2019 Special Tax Bonds (Improvement Area No

SUPPLEMENT DATED DECEMBER 13, 2019

OFFICIAL STATEMENT DATED DECEMBER 2, 2019

Relating to

$20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

This Supplement to the Official Statement (the "Supplement") corrects: (i) the date of the Official Statement as shown on the front cover of the Official Statement, and (ii) the Price of the September 1, 2032 maturity of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds") as shown on the inside front cover of the Official Statement.

PLEASE BE ADVISED that the following replacement pages replace the cover and the inside front cover in their entirety to correct: (i) the date of the Official Statement to December 3, 2019, and (ii) the Price with respect to the September 1, 2032 maturity of the Bonds to 121.094. All other statements in the Official Statement are unaffected by this Supplement.

CITY OF AZUSA for and on behalf of CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) NEW ISSUE-BOOK-ENTRY ONLY EXPECTED INSURED BONDS RATING: S&P "AA" UNINSURED BONDS: NO RATING See "RATING" herein. In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax