonds. The principal of and interest on the Series 2006A Bonds are payable directly to DTC 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 DTC for subsequent disbursement to the beneficial owners of the Series 2006A Bonds. The Series 2006A Bonds are being issued b the Rosemead Community Development Commission (the "Commission") (1) to refund a portion of the Commission's outstanding Series 1993 Bonds (as defined herein); (2) to finance redevelopment activity in the Redevelopment Project Area No. I (as defined herein) (the "Project "); (3) to fund a debt service reserve account surety; and (4) to pay costs of issuance related to the Series 2006A Bonds. See "PLAN OF FINANCE" herein. The Series 2006A Bonds are subject to optional and mandatory redemption as described herein. Payment of the principal of and interest on the Series 2006A 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 2006A Bonds. Ambac The Series 2006A 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 'Fax Revenues. All of the Series 2006A 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 2006A Bonds. The Series 2006A 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. DOCSLA I :509308.6 41555 -8 K35/K35 therefor, nor in any event will the Series 2006A Bonds be payable out of any funds or properties other than those of the Commission. The Series 2006A 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 2006A Bonds are liable personally on the Series 2006A Bonds by reason of their issuance. For a discussion of some of the risks associated with the purchase of the Series 2006A Bonds, see "RISK FACTORS" herein. Legal matters incident to the issuance and sale of the Series 2006A Bonds are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel. As Bond Counsel, Orrick, Herrington & Sutcliffe LLP undertakes no responsibility for the accuracy, completeness or fairness of this Ogicia/ Statement. Certain legal matters will be passed upon for the Commission in connection with the Series 2006A Bonds by Wallin, Kress, Reisman & Kranitz LLP, Santa Monica, California, as counsel to the Commission, and by.Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. The Commission anticipates that the Series 2006A Bonds, in book entiyform, will be available for delivery to DTC in New York, New York on or about March , 2006 PiperJaffray Dated: February _, 2006 DOCSI -A I :509308.6 41555 -8 K35/K35 SERIES 2006A BOND MATURITY SCHEDULE' SERIES 2006A BONDS BASE CUSIP': Serial Series 2006A Bonds Maturity - Interest _ CUSIP Maturity Interest CUSIP (October 1) Amount Rate Yield . Numbert (October 1) Amount Rate Yield Numbert $ % Series 2006A Term Bonds due October 1, 2022 — Yield - % CUSIP No. t Preliminary, subject to change. t CUSIP data, copyright 2006, American Bankers Association. CUSIP data herein are provided for convenience of reference only. Neither the Commission nor the Underwriter shall be responsible for the selection or correctness of the CUSIP numbers set forth above. DOCSLAl: 509308.6 41555 -8 K35/K35 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Jay T. Imperial, Chairperson Gary A. Taylor, Vice Chairperson Margaret Clark John Tran John H. Nunez CITY /COMMISSION STAFF William Crowe 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 Karen Ogawa Finance Director 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 GRC Associates, Inc. Fiscal Consultan Public Financial Management, Inc. Financial Advisa The Arbitrage Group, Inc. Verification Agent DOCSLA1:509346 41555 -5 K35/K35 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 2006A 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 2006A 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 2006A 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 2006A BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2006A 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 2006A 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 2006A BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE SERIES 2006A BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. . DOCSLA L 509308.6 41555 -8 K35/K35 TABLE OF CONTENTS - DOCSLA 1:509308.6 41555 -8 K35 /K35 -1- Page INTRODUCTORYSTATEMENT ................................................................................. ............................... 1 TheSeries 2006A Bonds .................................................................................... ............................... I The Authority, the Commission and the Redevelopment Project Area No. 1 .... ............................... 2 TaxAllocation Financing ................................................................................... ............................... 2 Bond Insurance .......... ................... . . ..................................................................... ........................... .. .. 2 TaxExemption ...................................................:............................................... .............................. ContinuingDisclosure ........................................................................................ ............................... 3 AdditionalInformation ....................................................................................... ............................... 3 PLANOF FINANCE ...................................................................................................... ............................... 4 General............................................................................................................... ............................... 4 Planof Refunding ........................ ............................... 4 ESTIMATED SOURCES AND USES OF FUNDS ....................................................... ............................... 4 THESERIES 2006A BONDS ........................ ..... .... . ...... ........... :.................................................................... 5 Description of the Series 2006A Bonds ............................................................. ............................... 5 DTCand Book -Entry Only System .................................................................... ............................... 5 Redemption........................................................................................................ ............................... 5 Noticeof Redemption ........................................................................................ ............................... 6 DEBT SERVICE SCHEDULES FOR THE SERIES 2006A BONDS AND THE SERIES 1993 BONDS................. ................................................................. :.......................................................... 7 BONDINSURANCE ...................................................................................................... ............................... 8 Payment Pursuant to Financial Guaranty Insurance Policy ................................ ............................... 8 AmbacAssurance Corporation ........................................................................... ............................... 9 AvailableInformation ..................................... :................................................................................. 9 Incorporation of Certain Documents by Reference .......................................... ............................... 10 SECURITY FOR THE SERIES 2006A BONDS ......................................................... ............................... 10 Pledge and Allocation of Taxes ........................................................................ ............................... 10 ReserveAccounts ............................................................................................. ............................... 12 ReserveSurety Bond ........................................................................................ ............................... 14 Issuanceof Additional Bonds ........................................................................... ............................... 15 Series 2006A Bonds Not a Debt of the City or the State ................................. ............................... 17 RISKFACTORS ........................................................................................................... ............................... 18 Assumptionsand Projections ........................................................................... ............................... 18 Real Estate and General Economic Risks ........................................................ ............................... 18 Reductionin Assessed Value ........................................................................... ............................... 18 AssessmentAppeals ......................................................................................... ............................... 19 - DOCSLA 1:509308.6 41555 -8 K35 /K35 -1- 0 0 TABLE OF CONTENTS (continued) Page Reductionin Inflationary Rate ......................................................................... ............................... 19 Real Estate and General Economic Risks ........................................................ ............................... 20 State Budget Deficit and Its Impact on Pledged Tax Revenues ....................... ............................... 20 Proposition1 A .................................................................................................. ............................... 21 LimitedObligations ................... ..................................................................... ............................... 22 HazardousSubstances ...................................................................................... ............................... 22 CertainBankruptcy Risks ........:........................................................................ ....................I.......... 22 SecondaryMarket ............................................................................................. ............................... 22 Lossof Tax Exemption .................................................................................... ............................... 23 Riskof Earthquake..........' ................................................................................. ............................... 23 TeeterPlan ........................................................................................................ ............................... 23 Concentration of Land Ownership ................................................................... ............................... 23 TAX ALLOCATION FINANCING AND LIMITATIONS ON RECEIPT OF TAX INCREMENT ........ 24 Introduction...................................................................................................... ............................... 24 Property Tax Rate and Appropriation Limitations .......................................... ............................... 24 UnitaryProperty ............................................................................................... ............................... 25 Property Tax Administrative Costs .................................................................. ............................... 26 Property Tax Collection Procedures ......................... ::..................................................................... 26 PlanLimitations ............................................................................................... ............................... 27 Low and Moderate Income Housing Fund ....................................................... ............................... 28 AssemblyBill 1290 .................. : .............................................................. :....................................... 29 Pass- Throu;h Arrangements ............................................................................ ............................... 30 Proposition218 ................................................................................................. ............................... 30 FutureInitiatives ............................................................................................... ............................... 30 THECOMMISSION ..................................................................................................... ............................... 30 Organization..................................................................................................... ............................... 30 Powers............................................................................................................. ............................... 31 THE REDEVELOPMENT PROJECT AREA NO. I ................................................... ............................... 32 ProjectArea Description .................................................................................. ............................... 32 AssessedValues ................................................................................................. ............................. ProjectStatus ...................... :............................................................................................................ 33 Controls, Land Use and Building Restrictions ................................................. ............................... 35 Current Plans for the Redevelopment Project Area No. 1 ................................ ............................... 35 Ten Largest Secured Taxpayers ....................................................................... ............................... 36 DOCSLAI.509308.6 41555 -8 K35/K35 II • TABLE OF CONTENTS • (continued) Page TAX INCREMENT REVENUES ................................................................................. ............................... 37 Projected Tax Revenues ............................. .......................................................................... I........... 38 AssessmentAppeals ......................................................................................... .....:......................... 42 Debt Service and Estimated Coverage ............................................................. ............................... 42 CERTAIN INFORMATION CONCERNING THE CITY ........................................... ............................... 44 CERTAINLEGAL MATTERS .................................................................................... ............................... 44 TAXMATTERS ........................................:.................................................................. ............................... 44 LITIGATION................................................................................................................ ............................... 46 RATINGS...................................................................................................................... ............................... 46 UNDERWRITING........................................................................................................ ............................... 47 VERIFICATION........................................................................................................... ............................... 47 FINANCIALADVISOR ............................................................................................... ............................... 47 FISCAL CONSULTANT .............................................................................................. ............................... 47 MISCELLANEOUS...................................................................................................... ............................... 47 APPENDIX A FISCAL CONSULTANT'S REPORT ................................................ ............................... A -I APPENDIX B FORM OF OPINION OF BOND COUNSEL ........................................ ............................B -I APPENDIX C DTC AND BOOK -ENTRY ONLY SYSTEM ....................................... ............................0 -1 APPENDIX D DEFINITIONS AND SUMMARY OF INDENTURE ...................... ............................... D -I APPENDIX E SUPPLEMENTAL INFORMATION CONCERNING THE CITY OF ROSEMEAD ...... E -I APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT ............... ............................... F -1 APPENDIX G FORM OF BOND INSURANCE POLICY ........... :........................................................... G -1 DOCSLAI: 509308.6 41555 -8 K35/K35 111 0 OFFICIAL STATEMENT $14,300,000" ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION (LOS ANGELES COUNTY, CALIFORNIA) REDEVELOPMENT PROJECT AREA NO. I TAX ALLOCATION BONDS SERIES 2006A INTRODUCTORYSTATEMENT This Official Statement, including the cover page, the inside cover page and appendices hereto, is provided to furnish information regarding the Commissions $14,300,000 aggregate principal amount of Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 2006A (the "Series 2006A Bonds "). The Series 2006A Bonds are to be issued by the Rosemead Community Development Commission (the "Commission "). The Series 2006A Bonds are payable from and secured by Pledged Tax Revenues, as defined in the 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 Slate Street Bank and Trust Company of California, N.A., as trustee (the "Trustee "), as amended and supplemented by a First Supplement to Indenture, dated as of March 1, 2006 (the "First 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 Countv 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 2006A BONDS" herein. The Series 2006A Bonds are being issued by the Commission: .(1) to refund a portion of the Commission's outstanding Series 1993 Bonds (as defined below); (2) to finance redevelopment activity in the Redevelopment Project Area No. I . (as defined below) (the "Project "); (3) to fund a debt service reserve account surety; and (4) to pay costs of issuance related to the Series 2006A Bonds. See "PLAN OF FINANCE" herein. The Series 2006A Bonds The Series 2006A Bonds are being issued for sale to the Rosemead Financing Authority (the "Authority ") pursuant to the Marks -Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6854) of the California Government Code (the "JPA Law "). The Series 2006A Bonds purchased by the Authority will be resold concurrently to the Underwriter. The Series 2006A Bonds are being issued pursuant to the Constitution and the laws of the State of California Preliminary, subjecrto change. DOCSLA I :509308.6 41555 -g K351 K351 • 0 (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 2006A Bonds are being issued pursuant to Resolution No. ( _ adopted by the Commission on February 14, 2006, and pursuant to.and secured by the Indenture. See "SECURITY FOR THE SERIES 2006A BONDS" herein. The Authority, the Commission and the Redevelopment Project Area No. 1 The Authority. The Rosemead Financing Authority was created by a Joint Exercise of Powers Agreement between the City and the Commission. The Agreement was entered into pursuant to the provisions of the JPA Law. The Authority. was created for the primary purpose of providing financing or refinancing for purposes which are authorized under the JPA Law. Under the JPA Law, the Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. 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 2006A Bonds are being issued finance and 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 2006A Bonds. The Project- Area. The Redevelopment Plan for the Redevelopment Project Area No. 1, ( "Redevelopment Project Area No. 1" 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 Poniona Freeways to the north and south, respectively. 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 2006A Bonds. See "SECURITY FOR THE SERIES 2006A 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 2006A Bonds. See "RISK FACTORS" herein. Bond Insurance The scheduled payment of principal of and interest on the Series 2006A Bonds when due will be insured under a financial guaranty insurance policy (the "Policy ") to be issued concurrently with the delivery DOCSLA 1:509308.6 41555 -8 K35 /K35 w 0 of the Series 2006A 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. Continuing Disclosure The Commission has covenanted for the benefit of owners of the Series 2006A Bonds to provide, so long as the Series 2006A 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 F — "FORM OF CONTINUING DISCLOSURE AGREEMENT." Additional Information There follows in this Official Statement brief descriptions of the Series 2006A Bonds, the security for the Series 2006A Bonds, the Indenture, the Commission, the Project Area, and certain other information relevant to the issuance of the Series 2006A 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 2006A Bonds are further qualified by references to the information with respect thereto contained in the appropriate Indenture. The Report of GRC Associates, Inc., the Fiscal Consultant, regarding tax increment revenues is included in Appendix A (the "Fiscal Consultant's Report"). The proposed form of legal opinion for the Series 2006A 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. Selected information regarding the City of Rosemead and the County of Los Angeles is included in Appendix E. The proposed form of Continuing Disclosure Agreement is included in Appendix F. The specimen form of the Policy of the Bond Insurer is included in Appendix G. 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, 2004, 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: Finance Director, Telephone: (626) 569 -2100. DOCSLA1:509308.6 41555 -8 K35/K35 PLAN OF FINANCE General The Series 2006A Bonds are being issued by the Commission: (1) to refund a portion of the Commission's outstanding Series 1993 Bonds (as defined below); (2) to finance redevelopment activity in the Redevelopment Project Area No. 1 (as defined below) (the "Project "); (3) to fund a debt service reserve account surety; and (4) to pay costs of issuspce related to the Series 2006A Bonds. A portion of the proceeds of the Series 2066A Bond proceeds will be deposited in an escrow account and used to refinance redevelopment activities through the refunding of a portion of the outstanding principal amount of the Commission's Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993A (the "Series 1993 Bonds "). See "Plan of Refunding" below. Plan of Refunding $ of the proceeds of the Series 2006A Bonds 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 10, 2006 (the "Redemption Date ") the interest and principal of the outstanding Series 1993 Bonds that mature on October 1, 2006 through October 1, 2018 (the "Refunded Bonds ") at a redemption price of 100 %. (See "VERIFICATION" herein). Upon the issuance of the Series 2006A 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 2006A 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 2006A Bonds are as follows: ESTIMATED SOURCES AND USES OF FUNDS Sources of Funds: Principal Amount of Series 2006A Bonds $ Less: Underwriter's Discount Funds released from Original Indenture TOTAL SOURCES OF FUNDS S Uses of Funds: Deposit to Series 2006A Expense Account Deposit to Redevelopment Fund Deposit to Escrow Fund TOTAL USES OF FUNDS Iq Includes the premium for the Financial Guaranty Insurance Policy and the Reserve Surety Bond issued by the Bond Insurer, the fees and expenses of the fiscal consultant, Bond Counsel and Disclosure Counsel, the applicable Trustee (including counsel fees), the rating agencies. the financial advisor, other costs incidental to the issuance of the Series 2006A Bonds, and the costs of printing. DOCSLA I :509308.6 41555 -8 K35/K35 Ll THE SERIES 2006A BONDS Description of the Series 2006A Bonds 0 The Series 2006A 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 2006A Bonds will be issued in denominations of $5,000 or any integral multiple of $5,000 in excess thereof. Interest on the Series 2006A Bonds will be payable on April 1 and October 1 of each year (each an. "Interest Payment Date "), commencing October 1, 2006. Principal and redemption premiums, if any, on the Series 2006A 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 2006A Bonds will be computed on the basis of a 360 -day year of twelve 30 -day months. The Series 2006A Bonds will bear interest from the Interest Payment Date next preceding the dale 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 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 2006A Bond, interest is then in default on the outstanding Series 2006A Bonds, such Series 2006A 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 2006A Bonds. Payment of interest on the Series 2006A Bonds due on or before the maturity or prior redemption of such Series 2006A 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 2006A 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 2006A Bonds. The Series 2006A 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 2006A Bonds mature in denominations equal to the aggregate principal amount of the Series 2006A 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 2006A Bonds, as nominee of DTC, references herein to the owners of the Series 2006A Bonds or Bondowners means. Cede & Co. and does not mean the actual purchasers of the Series 2006A 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 Optional Redemption. The Series 2006A Bonds due on or before October 1, 20_ are not subject to redemption prior to their respective stated maturities. Series 2006A Bonds maturing on or after October 1, 20 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 2006A Bonds of such maturity are to be redeemed, prior to their respective maturity dates, at the option of the DOCSLAI: 509308.6 41555 -8 K35/K35 0 0 Commission, on any date on or after October 1, 20, from funds derived by the Commission from any source, at the redemption prices of the principal amount of the Series 2006A Bonds to be redeemed, together with interest accrued thereon to the date fixed for redemption . Sinking Fund Redemption. The Series 2006A Bonds will 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 Sinking Account provided for in the Indenture, 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: Year Principal (October 1) Amount 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Maturity. ❑i lieu of redemption of any Term Bond, amounts on deposit in the Revenue 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, 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. The principal amount of any Term Bonds so purchased by the Trustee in any twelve -month period ending 60 days prior to any Sinking Account Payment Date in any year will be credited towards and will reduce the principal amount of such Term Bonds required to be redeemed on such Sinking Account Payment Date in such year. 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 2006A 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 2006A Bonds to be redeemed, the date of issue of such Series 2006A 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 2006A Bonds of such maturity to be redeemed and, in the case of Series 2006A 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 DOCSLA I :509308.6 41555 -8 K35/K35 0 0 such Series 2006A Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Series 2006A 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 2006A 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 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 2006A 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 snail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. DEBT SERVICE SCHEDULES FOR THE SERIES 2006A BONDS AND THE SERIES 1993 BONDS . Set forth below is the principal and interest on the Series 2006A Bonds and Series 1993 Bonds remaining outstanding as of the date of issuance of the Series 2006A Bonds. DEBT SERVICE ON THE BONDS Year 2006 2007 2008 .2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Series 1993 Series 1993 Series 1993 Series 2006A Series 2006A Series 2006A Total Principal' - Interest' Total' - Principal Interest Total Debt Service + The Series 1993 Bonds mature on October I, 2033. Debt service owing to the Series 1993 Bonds between 2023 and 2033 are not included in this table. Source: Rosemead Community Development Commission and Piper Jaffrav & Co., as Underwriter of the Series 2006A Bonds. DOCSLAI:509308.6 41555 -8 K35/K35 0 • BONDINSURANCE The following information has been furnished by Antbac Assurance Corporation ( "Ambac Assurance) for use in this Official Statement. Reference is made to Appendix G for a specimen of the Ambac Assurance Corporation Financial Guaranty Insurance Policy. The information relating to Ambac Assurance and the Financial Guaranty Insurance Policy contained above has been furnished by Antbac 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 2006A Bonds effective as of the date of issuance of the Series 2006A 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 2006A 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 2006A 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 2006A Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding Series 2006A Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding Series 2006A 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 2006A 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. In the event the Trustee has notice that any payment of principal of or interest on a Series 2006A 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. DOCSLAI: 509308.6 41555 -8 K35/K35 0 0 If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of Series 2006A Bonds to the Insurance.Trustee together with an appropriate instrument of assignment so as to permit ownership of such Series 2006A 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 2006A Bond, appurtenant coupon, if any, or right to payment of principal or interest on such Series 2006A 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 $8,645,000,000 (unaudited) and statutory capital of approximately $5,403,000,000 (unaudited) as of September 30, 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 2006A 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 2006A Bonds. Ambac Assurance makes no representation regarding the Series 2006A Bonds or the advisability of investing in the Series 2006A 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 I -800- SEC -0330 for further information on the public reference room. The SEC maintains an internee site at http: / /www.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. DOCSLA 1:509308.6 41555 -8 K35IK35 • . • Copies of Ambac Assurance's financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac 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 ']0 -K for the fiscal year ended December 31, 2004 and filed on March 15, 2005; 2. The Company's Current,Report on* Form 8 -K dated April 5, 2005 and filed on April 11, 2005; 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 ]0 -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; - 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; I The Company's Current Report on Form 8 -K dated November 29, 2005 and filed on December 5, 2005; and 12. The Company's Current Report on Form 8 -K dated and filed on January 25, 2006. All documents subsequently filed by the Company pursuant to the requirements bf 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." f SECURITY FOR THE SERIES 2006A 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, DOCSLA I :509308.6 41555 -8 K35/K35 0 0 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; 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, (1) 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 "fax 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 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. 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 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. See APPENDIX A — "FISCAL CONSULTANT'S REPORT" for the Fiscal Consultant's 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 2006A Bonds. DOCSLAI: 509308.6 41555 -8 K35/K35 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 the Fiscal Consultant has assumed that these payments are subordinated to bond indebtedness accordingly. See APPENDIX A = "FISCAL CONSULTANT'S REPORT" herein. These statutory pass - throughs to affected agencies will begin in the year 2004 -05 at a rate of 25% of the tax increment growth net of the Housing Set -Aside Requirement with of base year of 2003 -04. An additional pass through will begin in the 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 consistent methodology, among various counties within the State as to the calculation of SB 211 pass throughs. See APPENDIX A — 'FISCAL CONSULTANT'S REPORT" herein. For the purpose of its report and the projections set forth herein, the Fiscal Consultant 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 2006A 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 2006A Bonds, the Commission is required, upon delivery of each series of Bonds, to fund a Reserve Account in an amount equal to the respective Reserve Account Requirement for each such series. The following describes the Reserve Account provisions under the Indenture. Reserve Account Requirement. As of the Closing Date, the Reserve Account Requirement for the Series 2006A 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 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. DOCSLA I :509308.6 41555 -8 K35/K35 • • 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 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 I3 months prior to the stated expiration date thereof. At least one year prior to the stated expiration of 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 rata 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 2OO6A Bonds, the Reserve Account Requirement will equal $ . The Commission anticipates that it will fund the Reserve Account Requirement upon issuance of the Series 2006A Bonds through the deposit of a Reserve Surety DOCSLA 1: 509308.6 41555 -8 K35tK35 0 Bond issued by the Bond Insurer in a principal amount equal to the Reserve Account Requirement. The Reserve Surety Bond is a Qualified Reserve Instrument as defined below. Reserve Surety Bond The Indenture requires the establishment of a Reserve Account in an amount equal to the Reserve Account Requirement. The Indenture authorizes the Commission to obtain a surety bond in place of fully funding the Reserve Account. Accordingly, application has been made to Ambac Assurance for the issuance of the Surety Bond for the purpose of funding the Reserve Account. The Series 2006A Bonds will only be delivered upon the issuance of such Surety Bond with respect to the Series 20O6A Bonds. The premium on the Suretv Bond is to be fully paid at or prior to the issuance and delivery of the Series 2006A Bonds. The Surety Bond provides that upon the later of (i) one day after receipt by Ambac Assurance of a demand for payment executed by the Trustee certifying that provision for the payment of principal of or interest on the Series 2O06A Bonds when due has not been made or (ii) the interest payment date specified in the Demand for Payment submitted to Ambac Assurance, Ambac Assurance will promptly deposit funds with the Trustee sufficient to enable the Trustee to make such payments due on the Series 20O6A Bonds, but in no event exceeding the Surety Bond Coverage, as defined in the Surety Bond. Pursuant to the terms of the Surety Bond, the Surety Bond Coverage is automatically reduced to the extent of each payment made by Ambac Assurance under the terms of the Surety Bond and the Commission is required to reimburse Ambac Assurance for any draws under the Surety Bond with interest at a market rate. Upon such reimbursement, the Surety Bond is reinstated to the extent of each principal reimbursement up to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the Commission is subordinate to the Commission's obligations with respect to the Series 2OO6A Bonds. In the event the amount on deposit, or credited to the Reserve Account, exceeds the amount of the Surety Bond, any draw on the Surety Bond shall be made only after all the funds in the Reserve Account have been expended. In the event that the amount on deposit in, or credited to, the Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under a letter of credit, insurance policy, surety bond or other such funding instrument (the "Additional Funding Instrument "), draws on the Surety Bond and the Additional Funding Instrument, if any, shall be made on a pro rata basis to fund the insufficiency. The Indenture provides that the Reserve Account shall be replenished in the following priority: (i) principal and interest on the Surety Bond and on any Additional Funding Instrument shall be paid from first available Pledged Tax Revenues on a pro rata basis, and (ii) after all such amounts are paid in full, amounts necessary to fund the Reserve Account to the required level, after taking into account the amounts available under the Surety Bond and any such Additional Funding Instrument, shall be deposited from the next available amounts transferred to the Reserve Account pursuant to the foregoing provision of the Indenture. The Surety Bond does not insure against nonpayment caused by insolvency or negligence of the Trustee. In the event the Surety Provider were to be come insolvent, any claims arising under the Surety Bond would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. In the event that Ambac Assurance were to become insolvent, any claims arising under the Surety Bond would be excluded from coverage by the California Insurance Guaranty Association, established pursuant to the laws of the State of California. DOCSLA I :509308.6 41555 -8 K35/K35 •. 0 See "BOND INSURANCE — Ambac Assurance Corporation;" "— Additional Information" and "— Incorporation of Certain Documents by Reference" for additional, information regarding Ambac Assurance. Issuance of Additional Bonds The Commission may at any time after the issuance and delivery of the Series 2006A 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: (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. DOCSLA 1:509308.6 41555 -8 K35/K35 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 term "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. 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. DOCSLA1:509308.6 41555 -8 K35/K35 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 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 2006A Bonds Not a Debt of the City or the State The Series 2006A 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 2006A 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 2006A Bonds. The Series 2006A 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 2006A Bonds be payable out of any funds or properties other than those of the Commission. The Series 2006A 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 2006A Bonds are liable personally on the Series 2006A Bonds by reason of their issuance. DOCS LA 1:509308.6 41555 -8 K35/K35 0 0 RISK FACTORS The following information should be considered by prospective investors in evaluating an investment in the Series 2006A 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 2006A Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. Assumptions and Projections To estimate the tax increment available to pay debt service on the Series 2006A Bonds, the Commission has retained GRC Associates, Inc., Brea, California as its Fiscal Consultant, which has made certain assumptions with regard to the assessed valuation in the Project Area, future tax rates, percentage of taxes collected, the amount of funds available for investment and the interest rate at which those funds will be invested. See APPENDIX A — "FISCAL CONSULTANT'S REPORT" hereto for a full discussion of the assumptions underlying the projections set forth herein with respect to Pledged Tax Revenues. The Commission believes these assumptions to be reasonable, but to the extent that the assessed valuation, the tax rates, the percentage of taxes collected, the amount of the funds available for investment or the interest rate at which they are invested are less than projected by the Fiscal Consultant, the tax increment available to pay debt service on the Series 2006A Bonds may be less than those projected herein. Real Estate and General Economic Risks The Commission's ability to make payments on the Series 2006A 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 2006A 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. 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 2006A Bonds on a timely basis. DOCSLA I :509308.6 41555 -8 K35/K35 • • 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 2006A 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 2006A Bonds or to refinance the Series 2006A 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, the base year value of the property cannot be increased until a change in ownership occurs or additional improvements are added. The Fiscal Consultant has identified one 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 2006A Bonds. See "TAX INCREMENT REVENUES — Assessment Appeals" herein and APPENDIX A — "FISCAL CONSULTANT'S REPORT" hereto. 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 DOCSLA1: 509308.6 41555 -8 K35/K35 0 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 1.19 %. The Fiscal Consultant has projected Pledged Tax Revenues to be received by it 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 Commission's ability to make payments on the Series 2006A 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 2006A 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 2006A Bonds. As the Commission's only active project area, Project Area No. 1 is responsible for any such revenue allocation in its entirety. 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, 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 DOCSLA 1:509308.6 41555 -8 K35/K35 • r 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 is 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 is estimated at $342,811. 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 in the Fiscal Consultant's Report. 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 2006A 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. Proposition lA 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. DOCSLA1:509308.6 41555 -8 K35/K35 0 Limited Obligations 0 The Series 2006A 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 2006A 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 2006A Bonds. The Series 2006A 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 2006A Bonds be payable out of any funds or properties other than those of the Commission. The Series 2006A 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 2006A Bonds are liable personally on the Series 2006A 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 2006A 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 2006A 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. Secondary Market There can be no guarantee that there will be a secondary market for the Series 2006A Bonds, or, if a secondary market exists, that such Series 2006A 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. DOCSLA1:509308.6 41555 -8 K35/K35 0 Loss of Tax Exemption U As discussed under the caption "TAX MATTERS" herein, interest on the Series 2006A Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date such Series 2006A 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 2006A 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 2006A Bonds, which in turn could impair the ability of the Commission to make payments of principal of and /or interest on the Series 2006A 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 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 2006A 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. I —Ten Largest Secured Taxpayers" herein. DOCSLA I :509308.6 41555 -8 K35/K35 0 0 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 rate 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 I, 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 Article 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 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 DOCSLAI:509308.6 41555 -8 K35/K35 • 0 revenues, and, accordingly, would have an adverse impact on the ability of the Commission to pay debt service on the Series 2OO6A 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 XII[B"). 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 higher than 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: ( l) 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 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. DOCSLA 1:509308.6 41555 -8 K35/K35 0 0 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. The Fiscal Consultant has assumed 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 be 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. The Fiscal Consultant has assumed, for purposes of its projections, 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. 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. DOCSLA1:509308.6 - 41555 -8 K35/K35 0 0 Property taxes on the secured roll are due in two installments, on July 1 and February 1 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 [ 1% of the unsecured taxes are paid to the Commission by the end of July of each year, and substantially all of the unsecured taxes are paid to the Commission in July 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 I, 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 I, 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 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 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 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 DOCSLA1:509308.6 41555 -8 K35 /K35 0 0 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 1 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 Limit 111 Debt 6/27/2013 No Limit 6/27/2023 $249,245,938 No Limit "I The tax increment limit is net of any tax increment which is paid to an affected taxing agency pursuant to the Redevelopment Law. Source: GRC Associates, Inc. According to the County records, the Commission has received approximately $[88,633,000] in total cumulative tax increment from the Project Area to date. Based on the projected tax increment 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 I)OCSLA1:509308.6 41555 -8 K35/K35 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 until 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. Ass6 mbly Bill 1290 Assembly Bill 1290 (being Chapter 942, Statutes of 1993) ( "AB 1290 ") became law on January 1, 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 2006A Bonds on a timely basis, and the Commission does not expect that the provisions of AB 1290 will hav6 an adverse impact on the undertaking by the Commission of future redevelopment activities within the Project Area. DOCSLA1:509308.6 41555 -8 K35/K35 i Pass Through Arrangements 0 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 "Comity 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 APPENDIX A — "FISCAL CONSULTANT'S REPORT" for the Fiscal Consultant's 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 2006A 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 the Fiscal Consultant has assumed that these payments are subordinated to bond indebtedness accordingly. See APPENDIX A — "FISCAL CONSULTANT'S REPORT" herein. 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 XIIIC and XIIID 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 2006A 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 2006A Bonds. Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID 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, furtfier affecting Commission revenues or the Commission's ability to expend revenues. i 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 I DOCSLA1:509308.6 415554 K35/K35 • 0 requirements of the Redevelopment Law. The Commission has two active project areas, Redevelopment Project Area No. 1 and Redevelopment Project No. 2. The Series 2006A Bonds are being issued finance and 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 2006A 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, Jay Imperial, also serves as Chairperson of the Commission. The Commission's Vice - Chairperson, Gary Taylor, is Mayor Pro -Tem of the City. Other members of the City Council and Commission Board are shown below. Bill Crowe, the City Manager and Executive Director of the Commission has been an employee of the City since 1999, and has been City Manager since 2002. Mr. Crowe has announced his resignation, effective February 21, 2006. Until such time as a replacement is appointed, Don Wagner will serve as Interim City Manager. Mr. Wagner was hired in 1983, and has served as Assistant City Manager since that time. Commission Member Jay T. Imperial Gary A. Taylor Margaret Clark John Tran John H. Nunez Term Expires 2007 2007 2009 2009 2009 Powers 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 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. i UULSLA I :509308.6 41555 -8 K35/K35 • • THE REDEVELOPMENT PROJECT AREA NO. 1 Redevelopment Project Area No. I 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. I (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. Table 2 Rosemead Community Development Commission Present Land Uses Within Redevelopment Project Area No. 1 Uses Parcels Residential 775 Commercial 157 Industrial 66 Vacant Land 54 Government owned 15 Institutional 3 Miscellaneous 32 Public Utility 0.32 Unsecured tq 4.91 Total 1 102 (1) Values assigned to other parcels and use categories. - Source: Rosemead Community Development Commission, 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 DOCSLA 1:509308.6 41555 -8 K35/K35 Percent of Assessed Value Assessed Value $165,381,310 44.61% 107,539,554 29.01 35,576,839 9.60 17,465,444 4.71 1,315,041 0.35 2,358,583 0.64 1,167,991 0.32 18,218,894 4.91 21,723,756 5.86 $370,747,412 55.8461% (1) Values assigned to other parcels and use categories. - Source: Rosemead Community Development Commission, 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 DOCSLA 1:509308.6 41555 -8 K35/K35 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, GRC 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. As noted in the Fiscal Consultant's Report, 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 Revenueand 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 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. DOCSLA 1: 509308.6 41555 -8 K35/K35 • • 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 1, 100 people. 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 c orribine 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 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 recent sale to Wal -Mart of an SCE owned 23 -acre site at the corner of Walnut Grove and Rush Street was completed in December of 2005. Wal -Mart purchased the development site at a purchase price of approximately $10,000,000. The City has issued a building permit for an approximately 230,000 square foot retail building, with a total building valuation of $10,401,590, for a total valuation of approximately $21,000,000. See " Current Plans for the Redevelopment Project Area No. I" below. Within this property, there are two additional outpads which Wal -Mart is expected to eventually sell to another developer for a fast food restaurant and a stand alone commercial structure. 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 DOCSLA1:509308.6 41555 -8 K35/K35 0 0 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 mixed -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. 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. Current Plans for the Redevelopment Project Area No. 1 Within the Project Area there exists a 23 acre vacant site located at the southwest corner of Walnut Grove Avenue and Rush Street. In September 2004, the Rosemead City Council approved by unanimous vote a General Plan amendment, Parcel Map and Conditional Use Permit for development of a 230,367 square foot Wal -Mart Supercenter on the site. In December 2005 Wal -Mart closed escrow on the site at a purchase price of approximately $10,000,000.. 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 an election was set for February 7, 2006. However the election will not be held at that time because of a preliminary injunction issued by the Federal District Court in litigation that is still in progress. SOC is also pursuing two lawsuits challenging the Wal -Mart project's compliance with the California Environmental Quality Act. Construction of the project has commenced despite the pending litigation but it is not certain that the project will be completed. This sale of the development site is expected to result in an increase in tax increment revenues of approximately $73,302. While construction of the project could commence in the near future, no projection of incremental revenue from a completed project has been made in the fiscal analysis, and it is uncertain whether the project will be completed. The Fiscal Consultant has not included in its report an increase in DOCS LA I :509308.6 41555 -8 K35YK35 projected assessed value to reflect increased assessed value associated with sale of this property. Additionally, if the property is eventually privately developed as a Wal -Mart Supercenter, or otherwise, this could result in a substantial increase in assessed value. The Fiscal Consultant has not included increases in assessed value for future development in its projections. See APPENDIX A — "FISCAL CONSULTANT'S REPORT." 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 seemed 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. Table 3 Rosemead Community Development Commission Redevelopment Project Area No. I Ten Largest Secured Tax Payers Fiscal Year 2005 -06 Source: Los Angeles County, 2005 -06 Equalized Tax Rolls. Includes only locally assessed properties 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. DOCS LA I :509308.6 41555 -8 K35IK35 Percent of Project Parcel Secured Net Area Secured Net Owner Name - Count Land Use Assessed Value Assessed Value Rosemead Hwang LLC I Commercial $29,750.000 8.52% California Federal Savings and Loan 1 Commercial 12395,786 3.55 Panda Restaurant Group Inc. I Commercial 8,375,820 - 2.40 Yell Tom C and Nancy Y, TRS Yee Fain 1. Industrial 5,818,642 1.67 Galaxy Realcorp Rosemead LP 7 Commercial 3,437,772 0.98 Thong Phillip T Co TR Thong Fam Trust I Residential 3,137,000 0.90 Chiang Raymond K Co TR Chiang Trust 2 Industrial 3,400,000 0.97 Irish Construction - 2 Industrial 3,095,327 0.89 Beach Grocery Co Inc. - 14 Commercial 2,947,005 0.84 Wong Shi Yin TR Shi Yin Wong MD I Commercial 2,900,000 0.83 Trumideb Nominees Inc. Top Ten Totals 31 $75,257,352 21.56% Fiscal Year 2005 -06 Net Assessed Value for Project Area $349,023,656 Source: Los Angeles County, 2005 -06 Equalized Tax Rolls. Includes only locally assessed properties 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. DOCS LA I :509308.6 41555 -8 K35IK35 TAX INCREMENT REVENUES 0 The Commission has retained GRC Associates, Inc., to analyze the Redevelopment Project Area No. I and its Pledged Tax Revenues. Their report is included as Appendix A and should be read in its entirety. 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 2005 -06 is $370,747,412 which produces a total incremental value of approximately $345,580,740. DOCSLA I :509306.6 41555 -8 K35/K35 0 0 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 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 administtative costs and refunds resulting from successful appeals of assessed values. For a more complete discussion. of how the various adjustments are calculated see, APPENDIX A — "FISCAL CONSULTANT'S REPORT." Table 4 Rosemead Community Development Commission Redevelopment Project Area No. 1 Historical Values Securedo Land Improvements Personal Property Exemptions Total Secured Unsecured Improvements Personal Property Total Unsecured GRAND TOTAL Annual Change Incremental Value: 2001 -02 2002 -03 2003 -04 2004 -05 2005 -06 $125,341,703 $130,981,056 $155,175,638 $169,590,663 $203,769,318 116,444,795 121,189,983 128,977,977 135,434,124 148,698,519 2,953,024 2,042,074 1,843,772 1,586,980 1,917,867 5,572,510 5,663 5.045,427 5,252,907 5.362,048 $239,167,012 $248,549,338 $280,951,960 $301,358,860 $ 3,261,252 15,215,984 $349,023,656 $ 8,081,798 13,641,958 $ 4,938,825 $ 5 $ 4,830,503 10,089,103 9,580,847 12,558,449 S 15,027,928 $254,194,940 $229,032,268 S 14,698,028 $263,247,366 3.56"/, $238,084,694 S 17,388,952 $298,340,912 13.33% $273,178,240 U) Secured values include state assessed non - unitary utility property. Source: Fiscal Consultant's Report and Los Angeles County Assessment Roll, 2000 -2005. Projected Tax Revenues $ 18,477,236 $319,836,096 7.20% $294,673,424 S 21,723,756 $370,747,412 15.92% $345,584,740 The following table shows the projected Pledged Tax Revenues for Redevelopment Project Area No. 1 for the Fiscal Years 2004 -05 through 2014 -15. While the projections are based on assumptions which are believed by the Fiscal Consultant 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 2005 -06 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 2005 -06 fiscal year level. See "TAX ALLOCATION FINANCING AND LIMITATIONS ON . RECEIPT OF TAX INCREMENT — Property Tax Rate and Appropriation Limitations" herein. DOCS LA I :509308.6 41555 -8 K35/K35 • A (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 2004 -05 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 2004 -05 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 2005 -06 fiscal year. The 2005 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 17.10% 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. As noted in the Fiscal Consultant's Report, 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, the Fiscal Consultant and the Underwriter are unable to make any representation that taxable values will actually grow at the rate projected. DOCSLA1:509308.6 41555 -8 K35IK35 0 R v y V R R R N p V U x y vu c � - U e � v N N e e 49 t» e ^ O O� rV M O� �-+ �-• N O M 00 b- M O N N e e - fA - = Pcl C ^ " < ^ O M r p N T N N O N �YJ P N N T M 69 GC ono Q`o ^ r o N rn <r rn � rno��n V N N e 69 M E� O U Z y ��a n areav w o R h o N -rn r E YYii _ Q O �F _ O r 7 V O s5 �xc r V n T V O C r N N a O N N M M fA b P b N O M O M M p M b r n n r n Q M p o ^ � r e N N M W M R v y V R R R N p V U x y 0 V N v,Z p a O v RJr C � U E p 9 0 G G V C V c ry 9V a O b GQ 9O = v w m R x o ro Y Q R y c v C L � F � _ > F o o c o r„ c o u M O c a m rn u a C G y � A � J t+ V C o O p0 V] u D ° ° a E a � '❑ h v i �, v+ R N r ' J > y O V b W O r a o Y In Q w yr U �+ � a Il vu c � - U e � v 0 V N v,Z p a O v RJr C � U E p 9 0 G G V C V c ry 9V a O b GQ 9O = v w m R x o ro Y Q R y c v C L � F � _ > F o o c o r„ c o u M O c a m rn u a C G y � A � J t+ V C o O p0 V] u D ° ° a E a � '❑ h v i �, v+ R N r ' J > y O V b W O r a o Y In Q w yr U �+ � a Il yd �_ V C N il S CO W W = s � H y � C � N S (�' EJ F o jp N n � r � N � r V G ^J � C U � C_ � NI C 0 W l7 C G F � � -- v � .� - N O `� N � C _O pQ V U U L y O N j _ N 09 � O A S � r � 0 G 4 rf O G _� a U m °� _t 4 � c o H c `� c y N '� �F n v r T L -' E c. 0 0 '= c > > o ° m h `u c v � v "' o " V d C e C U � V O � � N � e� � �J C U N p '- 'J O v � J m O � 6 � O r ^ J L. V C N V � � o o U c � m C o�� N � 9 �.� � � CO V f] � � H � x o �n � rn o n < Y �� N � 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 projections of the Fiscal Consultant set forth herein. Table 6 Rosemead Community Development Commission Redevelopment Project Area No. 1 Projected Taxable Values and Tax Increment Revenues Assessment Appeals The Fiscal Consultant reports 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. See APPENDIX A- "FISCAL CONSULTANT'S REPORT" hereto. Debt Service and Estimated Coverage Table 7 sets forth the debt service and estimated coverage on the Series 2006A 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 Fiscal Consultant's projections of net Pledged Tax Revenues as summarized in Table 5 and as set forth in APPENDIX A hereto are realized through Fiscal Year 2005 -06 and escalated at 2% per year thereafter. 2. Debt service is based on an assumed maturity schedule and interest rates for the Series 2006A 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. DOCSLA1:509308.6 41555 -8 K35/ 0542 Adjusted Projected Incremental - Gross Pledged Tax Fiscal Year Taxable Value Revenues 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. 19,000 5,881 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 Assessment Appeals The Fiscal Consultant reports 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. See APPENDIX A- "FISCAL CONSULTANT'S REPORT" hereto. Debt Service and Estimated Coverage Table 7 sets forth the debt service and estimated coverage on the Series 2006A 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 Fiscal Consultant's projections of net Pledged Tax Revenues as summarized in Table 5 and as set forth in APPENDIX A hereto are realized through Fiscal Year 2005 -06 and escalated at 2% per year thereafter. 2. Debt service is based on an assumed maturity schedule and interest rates for the Series 2006A 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. DOCSLA1:509308.6 41555 -8 K35/ 0542 0 0 I 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) Estimated Less: Tax Housing Set Series 1993 Series 2006A Combined Year In Increment Aside Bond Debt Service (2) Bond Debt Service Debt Service Total Coverage 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (1) Tax Increment is for the Tax Year ending June 30 and debt service is for the Bond Year ending October 1. (2) The Series 1993 Bonds mature on October 1, 2033. Debt service owing to the Series 1993 Bonds between 2023 and 2033 are not included in this table. Source: GRC Associates, Inc. with debt service schedules provided by Piper Jaffray & Co. DOCSLAI: 509308.6 41555 -8 K35/ K3543 • 0 CERTAIN INFORMATION CONCERNING THE CITY Certain general information concerning the City of Rosemead is included herein as Appendix E hereto. Such information is provided for informational purposes only. The General Fund of the City is not liable for the payment of the Series 2006A Bonds or the interest thereon, nor is the taxing power of the City pledged for the payment of the Series 2006A Bonds or the interest thereon. CERTAIN LEGAL MATTERS Legal matters incident to the delivery of the Series 2006A 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 2006A 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 2006A 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 2006A 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 2006A 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 2006A Bonds is less than the amount to be paid at maturity of such Series 2006A Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Series 2006A 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 2006A 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 2006A Bonds is the first price at which a substantial amount of such maturity of the Series 2006A 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 2006A Bonds accrues daily over tine term to maturity of such Series 2006A 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 2006A Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2006A Bonds. Beneficial Owners of the Series 2006A Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series 2006A Bonds with original issue discount, including the treatment of beneficial owners who do not purchase such Series 2006A Bonds in the original offering to the public at the first price at which a substantial amount of such Series 2006A Bonds is sold to the public. DOCSLAI: 509308.6 41555 -8 K351 K3544 0 0 Series 2006A 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 2006A Bonds. The City and the Authority have made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Series 2006A 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 2006A Bonds being included in gross income for federal income tax purposes, . .possibly from the date of original issuance of the Series 2006A 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 2006A Bonds may adversely affect the value of, or the tax status of interest on, the Series 2006A 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 2006A 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 tine 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 2006A 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 2006A Bonds. Prospective purchasers of the Series 2006A Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses 110 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 2006A 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, DOCSLA L509308.6 41555 -8 K35/ K3545 • w 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. - Bond Counsel's engagement with respect to the Bonds ends with the issuance of the Series 2006A 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 2006A 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 2006A 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 2006A 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 2006A 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 deliver} of the Series 2006A 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 2006A Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Series 2006A Bonds, die 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 2006A Bonds from gross income for Federal income tax purposes or the exemption of interest paid on the Series 2006A 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 2006A Bonds based on the issuance by Ambac Assurance of the Financial Guaranty Insurance Policy. The Series 2006A 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 2006A 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 2006A Bonds. DOCSLA I :509308.6 41555 -8 K351 K3546 � M UNDERWRITING The Series 2006A Bonds are to be purchased from the Authority by Piper Ja ffray & Co., as Underwriter, pursuant to a Purchase Contract among Commission, the Authority and the Underwriter. The Underwriter will purchase the Series 2006A Bonds at a price of $ which reflects the par amount of tine Series 2006A Bonds, plus original issue premium of $ less an underwriter's discount of $ . The Underwriter is committed to purchase all the Series 2006A Bonds if any are purchased. The Underwriter may offer and sell the Series 2006A Bonds to certain dealers (including depositing the Series 2006A 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 2006A 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 A,reement, the mathematical accuracy as of the date of the closing on the Series 2006A 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, when due, the principal of and interest on the Series 1993 Bonds on April 10, 2006. 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. FINANCIAL ADVISOR The Commission has retained Public Financial Management as Financial Advisor for the sale of the Series 2006A Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. Public Financial Management is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. FISCAL CONSULTANT The Report of GRC Associates, Inc., included in Appendix A to this Official Statement has been presented in reliance upon the knowledge, experience and authority of that firm as experts in redevelopment consulting. MISCELLANEOUS All of the preceding summaries of the Series 2006A Bonds, other applicable legislation, agreements and other documents are made subject to the provisions of the Series 2006A 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. DOCSLAI:509308.6 41555 -8 K35/ 63547 1 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 2006A 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 2006A 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 0 Executive Director ATTEST: City Clerk DOCSLA 1:509308.6 41555 -8 K351 K3548 0 0 APPENDIX A FISCAL CONSULTANT'S REPORT DOCSLAI:509308.6 41555 -8 K35/ K35A -1 0 0 ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION ROSEM EAD REDEVELOPMENT PROJECT AREA NO. 1 PROJECTED TAX INCREMENT REVENUES FEBRUARY 7, 2006 I. Introduction The Community Development Commission of the City of Rosemead (`Agency') is proposing to issue its Tax Allocation Bonds, 2006 Series A, (`Bonds ") secured by a pledge of and lien on the tax increment revenues derived .from the Rosemead Redevelopment Project Area No. 1 (`Project Area "). The Project Area, to be described in this report, was originally established in 1972. The Bonds are being issued to refund a portion of the Rosemead Redevelopment Project Area No. 1 Tax Allocation Bonds, Series 1993 A, previously issued by the Agency, as well as to raise new funds. The California Community Redevelopment Law ( "CRL ") provides for the creation of redevelopment agencies by cities and counties for the purpose of the elimination of blight. The CRL, collectively with Article 16, Section 16 of the California Constitution, authorizes redevelopment agencies to receive that portion of property tax revenue generated by project area taxable values that are in excess of the base year value. The base year ('Base Year ") value is defined to be the amount of the taxable values within the project area boundaries on the last equalized tax roll prior to adoption of a project area or an amendment to a project area that adds area. The amount of current year taxable value that is in excess of the Base Year value is referred to as incremental taxable value. Tax revenues generated from the incremental taxable value are generally referred to as Tax Increment Revenues. The CRL provides that Tax Increment Revenues may be pledged by a redevelopment agency to the of agency indebtedness. The purpose of this fiscal consultant report (`Report ") is to examine the current fiscal year and estimate, for subsequent fiscal years, the amount of tax increment revenues anticipated to be received by the Agency from the Project Area. Provisions of the CRL and the Redevelopment Plan determine the amount of tax increment that the Agency may utilize for purposes of making debt service on bonds, loan payments, payments pursuant to tax sharing agreements between the Agency and other taxing entities and payments on other obligations. The estimated tax increment revenue available for bond debt service (`Pledged Revenues ") generated by the Project Area are shown in the table below for fiscal years 2005 -06 through 2022 -23. Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 The projected incremental taxable values of property and the resulting gross tax increment revenues ( "Gross Revenue ") and Pledged Revenues summarized above are reflected in Tables 1, 2, 3, 4, and 5 attached to this Report. The projections in this Report are based on the history of taxable values within the Project Area and the property tax assessment and property tax apportionment procedures of Los Angeles ( "County"). Future year assessed values, Gross Revenues and Pledged Revenues are estimates based upon the assumptions described in this Report. This Report should not to be construed as a guarantee of Agency revenues by the Agency or GRC Associates, Inc. 1L The Project Area The redevelopment plan for Rosemead Project Area No. 1 was originally adopted by Rosemead City Council on June 27, 1972 by Ordinance 340. The Project Area consists of approximately 511 acres and is roughly triangular in shape. Garvey Avenue, San Gabriel Boulevard and Walnut Grove are major thoroughfares traversing the area. The Project Area is located between the San Bernardino and Pomona freeways to the north,and south and contains a complete cross section of the existing cities land use, including commercial, industrial and residential uses. The original Redevelopment Plan has been amended four times since its adoption. The plan was first amended on December 9, 1986, by City Council Ordinance 592, to increase the number of dollars allocated to the Agency and re- establish eminent domain. The plan was further amended on December 20, 1994 by City Council Ordinance 752 to bring the plan into conformity with 2 Project Area (000's Omitted) 0 0 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 California State Assembly Bill 1290. The plan was amended a third time by City Council Ordinance 822 on June 22, 2002, to extend the duration of the plans effectiveness. Finally, the Plan was amended on July 27, 2004 by City Council Ordinance 832 to extend the life of the Project by 1 year pursuant to SB 1045. A. Lance Use The following table presents a breakdown of land use in the Project Area, by assessed value for fiscal year 2005 -06. Unsecured parcels are not shown because these parcels are tax bills that are assigned to secured ,parcels already and are accounted for in other categories. It should be noted that the figures below exclude the value of exempt parcels such as those owned by the City, Agency, State or other governmental agencies that do not contribute to Agency revenues. Project Area I❑ Unsecured properties are assigned to the secured parcel in which they are located. Source: Los Angeles County Auditor Controller, based on 2005 -06 Los Angeles County Equalized Tax Roll B. Redevelopment Plan Limits Not including the one year extension permitted by Senate Bill SB 1045 to mitigate the impacts of ERAF payments, CRL 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 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 3 Percent Category Parcels Assessed Value of AV 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% Misc. 32 $ 1,167,991 0.32% Public Utilit $ 18,218,894 4.91% Unsecured I'1 $ 21,723,756 5.86% Totals 1102 $ 370,747,412 100.00% I❑ Unsecured properties are assigned to the secured parcel in which they are located. Source: Los Angeles County Auditor Controller, based on 2005 -06 Los Angeles County Equalized Tax Roll B. Redevelopment Plan Limits Not including the one year extension permitted by Senate Bill SB 1045 to mitigate the impacts of ERAF payments, CRL 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 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 3 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 an ordinance, can eliminate the time limit on the in debtednessrequired prior to January 1, 2002. . . e effective September 1, 200 p Pursuant to California State Senate Rill 1045, which becam redevelopment agencies may amend the redevelopment Ian to extend one y ear the time limit on the effectiveness of the plan and the time limit to receive prr operty. taxes and repay y indebtedness. of ordinances a series velops ent Plan to theomaaimun allowed under lw. Additionally, ll the Agency l eliminated the time Rede the timeframe to incur debt under state legislation SB 211. Rosemead Redevelopment Project Area No. 1 Plan Limits Last Date to Last Dale to Repay Debt e'itb Redevelopment I 6/27/2013 Project Area No. 1 establishment of loans, advances, and No Limit I 6127/2023 Lm"t on Total Tax Increment Tax Increment Limit Bond Debt $2497245,938 No Limit Accord e County records, the Agency has received approximately $78,579,553 in total the p cumulative tax increment from the Project Area as of January the limit on increment of funds that the tax increment revenues to be received the Bonds. by the Agency, Agency may receive for the Project Area will not be exceeded within the term of 11I. Project Area Assessed Values A. Assessed Values ' d by the County ALiditor-Controller fiscal , Taxable values are prepar d anepocal assessedproper swh the eP oje tArea. The represent the all y assessments are assigned Tax Rate Areas (TRA) that are coterminous the boundaries the project area in the first year that an agency is eligible to receive fax increment revenue. . The Project Area consists of 12 individual TRAs. ter ine Historic taxable values since 2000 -2001 were utilized valuesw the h Project r Area have h steadily property values within the Project Area. Property crown at a compounded rate of 10.5% per year between the years 2001 -200 and 2005 -2006. decline period 2005 -2006 s At o, at no t1 me this period did property tax value O between grow at a ranee of less than 2 %.- GRC is not aware of any potential exemptions that would substantially affect property values in the Project Area in the coming future. The historic taxable values for the Project Area are shown in Table 3. B. Top Ten Taxable Property Owners A review of the top ten taxable prop erty owners e aggregate the te P total c t taxable o value a for e the ten largest conducted. Within the Project Area, the aga g values. These top -ten taxpayers account taxpayers totaled $79,920,183 of the assessed property 4 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 ' . . for 20.7% percent of the secured assessed value within the Project Area and 21.5% percent of the unsecured assessed value. GRC's analysis 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. For this reason, GRC has not included Southern California Edison in its analysis of top 10 property owners. See Section IV. H. below for a more complete description of unitary revenues. A list of the top ten taxpayers, and the number of parcels attributed to each owner for the Project Area, is presented in Table 5. IV. Tax Allocation and Disbursement A. Property Taxes The taxable values of property are established each year on the property tax lien date. Prior to 1997 the lien date was March l for locally assessed property and January 1 for State assessed utility property. Beginning with 1997, the lien date of January 1 was established for both locally and State assessed property. Real Property reflects the reported assessed values for secured and unsecured land and improvements. Pursuant to Article X111A of the State Constitution, the value of locally assessed Real Property may only be increased up to two percent annually to reflect inflation. Real Property values are also permitted to increase as a result of a change of ownership or new construction. Utility property assessed by the State Board of Equalization may be revalued annually and such assessments are not subject to the inflation limitations of Article X111A. The taxable value of Personal Property is also established on the lien dates and is not subject to the annual two percent limit of locally assessed Real Property. , Secured property includes property on which any property tax levied by a county becomes a lien on that property. Unsecured property typically includes value for tenant improvements, fixtures and personal property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other secured property owned by the taxpayer. The taxes levied on unsecured property are levied at the previous year's secured property tax rate. B. Supplemental Assessments Chapter 498 of the Statutes of 1983 provides for the reassessment of property upon a change of ownership or completion of new construction. Such reassessment is referred to as a Supplemental Assessment and is determined by applying the current year's tax rate to the amount of increase in a property's value and prorating the resulting property taxes to reflect the portion of the tax year remaining as determined by the date of the change in ownership or completion of new construction. Supplemental Assessments become a lien against Real Property. Since 1984 -85 revenues derived from Supplemental Assessments have been allocated to redevelopment agencies and taxing entities in the same manner as regularly collected property taxes. The Agency received $251,440 in revenue from Supplemental Assessments' within the ' Supplemental Assessments as reported by Los Angeles County Auditor - Controller in monthly remittance reports for Fiscal Year 2004 -05. 5 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 Project Area during fiscal year 2004 -05. This revenue is indicative of new development that was assessed after finalization of the tax roll and sales of property at prices that were higher than the assessed value. GRC has not included revenues or revenue reductions resulting from Supplemental Assessments in our projections. C. Tax Rates Tax rates will vary within a community and a project area. The tax rate for any particular parcel is based upon the taxing entities levying the tax rate for the area where the parcel is located. The tax rate consists of the General Levy Tax Rate of $1.00 per $100 of taxable values and the Over- ride Tax Rate. The Over -ride Tax Rate is that portion of the tax rate that exceeds the General Levy Tax Rate and is levied to pay voter approved indebtedness or contractual obligations that existed prior to the enactment of proposition X111. . The State Constitution prohibits the allocation to redevelopment agencies of tax revenues derived from Over -ride Tax Rates levied for repayment of indebtedness approved by the voters after December 31, 1988. The Over -ride Tax Rates typically decline each year as a result of (1) increasing property values (which would reduce the Over -ride Tax Rate required to produce the revenue necessary to meet debt service obligations) and (2) the eventual retirement of debt over time. The Project Area is subject to the Metropolitan Water District. The tax rate levied by the Metropolitan Water District is authorized by a contract and does not have a termination date. The Project Area contains 12 Tax Rate Areas (TRA's). A Tax Rate Area is a geographic area within which the taxes on all property are levied by a certain set of taxing entities. These taxing entities each receive a prorated share of the General Levy and those taxing entities with voter approved Over -ride Tax Rates receive the revenue resulting from that tax rate. For the revenue projections contained within this report, it is assumed that the tax rate is $1.0052 per $100 of secured and unsecured assessed value for the life of the Project Area. The breakdown of the tax rate that is applicable to the Project Area is as follows: 1.000000 General Levy .0052 Metro Water District 1.0052 RDA Applicable Rate:. D. Allocation of Taxes Taxes paid by property owners are due in two equal installments. Installments of taxes levied upon secured property become delinquent on December 10 and April 10. Taxes on unsecured st 31. The County disburses Tax property are due March 1 and become delinquent Augu Increment Revenue to all redevelopment agencies from November through August with approximately 45 percent of secured revenues apportioned by the end of December. Unsecured revenues are disbursed in September, January and June of each fiscal year. E. Annual Tax Receipts to Tax Levy The Agency received a total of $4,588,594 in tax. increment revenue from the Project Area for fiscal year 2004 -05. This total is inclusive of revenues from supplemental assessments, homeowners exemptions, public utilities and prior year collections and refunds. 0 Rosemead Community Development Commission Fiscal,Consultant's Report February 7, 2006 • The County of Los Angeles apportions tax revenues to redevelopment agencies based upon the amount of the tax levy that is received from the taxpayers. Secured collection rates for the Merged Project have been consistently high over last four years. The following table illustrates the tax revenue collections for Agency over the previous five years. The total tax levy includes the tax levy, including secured, unitaKy and unsecured tax levy's as reported at the beginning of each fiscal year. The total apportioned includes amounts actually allocated to the Agency including supplementary assessments and prior year collections. Fiscal Year Total Tax Levy I'1 Collection Rate Total Apportione d Total % Received 2004 -05 $ 4,205,694 99.00% $ 4,588,598 109.10% 2003 -04 $ 4,053,338 98.40% $ 4,318,373 106.54% 2002 -03 $ 3,720,264 96.40% :$ 3,800,050 102.14% 2001 -02 $ 3,711,493 97.30% $ 3,845,676 103.62% 2000 -01 $ 3,475,165 87.10% $ 3,547,755 102.09% Source: Los Angeles County Auditor - Controller's Office, 2000 -2001 to 2004 -05 [11 Total tax levy includes secured tax levy, unitary taxes and unsecured tax levy Tax increment revenue projections contained in this report do not include any adjustments for delinquencies or collection history. F. Assessment Appeals GRC has provided for a reduction in assessed value based on appeals data from Project Area in the aggregate. Since 1999, there have been a total of 34 assessment appeals filed on properties within the Project Area. Of the 34 appeals filed, 14 have been allowed with a reduction in value and 19 have been denied or withdrawn. These figures result in an average of 42.4% percent of resolved appeals being allowed with a reduction of value. The historical average reduction in value for allowed appeals is 25.31 percent. There is 1 appeal currently pending on property within the Project Area. These owners have appealed valuations totaling $789,000. Based on the above historical averages, GRC 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. The historical appeals data for the Project Area is presented in Table 4 attached to this report. 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 7 0 1 0 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 with the actual full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other 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. G. County Collection Charges I Counties are permitted by State law to recover charges for property tax administration in an amount equal to their property tax administration costs. For the fiscal year 2004 -05, the amount - of County collection charges attributed to the Project Area is $69,875.11. For purposes of these projections, GRC has assumed that the County will continue to charge the Agency for property tax administration and that such charge will be 1.52% percent of the gross revenues (see Tables 1 and 2) based on the prior year administration fee. ' H. Allocation of State Assessed Unitary Taxes Legislation enacted in 1986 (Chapter 1457) and 1987 (Chapter (92 1) provided for a modification of the distribution of tax revenues derived from utility property assessed by the State Board of Equalization, other than railroads. Prior to the 1988 -89 fiscal year, property assessed by the SBE was assessed statewide and was allocated according to the location of individual components of a utility in a tax rate area. Since 1988 -89, tax revenues derived from unitary property assessed by the SBE are accumulated in a single Tax Rate Area for the County. It is then distributed to each taxing entity in the County in the following manner. (1) each taxing entity will receive the same amount as in the previous year plus an increase for inflation of up to two percent; (2) if utility tax revenues are insufficient to provide the same amount as in the previous year, each taxing entity's share would be reduced pro -rata county wide; and (3) any increase in revenue above two percent would be allocated in the same proportion as the taxing entity's local secured taxable values are to the local secured taxable values of the County. 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. Unitary tax revenues make up a substantial portion of the tax increment revenues received by the Agency. This is primarily because the headquarters of Southern California Edison are located within the Project Area. However, the revenues allocated to the Agency 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 Agency for 2004 -05. This amount is reasonably consistent with the unitary revenue allocations made to the Agency in prior years. However, the Agency's unitary revenues have fallen by approximately 23% since 1992 -1993. See the table below for the total unitary assessed values in the County of Los Angeles since 1997. 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 8 • i Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 to a decrease in the assessed valuation of telecommunication companies during the period 2002- 2005. We have assumed 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 l i f e of the proj ect. Total Unitary Assessed Value for County of Los Angeles Year Total Assessed Value 1997 -98 $ 12,668,473,940 1998 -99 $ 12,681,433,366 1999 -00 $ 12,505,962,644 2000 -01 $ 12,348,514,649 2001 -02 $ 12,425,634,651 2002 -03 $ 12,357,025,398 2003 -04 $ 11,587,735,634 2004 -05 $ 10,648,846,372 2005 -06 $ 10,718,105,185 Source: California State Board of Equalization V. Low and Moderate Income Housing Set -Aside Section 33334.2 of the CRL requires redevelopment agencies to set aside 20 percent of all tax increment revenues into, a low and moderate - income housing fund ("Housing Set -Aside Requirement "). An agency can reduce the Housing Set -Aside Requirement if it annually makes certain prescribed determinations that are consistent with the housing element of the general plan. These findings are: (1) that no need exists in the community to improve or increase the supply of low and moderate income housing; or, (2) some stated percentage less than 20 percent of the tax increment is sufficient to meet the housing need. In order to make findings (I) or (2), the Agency's finding must be consistent with the housing element of the community's general plan, including its share of the regional housing needs of very low income households and persons and families of low or moderate income. No such findings have been made by the Agency. However, on October 9, 1991 the Agency prepaid its housing obligation in the amount of $6,813,849.62. As a result, the Agency's housing obligation has been reduced by $469,142 per year until the 2021 -22 fiscal year. This annual reduction was based on a present value factor determined by the yield on the Agency's outstanding bonds. The Agency additionally deferred its housing set -aside obligation for fiscal years 1992 -93, 1993 -94 and 1995 -96. The agency must repay these amounts prior to the last date the Agency may receive tax increment. VI. Legislation In order to address State Budget deficits, the Legislature enacted S13614, SB844 and SB 1135 that required payments from redevelopment agencies for the 1992 -93, 1993 -94 and 1994 -95 fiscal years into a countywide Education Revenue Augmentation Fund (the ERAF). The Agency was allowed to use any funds legally available and not legally obligated for other uses, including reserve funds, bond proceeds, earned income and proceeds of land sales to satisfy this obligation, but was prohibited from using moneys in the Low and Moderate Income Housing Fund (the Housing Fund). The obligation is applied to the agency and not to specific project areas. All 6 i 0 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 ERAF obligations of the Agency in the above noted years have been fulfilled and no repayment obligation exists. In addition to the payments from redevelopment. agencies, the State budget solutions have involved the shifting of property tax revenues from cities, counties and special districts to the ERAF. In Los Angeles, this shift has been accomplished by allocating to the ERAF its share of taxes in the same manner as they are distributed to other taxing entities except for redevelopment agencies whose revenue is distributed in accordance with its incremental taxable value. Pursuant to AB 1768, the State introduced a one -time ERAF shift for redevelopment agencies of $75,000,000 for the fiscal year 2002 -03 to help fund the State budget deficit. The Agency's ERAF obligation was $122,487, which was paid to the County. Additional State legislation, SB 1045, again introduced a one -time ERAF shift of $135,000,000 for fiscal year 2003 -04 year to meet the ongoing State budget deficits. The Agency's ERAF obligation for the 2003 -04 fiscal year was $207,391. Subsequent to SB1045, 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 Agency's ERAF obligation for the 2004 -05 and 2005 -06 fiscal years is estimated at $342,811.45. No other future ERAF obligations have been drafted or adopted, but it is possible that the 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 in this Report. The Agency 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 2005 Bonds could be substantially reduced in the future. VII. Tax Sharing Agreements and Other Obligations Pursuant to Section 33401 of the Redevelopment Law, a redevelopment agency may enter into an agreement to pay tax increment revenues to any taxing agency that has territory located within a redevelopment project in an amount which in the agency's determination is appropriate to alleviate any financial burden or detriment caused by the redevelopment project. These agreements normally provide for a pass - through of tax increment revenue directly to the affected taxing agency, and therefore, are commonly referred to as "pass - through" agreements or "tax sharing" agreements. The following paragraphs describe the pass - through agreements the Agency has entered into with respect to each project area. County of Los Angeles Consolidated Fired Protection Department and County Library District. On September 22, 1989 the Agency entered into a reimbursement agreement with the County of Los Angeles, Consolidated Fire Protection District and County Library District. The Agency agreed to pay the Fire District its share of general levy property tax increment. The Fire District share of property tax revenues is approximately 17.1 %. Additionally, the Agency agree to pay the Library District its share of tax increment revenues, net of housing set - aside, if the Agency constructed a new Library facility within the Project Area. The Agency has not constructed a new facility and does not currently have plans to do so. Therefore, it has been assumed that the 10 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 Agency will not make payments to the Library District. This agreement is not subordinated to bond indebtedness. Statutory Pass Throughs. When the Agency extended the time frame to incur debt pursuant to State Assembly Bill 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. These statutory pass - throughs to affected agencies will began in the year 2004 -05 at a rate of 25% of the tax increment growth net of the Housing Set -Aside Requirement with of base year of 2003- 04. An additional pass through will begin in the 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 of Los Angeles includes the unitary assessed values in its calculation of SB 211 pass throughs. However, there is no consistent methodology among various counties within the State as to the calculation of SB 211 pass throughs. The California Redevelopment Association is currently working on a standardized methodology for these payments. However, GRC is not aware of any pending legislation that would impact this matter. For the purpose of this report, GRC has calculated the pass throughs based on the County of Los Angeles's methodology. Pursuant to SB 211, these pass throughs may be subordinated to bond debt if the Agency makes the finding that the issuance of the debt will not impact the Agency's ability to make the statutory payments. The Agency has made the appropriate findings, and therefore GRC has assumed that these payments are subordinated to bond indebtedness accordingly. VIII. Development Activities A. Future Projects New development is one of the primary sources of increased assessed property values above the 2% annual inflation factor. Within the Project Area there exists a 23 acre vacant site located at the northwest corner of Grove and Rush Streets. This property is current under the ownership of Southern California Edison. Southern California Edison has reached an agreement to sell this property to Wal -Mart for a price of $10,500,000. This transaction would result in an increase in tax' increment revenues available for debt service of approximately $73,302. GRC has not included an increased in projected assessed value to reflect increased assessed value associated with resell of this property. Additionally, if the property is eventually privately developed, this could result in a substantial increase in assessed value. GRC has not included increases in assessed value for future development in our projections. IX. Trended Taxable Value Growth 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. A two percent growth rate has been assumed because it is the maximum inflationary growth rate permitted by law and this rate of growth has been realized in all but four years since 1981. The years in which less than two percent growth was realized were 1983 -84 (1.0 %), 1995 -96 (1.19 %), 1996 -97 (1.11 %) and 1999 -00 (1.85 %). In addition, the State Board of Equalization has directed county assessors to use an inflation adjustment of 1.867% in II 0 6 Rosemead Community Development Commission Fiscal Consultant's Report February 7, 2006 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 4ppeals based on reduced market values could increase more than two percent when real estate values increase more than two percent (see Section III.F above)., Seismic activity and environmental conditions such as hazardous substances are not anticipated in this report and might also impact property taxes and Tax Increment Revenue. GRC Associates makes no representation that taxable values will actually grow at the rate projected. 12 0 9 Table 1 Rosemead Redevelopment Project Area No. 1 Projection of Tax Increment Revenue (000'$ Omitted) Taxable Values (1) - 2005106 2006107 2007108 2008109 2009110 2010111 2011112 2012113 2013114 2014115 Land 203,769 207,845 212,002 216,242 220,566 224,978 229,477 234,067 238,748 243,523 Improvements 156,696 159,830 163,026 166,287 169,612 173,005 176,465 179,994 183,594 187 266 Less Exemptions -5,362 -5,469 -5,579 -5,690 -5,804 5,920 -6,039 6,159 8,282 -6,408 Personal Property (2) 15,560 15,560 .15,560 15,560 15,560 15,560 15,560 15,560 15,560 15,560 Total Projected Taxable Value 370,663 377,765 385,009 392,390 399,935 407,622 415,463 423,461 431,619 439,941 Taxable Value over Base 345,500 352,602 359,846 367,235 374,772 382,459 390,301 398,299 406,457 414,778 Tax moremeN(3) 3,473 3,544 3,617 3,691 3,767 3,844 3,923 4p04 4,086 4,169 Unitary Tax Revenue (4) 1,173 .1,173 1,173 1,173 1,173 1,173 1,173 1,173 1,173 1,173 Adjusted Gross Revenues 4,646 4,718 4,791 4,865 4,941 5,018 5,097 5,177 5,259 5,343 LESS: Housing Set Aside Requirement (5) 1460) (474) (489) (5(k) (519) (534) (550) (566) (583) (5991 SB 2557 Admin. Fee (S) (711 (72) (73) (74) (75) (76) (78) (791 (80) (61) Pass Throughs Fire Depanment(7)' (790) (802) (815) (825) (Fk0) (854) (867) (881) (895) (909) Pledged Revenues (8] 3,325 3,369 3,414 3,459 3,506 3,553 3,602 3,651 3,702 3,753 Subordinated Pass Throughs 58 211 Statutory Pass- Through(9) (103) - (115) (127) (139) (152) (164) (177) (191) (204) (2 2 30) Footnotes For Table 1 (1) Taxable values as tapered by Los Angeles for the 2005 -2008 fiscal year. Projections inflate Lane Improvements and Exemptions 2% Per year. The 2005 improvement value has been decreased by $84,718 to reflect potential losses due to appeals. See Table 4 for details. (2) Personal property is held constant at 200SM level. (3) Projected Gross Tax Increment is based upon incremental taxable values factored against an assumed project tax rate and adjusted for mclebtedness approved by voters prior to 1988. The assumed future tax rates remain at $1.00604 per $100 of taxable value as reported by Los Angeles Auditor Controller. According to the redevelopment plan, the last day to receive tax increment is June 2023.' (4) Unitary tax amount as reposed by Los Angeles County. Unitary tax is held constant at 2004 -2005 level. (5) Housing Set aside requirement is calculated at 20% of Adjusted Gross Revenue. In 1991, the Agency prepaid $6.8 million from proceeds from its 1987 tax allocation notes. This prepayment was restructured in 1993 along with Ind 1993 series tax allocation bonds. These actions have resulted in a decease 01$469,142 on annual housing set -aside requirement until fiscal year 2021 -22. This decrease has been reflected in the projections. (6) Los Angeles County Administration Fee is estimated at 1.52% of Gross Revenue based on actual 20N105 (7) The Los Angeles County Fire Department recieves 17.01% of gross tax increment pursuant to an agreement with the Agency. (8) Pledged revenues represent revenues available for debt service. - (9) The time limit to incur debt was extended pursuant to SB 211. Statutory pass through$ to agencies that do not have a current tax sharing agreement began 2004 -2005 at a rate of 20% of incremental growth train base year 2003 -2004. An additional pass through will begin in 2014 -2015 at 16.8% of incremental growth. These taxing agencies receive a combined share N 82.99% of general levy property tax. This assumes the City of Rosemead has elected to receive a pass- Nrough under SB211. These pass throughs are subordinate to the proposed indebtedness, d A � C O d F" a K r O N j m R U) y a o� a d sI d 7 C l6 N 4) L a� d d O C 0 (L U E C C O N N G) x r d E E C o u O N y O 0 °a Ea d N � O li N y x W d LL � U •N N �a O m = N A N m 0) 0 N N M M M M M M M M M M M M M M M M M M M Mvvu�u�mcorr W W mmoo�r c+i ch r ri c'i C6 M ci M m <+i ri ri v v v C . 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Ll APPENDIX B FORM OF OPINION OF BOND COUNSEL Upon the issuance and sale of the Series 2006A Bonds, Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, proposes to render its final approving opinion with respect to the Series 2006A 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 2006A (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel in connection with the issuance by the Rosemead Community Development Commission (the "Coin inission ") of $ aggregate principal amount of bonds designated Rosemead Community Development Commission (Los Angeles County, California) Redevelopment Project Area No. I Tax Allocation Bonds Series 2006A (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 by a First Supplement to Indenture, dated as of March 1, 2006 (the "First 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 date 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 terns 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 DOCSLA 1:509308.6 41555 -8 K35t K35B-1 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 ofjudicial 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: 1. 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. DOCSLA 1:509308.6 41555 -8 K35/K35 B -2 Ll 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, 1-IEKRINGTON & SUTCLIFFE LLP Per DOCSLAL509308.6 B 3 41555 -8 K35 /K35 0 0 APPENDIX'C DTC AND BOOK -ENTRY ONLY SYSTEM The description that follows of the procedures and recordkeeping with respect to ,beneficial ownership interests in the Series 2006A Bands, payment of principal of and interest on the Series 2006A Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series 2006A Bonds, and other Series 2006A 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 www.dtce,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 DOCSLA 1: 509308.6 41555 -8 K35/ K35C -I 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 DOCSLAI:509308.6 41555 -8 K35/ K35C -2 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. DOCSLAI:509308.6 41555 -8 K35/ K35C -3 0 0 APPENDIX D DEFINITIONS AND.SUMMARY OF INDENTURE DOCSLAL509308.6 41555 -8 K35/ K35D -I APPENDIX E 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 200" Bonds. The Series 200" Bonds,are special tax obligations of the Commission payable solely from a portion of the Special Trues and other amounts pledged under the Indenture, as more fully described in the Official Statennent 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 offacts. 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 Sheriffs 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 with the City and the County of Los Angeles (the "County'). While not constituting direct revenue sources as such, these trends help explain changes in revenue sources such as property trues, sales taxes, and transient occupancy taxes, which could be affected by changes in economic conditions. All the information presented in the following tables and other specific data references is the latest information available from the respective data sources. DOCSLA1:509308.6 41555 -8 K351 K35E -I 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 City of Rosemead Year 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. County of Los Angeles Population %Change 9,662,859 1.5 9,828,805 1.7 9,979,351 1.5 10,107,451 1.3 10,226,506 1.2 DOCSLAI: 509308.6 41555 -8 K35/K35 E -2 Personal Income 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 Totid, Effective Buying Income Calendar Years 2000 through 2004 Year and Area 2000 Total Effective Buying Median Household Effective Income(in thousands) Buying Income 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 VISA 170,440,432 40,789 State of California 650,251,407 43,532 United States 5,303,481,498 38,365 2002 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 2003 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 S 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 DOCSLAL509308.6 - 41555 -8 K35/K35 E-3 0 9 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 t'/ 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. - DOCSLA I :509308.6 41555 -8 K35/K35 E -4 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 Type of Business Number of Employees 2001 2002. 2003 So. California Edison Utility — Regional headquarters 3,000 — 4,000 Countrywide Home Loans Finance 2,500 Gamey School District Education 1,000 Rosemead School District Education 375 Hermetic Seal Corp. Hermetic seal manufacturing 260 La Victoria Foods (Seasonal) Food manufacturing 50-250 Marge Carson Inc. Furniture manufacturing 225 Irish Construction Underground utility contractor 220 Panda Restaurant Group Restaurant management 220 Don Bosco Technical Institute Education 200 Source: Rosemead Chamber of Commerce. Commercial Activity 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 S000's) 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: DOC SLA 1:509308.6 41555 -8 K35/K35 E -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: DOC SLA 1:509308.6 41555 -8 K35/K35 E -5 • M CITY OF ROSEMEAD Building Permit Valuations Calendar Years 2000 through 2004 New Housing Units Single Units 51 29 30 65 Multiple Units 0 72 0 0 Total 51 101 30 65 Source: Construction Industry Research Board. Utilities $24,193,125 10,354,515 $34,547,640 V71 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: California- 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. 2004 DOCSLAI: 509308.6 41555 -8 K35/K35 E -6 2000 2001 2002 2003 Valuation (S000's) Residential $14,887,453 $16,358,607 $12,413,924 $27,253,442 Non - Residential 8,592,852 13,256,252 8,249,041 13,024,000 Total $23,480,305 $29.614,859 $20,662,965 $35,277,442 New Housing Units Single Units 51 29 30 65 Multiple Units 0 72 0 0 Total 51 101 30 65 Source: Construction Industry Research Board. Utilities $24,193,125 10,354,515 $34,547,640 V71 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: California- 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. 2004 DOCSLAI: 509308.6 41555 -8 K35/K35 E -6 0 0 Education Most of the City is located in the Garvey School District and the Rosemead School District. Rosemead has 1 I elementary schools, 3 junior high schools and I 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 In titute 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 drivine distance. DOCSLA I :509308.6 41555 -8 K35/K35 E -7 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT DOCSLA1:509308.6 41555 -8 K35/K35 F -1 APPENDIX G FORM OF BOND INSURANCE POLICY DOCSLA1:509308.6 41555-8K35/ K35G -1 RESOLUTION NO. 2006 -03 RESOLUTION OF THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION AUTHORIZING THE EXECUTION AND DELIVERY OF A JOINT EXERCISE OF POWERS AGREEMENT WITH THE CITY OF ROSEMEAD . WHEREAS, agencies formed under the Joint Exercise of Powers Act, Section 6500 et seq. of the California Government Code (the "Joint Powers Act "), are permitted to provide financing for any of their members or other local public agencies in the State of California in connection with the acquisition, construction and improvement of public capital improvements or working capital requirements of such members or other local agencies; and WHEREAS, the City of Rosemead and the Rosemead Community Development Commission (the "Commission ") desire to form an Authority under the Joint Powers Act, to be known as the Rosemead Financing Authority, for the purpose of providing an entity which can assist in providing financing for purposes which are authorized under the Joint Powers Act; and WHEREAS, there has been prepared and submitted to this meeting a form of Joint Exercise of Powers Agreement (such Joint. Exercise of Powers Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Joint Powers Agreement "); NOW, THEREFORE, BE IT RESOLVED, by the members of the Rosemead Community Development Commission, as follows: Section 1. All of the recitals herein contained are true and correct and the Commission so finds. Section 2. The form of the Joint Powers Agreement, on file with the Secretary of the Commission, is.hereby approved, and the Chairman, the Executive Director and the Finance Director of the Commission, and such other officers of the Commission as said Chairman, Executive Director or Finance 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 Joint Powers Agreement in substantially said form with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 3. The officers and employees of the Commission are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Section 4. All actions heretofore taken by the officers, employees and agents of the Commission with respect to the transactions set forth above are hereby approved, confirmed and ratified. DOCSLA I :509457.2 41555 -8 • .• Section 5. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED by the members of the Rosemead Community Development Commission at a meeting of said Commission on February 14, 2006, by the following vote of said members: Ayes: Noes: Absent: Abstain: Secretary of the Rosemead Community Development Commission ATTEST: City Clerk ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Chairperson q P DOCSLA1 509457.2 41555 -8 2 CERTIFICATE OF SECRETARY 1, Nina Castruita, Secretary of the Rosemead Community Development Commission, do hereby certify as follows: That the foregoing is a full, true and correct copy of Resolution No.2006 -03 duly adopted at a meeting of the Rosemead Commui6ity Development Commission held at the regular meeting place thereof on February 14, 2006, of which meeting all of the members of the Rosemead Community Development Commission had due notice and.at which a quorum was present. That an agenda of said meeting was posted at least 72 hours before said meeting at 8838 E. Valley Boulevard, Rosemead, California, a location freely accessible to members of the public, and a brief description of said Resolution appeared on said agenda. That I have carefully compared the foregoing copy with the original minutes of said meeting on file and of record in my office; that said copy is a full, true and correct copy of the original Resolution adopted at said meeting and entered in said minutes; and that said Resolution has not been amended, modified, rescinded or revoked in any manner since the date of its adoption, and the same is now in full force and effect. Dated: 2006 Secretary [SEAL] DOCSLA 0509457.2 41555 -8 t j� JOINT EXERCISE OF POWERS AGREEMENT by and between CITY OF ROSEMEAD and ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION Dated as of February 1, 2006 DOCS LA I :509439.2 41555 -8 TABLE OF CONTENTS Page ARTICLEI DEFINITIONS ...................................................... ............................... Section 1.01 Definitions ................................................. ............................... ARTICLE ]I GENERAL PROVISIONS .................................. ............................... Section 2.01 Purpose ............................... . ....................... :............................. Section 2.02 - Creation of Authority ............................... ............................... ARTICLE III BOARD OF DIRECTORS .................................. ............................... Section 3.01 Board of Directors .................................... ............................... Section 3.02 ............... ............................... Powers... .................. ..••..• •.. ° °"' Section 3.03 Compensation .......................................... ............................... Section 3.04 Meetings of the Board of Directors ......... ............................... ARTICLE IV OFFICERS, EMPLOYEES AND AGENTS ...... ............................... Section4.01 Officers ................................................... ............................... Section 4.02 Designation of Officers ........................... ............................... Section 4.03 Subordinate Officers ............................... ............................... Section 4.04 Executive Director .................................. ............................... Section 4.05 Treasurer .................:............................... ............................... Section4.06 Secretary ......................................................... :....................... Section 4.07 Authority Counsel ................................... ............................... Section 4.08 Assistant Officers ................................... ............................... Section 4.09 Employees, Agents and Independent Contractors ................ Section 4.10 Privileges and Immunities; No Employment by City or Commission........................................................... :.............. ARTICLEV POWERS ........................................................... ............................... Section 5.01 General Powers ...................................... ............................... Section 5.02 Power to Issue Revenue Bonds .............. ............................... Section 5.03 Specific Powers ...................................... ............................... Section 5.04 Manner of Exercising Powers ................ ............................... Section 5.05 Non - Liability For Obligations of Authority ......................... Section 5.06 Indemnity by Authority for Litigation Expenses of Officer, Director or Employee ............................ ............................... Section 5.07 Execution of Contracts .................................................. I...... DOCSLA1:509439.2 -1- 41555-8 ............ 1 ............ 1 ............ 2 ............. 2 ............. 3 ............. 3 ............. 3 ............. 3 ............. 3 ............. 3 ............. 4 .............. 4 .............. 4 .............. 5 .............. 5 ...... 5 .............. 5 .............. 5 .............. 5 ............... 6 .......... 6 .......... 6 .......... 6 .......... 6 .......... 6 ........... $ .8 • o TABLE OF CONTENTS (continued) Page. Section 5.08 Fiscal Year .......................................... ............................... ARTICLE VI CONTRIBUTION; ACCOUNTS AND REPORTS; FUNDS ...... Section 6.01 Contributions ....................................... ............................... Section 6.02 Accounts and Reports ......................... ............................... Section6.03 Funds ................................................. :................................. ARTICLE VII TERM; DISSOLUTION ................................. ............................... Section7.01 Term .................................................... ............................... Section 7.02 Termination ......................................... ............................... ARTICLE VIII MISCELLANEOUS PROVISIONS ............... ............................... Section 8.01 Notices ................................................ ............................... Section 8.02 Section Headings ................................ ............................... - Section 8.03 Law Governing ................................... ............................... Section 8.04 Amendments ....................................... ............................... Section 8.05 Enforcement by Authority ................... ............................... Section 8.06 Counterparts ........................................ ............................... Section 8.07 Successors ........................................... ............................... ........... I..... 8 ................. 9 ................. 9 ................. 9 ................. 9 ............... 10 ............... 10 ............... 10 ............... 10 ............... 10 ............... 10 ............... 10 ............... 10 ............... 11 ............... 11 ............... 11 ROCS LA I :509439.2 41555 -8 • JOINT EXERCISE OF POWERS AGREEMENT THIS JOINT EXERCISE OF POWERS AGREEMENT (this "Agreement"), dated as of February 1, 2006, is by and between the CITY OF ROSEMEAD, a municipal corporation organized and existing under and by virtue of the Constitution and laws of the State of California (the `'City" ), and 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'). WITNESSETH: WHEREAS, agencies formed under the Joint Exercise of Powers Act, Section 6500 et seq. of the California Government Code (the "Joint Powers Act "), are permitted to provide financing for any of their members or other local public agencies in the State of California in connection with the acquisition, construction and improvement of public capital improvements or working capital requirements of such members or other local agencies; and WHEREAS, the City and the Commission desire to form an Authority under_ the Joint Powers Act, to be known as the Rosemead Financing Authority, for the purpose of providing an entity which can assist in providing financing for purposes which are authorized under the Joint Powers Act; NOW, THEREFORE, in consideration of the above premises and of the mutual promises herein contained, the City and the Commission do hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions Unless the context otherwise requires, the words and terms defined in this Article shall, for the purposes hereof, have the meanings herein specified. "Agreement" means this Joint Exercise of Powers Agreement, as originally executed and as it may from time to time be amended in accordance with the provisions hereof. "Authority" means the Rosemead Financing Authority, a joint. exercise of powers agency organized and existing under and by virtue of the laws of the State of California, established pursuant to Section 2.02 hereof. "Board of Directors" means the Board of Directors of the Authority. "Bond Law" means the Marks -Roos Local Bond Pooling Act of 1985 (Article 4 of the Joint Powers Act), as now in effect or hereafter amended, Article 2 of the Joint Powers Act, as now in effect or hereafter amended, or any other law available for use by the Authority in the authorization and issuance of bonds to provide for the financing of Obligations and/or Public Capital Improvements. DOCS LA I :509439.2 41555 -8 1 "Bond Purchase Agreement" means an agreement between the Authority and a Local Agency, pursuant to which the Authority agrees to purchase Obligations from a Local Agency. "City" means the City of Rosemead, a municipal corporation organized and existing under and by virtue of the Constitution and laws of the State of California. "Commission" means 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. "Fiscal Year" means the period from July 1 in any calendar year to and including .tune 30 in the succeeding calendar year. "Joint Powers Act" means the Joint Exercise of Powers Act, Section 6500 et seq. of the California Government Code. "Local Agency" means the City, the Commission or any other city, county, city and county, authority, district or public corporation of the State of California. "Obligations" has the meaning ascribed to the term `Bonds" in Section 6585(c) of the Joint Powers Act. "Public Capital Improvements" has the meaning ascribed to such term in Section 6585(g) of the Joint Powers Act. "Revenue Bonds" means bonds, commercial paper, floating rate and variable maturity securities, and any other evidences of indebtedness of the Authority and also includes certificates of participation and lease purchase agreements. "Working Capital Requirements" means the requirements of any Local Agency for funds to be used by, or on behalf of, such Local Agency for any purpose for which such Local Agency may borrow money pursuant to Section 53852 of the California Government Code. ARTICLE Il GENERAL PROVISIONS Section 2.01 Purpose This Agreement is made pursuant to the Joint Powers Act providing for the joint exercise of powers common to the City and the Commission, and for other purposes as permitted raider the Joint Powers Act and the Bond Law. The purpose of this Agreement is to provide for the financing or refinancing of Public Capital Improvements for, and Working Capital Requirements of, any Local Agency through the acquisition by the Authority of such Public Capital Improvements, the purchase by the Authority of Obligations of any Local Agency pursuant to Bond Purchase Agreements, the lending of-funds by the Authority to a Local Agency or the entering into of contractual arrangements by the Authority with a Local Agency. Section 2.02 Creation of Authority Pursuant to the Joint Powers Act, there is hereby created a public entity to be known as the "Rosemead Financing Authority ". The Authority shall DOCSLA I :509439.2 41555 -8 be a public entity separate and apart from the City and Commission, and shall administer this Agreement. ARTICLE III BOARD OF DIRECTORS Section 3.01 Board of Directors The Authority shall be administered by the Board of Directors, which shall be comprised of five members, unless and until changed by amendment of this Agreement. Each member of the City Council shall be a member of the Board of Directors. The Board of Directors shall always consist of the persons then serving as members of the City Council, and each person who, currently or in the future, serves as a member of the City Council shall serve, during the period in which he or she serves in such capacity, as a member of the Board of Directors. Each member shall assume membership on the Board of Directors upon his or her becoming a member of the City Council, without any further act by any person, body or entity. Each member shall hold membership on the Board of Directors until the expiration of his or her tern as a member of the City Council, or until he or she resigns, is removed or for any other reason no longer serves as a member of the City Council, without any further act by any person, body or entity. The Mayor of the City shall be Chairperson of the Board of Directors and such Chairperson shall preside at all meetings of the Board of Directors. The Mayor Pro Tempore of the City shall be the Vice Chairperson of the Board of Directors and such Vice Chairperson shall preside at meetings of the Board of Directors during the absence or disability of the Chairperson. Section 3.02 Powers Subject to the limitations of this Agreement and the laws of the State of California, the powers of the Authority shall be vested in and exercised by and its property controlled and its affairs conducted by the Board of Directors of the Authority. Section 3.03 Compensation Members of the Board of Directors shall serve without compensation. Section 3.04 Meetings of the Board of Directors (a) Call, Notice and Conduct of Meetings. All meetings of the Board of Directors, including without limitation, regular, adjourned regular and special meetings, shall be called, noticed, held and conducted in accordance with the provisions of the Ralph M. Brown Act, Section 54950 et seq. of the California Government Code. (b) Regular= Meetings. Regular meetings of the Board of Directors shall be held, at such time as the Board of Directors may fix by resolution from time to time, and if any day so fixed shall fall upon a legal holiday then, upon the next succeeding business day at the same hour. No notice of any regular meeting of the Board of Directors need be given to the members of the Board of Directors. DOCSLA1:509439.2 41555 -g J • 0 (c) Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairperson of the Board of Directors, the Executive Director of the Authority or by a majority of the members of the Board of Directors. (d) Quorum. A majority of the members of the Board of Directors shall constitute a quorum at any meeting of the Board of Directors. Every act or decision done or made by a majority of the members Qf the Board of Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. ARTICLE IV OFFICERS, EMPLOYEES AND AGENTS Section 4.01 Officers The officers of the Authority shall be an Executive Director, a Treasurer, a Secretary and such other officers as the Board of Directors may appoint: Section 4.02 Designation of Officers The City Manager of the City shall be the Executive Director of the Authority. The Executive Director of the Authority shall always be the person then serving as -City Manager of the City, and each person who, currently or in the future, serves as City Manager of the City shall be, during the period in which he or she serves in such capacity, Executive Director of the Authority. A person shall become Executive Director of the Authority upon his or her becoming City Manager of the City, without any further act by any person, body or entity. A person shall serve as Executive Director of the Authority until he or she resigns, is removed or for any other reason no longer serves as City Manager of the City, without any further act.by any person, body or entity. The Finance Director of the City shall be the Treasurer of the Authority. The Treasurer of the Authority shall always be the person then serving as Finance Director of the City, and each . person who, currently or in the future, serves as Finance Director of the City shall be, during the period in which he or she serves in, such capacity, Treasurer of the Authority. A person shall become Treasurer of the Authority upon his or her becoming Finance Director of the City, without any further act by any person, body or entity. A person shall serve as Treasurer of the Authority until he or she resigns, is removed or for any other reason no longer serves as Finance Director of the City, without any further act by any person, body or entity. The City Clerk of the City shall be the Secretary of the Authority. The Secretary of the Authority shall always be the person then serving as City Clerk of the City, and each person who, currently or in the future, serves as City Clerk of the City shall be, during the period in which he or she serves in such capacity, Secretary of the Authority. A person shall become Secretary of the Authority upon his or her becoming City Clerk of the City, without any further act by any person, body or entity. A person shall serve as Secretary of the Authority until he or she resigns, is removed or for any other reason no longer serves as City Clerk of the City, without any further act by any person, body or entity. Section 4.03 Subordinate Officers The Board of Directors appoint such officers other than those hereinabove mentioned as the business of the Authority may require, each of whom shall hold office for such period, have such authority and perform such duties as are DOCSLAL509439.2 41555 -s 4 provided in this Agreement, or as the Board of Directors from time to time may authorize or determine. Section 4.04 Executive Director The Executive Director shall be the chief executive officer of the Authority and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Authority. He or she shall be an ex officio member of all standing committees, and shall have the general powers and duties of management of the Authority and shall have such other powers and duties as may be prescribed by the Board of Directors or this Agreement. Section 4.05 Treasurer Subject to the applicable provisions of any indenture or resolution providing for a trustee or other fiscal agent, the Treasurer is designated as the depository of the Authority to have custody of all the money of the Authority, from whatever source, and, as such, shall have the powers, duties and responsibilities specified in Section 6505.5 of the Joint Powers Act. The Treasurer is hereby designated as controller of the Authority and, as such, shall have the powers, duties and responsibilities specified in Section 6505.5 of the Joint Powers Act. The controller of the Authority shall draw checks to pay demands against the Authority when the demands have been approved by the Authority. The City shall determine the charges to be made against the Authority for the services of the Treasurer. The Treasurer is designated as the public officer or person who has charge of, handles, or has access to any property of the Authority, and such officer shall file an official bond in the amount of $5,000, as required by Section 6505.1 of the Joint Powers Act. Such bond may be maintained as a part of or in conjunction with any other bond maintained on such person by the City, it being the intent of this Section not to require duplicate or overlapping bonding requirements from those bonding requirements which are otherwise applicable to the City. Section 4.06 Secretary The Secretary shall keep or cause to be kept a book of minutes at the principal office of the Authority or at such other place as the Board of Directors may order, of all meetings of the Board of Directors, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Board of Directors meetings and the proceedings thereof. The Secretary shall give or cause to be given notice of all meetings of the Board of Directors, shall keep the Authority records in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or this Agreement. Section 4.07 Authority Counsel The City Attorney of the City shall serve as Authority Counsel Section 4.08 Assistant Officers The Board of Directors may appoint such assistants to act in the place of the Treasurer, Secretary or other officers of the Authority as the Board of Directors shall from time to time deem appropriate. Section 4.09 Emplovees, Agents and Independent Contractors The Board of Directors shall have the power to engage such employees as may be necessary or appropriate for the purposes of this Agreement. The Board of Directors shall also have the power to engage DOCSLA 1:509439.2 41555 -8 5 • i such agents and independent contractors as may be necessary or appropriate for purposes of this Agreement. Section 4.10 Privileges and Immunities; No Emplovment by City or Commission All of the privileges and immunities from liability, exemption from laws, ordinances and rules, all pension, relief, disability, workers' compensation and other benefits which apply to the activities of officers, agents or employees of a public agency when performing their respective functions shall apply to them to the same degree and extent while engaged in the performance of any of the functions and other duties under this Agreement. None of the officers, employees, agents or independent contractors employed or engaged by the Authority shall be deemed, by reason of his or her employment or engagement by the Authority to be employed or engaged by the City or the Commission or, by reason of his or her employment or engagement by the Authority, to be subject to any of the requirements of the City or the Commission. ARTICLE V POWERS Section 5.01 General Powers The Authority shall exercise in the manner herein provided the powers common to the City and the Commission, or as otherwise permitted under the Joint Powers Act, and necessary to the accomplishment of the purposes of this Agreement, subject to the restrictions set forth in Section 5.04 hereof. As provided in the Joint Powers Act, the Authority shall be a public entity separate from the City and the Commission. The Authority shall have the power to finance or refinance Public Capital Improvements for, and Working Capital Requirements of any Local Agency through the acquisition by the Authority of such Public Capital Improvements, the purchase by the Authority of Obligations of any Local Agency pursuant to Bond Purchase Agreements, the lending of funds by the Authority to a Local Agency or the entering into of contractual arrangements by the Authority with a Local Agency. Section 5.02 Power to Issue Revenue Bonds The Authority shall have all of the powers provided in the Joint Powers Act, including Article 4 of the Joint Powers Act, and including the power to issue Revenue Bonds under the Bond Law. Section 5.03 Specific Powers The Authority is hereby authorized, in its own name, to do all acts necessary for the exercise of the foregoing powers, including but not limited to, any or all of the following: (a) to make and enter into contracts; (b) to employ agents or employees; - (c) to acquire, construct, manage, maintain or operate any Public Capital Improvement, including the common power of the City and the Commission to acquire any Public Capital Improvement by the power of eminent domain; DOCSL.A 1:509439.2 41555-8 9 0 (d) to sue and be sued in its own name; (e) to issue Revenue Bonds and otherwise to incur debts, liabilities or obligations, provided that no such Revenue Bond, debt, liability or obligation shall constitute a debt, liability or obligation of the City or the Commission; (f) to apply for, accept, receive and disburse grants, loans and other aids from any agency of the United States of America or of the State of California; (g) to invest any money in the treasury pursuant to Section 6505.5 of the Joint Powers Act that is not required for the immediate necessities of the Authority, as the Authority determines is advisable, in the same manner and upon the same conditions as local agencies, pursuant to Section 53601 of the California Government Code; (h) to apply for letters of credit or other form of financial guarantees in order to secure the repayment of Revenue Bonds and enter into agreements in connection therewith; (i) to carry out and enforce all the provisions of this Agreement; 0) to make and enter into Bond Purchase Agreements; (k) to purchase Obligations of any Local Agency; (1) to engage the services of private consultants to render professional and technical assistance and advice in carrying out the purposes of this Agreement; (m) as provided by applicable law, to employ and compensate bond counsel, financial consultants, and other advisers determined necessary by the Authority in connection with the issuance and sale of any Revenue Bonds; (n) to contract for engineering, architectural, accounting, or other services determined necessary by the Authority for the successful development of a Public Capital Improvement; (o) to pay the reasonable costs of consulting engineers, architects, accountants, and construction, land -use, recreation, and environmental experts employed by any sponsor or participant if the Authority determines those services are necessary for the successful development of Public Capital Improvements; (p) to take title to, and sell by installment sale or otherwise, lands, structures, real or personal property, rights, rights -of -way, franchises, easements, and other interests in lands which are located within the State of California which the Authority determines are necessary or convenient for the financing or refinancing of Public Capital Improvements, or any portion thereof; (q) to lease to, and to lease from, a Local Agency lands, structures, real or personal property, rights, rights -of -way, franchises, easements, and other interests in lands which are located within the State of California which the Authority determines are necessary or DOCSLA1:509439.2 41555 -8 0 convenient for the financing or refinancing of Public Capital ILnprovernerts, or any portion thereof, and (r) to exercise any and all other powers as may be provided in the Joint Powers Act. Section 5.04 Manner of Exercising Powers The powers of the Authority shall be exercised in the manner provided in the Joint Powers Act and shall be subject (in accordance with Section 6509 of the Joint Powers Act) to the restrictions upon the manner of exercising such powers of the City. Section 5.05 Non - Liability For Obligations of Authority The debts, liabilities and obligations of the Authority shall not be the debts, liabilities and obligations of the City or the Commission. No member, officer agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or premium or interest on any obligations of the Authority or be subject to any personal liability or accountability by reason of any obligations of the Authority; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by the instruments authorizing the issuance of any obligations of the Authority. Section 5.06 Indemnity by Authority for Litigation Expenses of Officer, Director or Employee Should any director, officer or employee of the Authority be sued, either alone or with others, because he or she is or was a director, officer or employee of the Authority, in any proceeding arising out of his or her alleged misfeasance or nonfeasance in the performance of his or her duties or out of any alleged wrongful act against the Authority or by the Authority, indemnity for such persons reasonable expenses, including attorneys' fees incurred in the defense of the proceedings, may be assessed against the Authority or its receiver by the court in the same or a separate proceeding if the person sued acted in good faith and in a mariner such person reasonably believed to be in the best interests of the Authority and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The amount of such indemnity shall equal the amount of the expenses, including attorneys' fees, incurred in the defense of the proceeding. Section 5.07 Execution of Contracts The Board of Directors may authorize any officer, employee or agent of the Authority, to enter into any contract or execute any contract or execute any instrument in the name of and on behalf of the Authority and such authority may be in general or confined to specific instances and unless so authorized by the Board of Directors, no such officer, agent or employee shall have any power or authority to bind the Authority by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. Section 5.08 Fiscal Year The Fiscal Year of the Authority shall, unless and until changed by the Board of Directors, commence on the 1 st day of July of each year and shall end on the 30th day of June of the next succeeding year. DOCSLA L509439.2 - 41555 -8 8 ARTICLE VI CONTRIBUTION; ACCOUNTS AND REPORTS; FUNDS Section 6.01 Contributions The City and the Commission may in the appropriate circumstance when required hereunder (a) make contributions from their treasuries for the purposes set forth herein, (b) make payments of public funds to defray the cost of such purposes, (c) make advances'of public funds for such purposes, such advances to be repaid as provided herein, or (d) use their personnel, equipment or property in lieu of other contributions or advances. The provisions of Section 6513 of the California Government Code are hereby incorporated into this Agreement. Section 6.02 Accounts and Reports The Authority shall establish and maintain such funds and accounts as may be required by good accounting practice. The books and records of the Authority shall be open to inspection at all reasonable times by the City and the Commission and their representatives. The Authority shall give an audited report of all financial activities for each Fiscal Year to the City and the Commission within 210 days after the close of each Fiscal Year. The Treasurer, as controller of the Authority, shall either make or contract with a certified public accountant or public accountant to make an annual audit of the accounts and records of the Authority. In each case the minimum requirements of the audit shall be those prescribed by the State Controller for special districts under Section 26909 of the Government Code of the State of California and shall conform to generally accepted auditing standards. When such an audit of an account and record is made by a certified public accountant or public accountant, a report thereof shall be filed as public records with the City and the Commission and with the county auditor of Los Angeles County, and shall be sent to any public agency or person in the State of California that submits a written request to the Authority. Such report shall be filed within 12 months of the end of the Fiscal Year under examination. By unanimous request of the Board of Directors, the annual special audit may be replaced with an audit covering a two -year period. Any costs of the audit, including contracts with, or employment of, certified public accountants or public accountants, in making an audit pursuant to this Section shall be borne by the Authority and shall be a charge against any unencumbered funds of the Authority available for the purpose. Section 6.03 Funds Subject to the applicable provisions of any instrument or agreement which the Authority may enter into, which may provide for a trustee or other fiscal agent to receive, have custody of and disburse Authority funds, the Treasurer of the Authority shall receive, have the custody of and disburse Authority funds as nearly as possible in accordance with generally accepted accounting practices, shall make the disbursements required by this Agreement or to carry out any of the provisions or purposes of this Agreement. DOCSLA I :509439.2 41555 -s 9 • 0 ARTICLE VII TERM; DISSOLUTION Section 7.01 Term This Agreement shall become effective, and the Authority shall come into existence, on the date of execution and delivery hereof, and this Agreement shall thereafter continue in full force and effect until terminated pursuant to Section 7.02 hereof. Section 7.02 Termination This Agreement may be terminated by agreement of the City and the Commission; provided, however, that this Agreement shall not be terminated so long as Revenue Bonds of the Authority are outstanding or so long as the Authority is a party to any material contract remaining in effect. Upon termination of this Agreement, the Authority shall be dissolved and, after payment or provision for payment of all debts and liabilities the assets of the Authority shall be distributed to the City and the Commission in such manner as shall be agreed upon by the City and the Commission. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.01 Notices Notices hereunder shall be in writing and shall be sufficient if delivered to the address of each party hereto set forth below or at such other address as is provided by a party hereto in writing to the other party hereto. City of Rosemead 8838 E. Valley Boulevard Rosemead, California 91770 Attention: City Manager Rosemead Community Development Commission 8838 E. Valley Boulevard Rosemead, California 91770 Attention: Executive Director Section 8.02 Section Headings All Section headings in this Agreement are for convenience of reference only and are not to be construed as modifying or governing the language in the Section referred to or to define or limit the scope of any provision of this Agreement. Section 8.03 Law Governing This Agreement is made in the State of California under the constitution and laws of the State of California, and is to be so construed. Section 8.04 Amendments This Agreement may be amended at any time, or from time to time, except as limited by contract with the owners of Revenue Bonds issued by the Authority or the owners of certificates of participation in payments to be made by the Authority, the City, the Commission or a Local Agency or by applicable regulations or laws of any jurisdiction having authority, by one or more amendments executed by the City and the nOCSLA1:509439.2 41 iii -S 10 Commission either as required in order to carry out any of the provisions of this Agreement or for any other purpose. Section 8.05 Enforcement by Authority The Authority is hereby authorized to take any or all legal or equitable actions, including but not limited to injunction and specific performance, necessary or permitted by law to enforce this Agreement. Section 8.06 Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Agreement. Section 8.07 Successors This Agreement shall be binding upon and shall inure to the benefit of the successors of the City and the Commission. No party hereto may assign any right or obligation hereunder without the written consent of the other party hereto. DOCSLA1:509439.2 41555 -8 l I IN WITNESS WHEREOF, the parties hereto have caused this Joint Exercise of Powers Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first written above. CITY OF ROSEMEAD ATTEST: City Clerk ATTEST: Secretary APPROVED AS TO FORM: By: City Attorney DOCSLA I :509439.2 41555 -8 Authorized Officer ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION 12 Authorized Officer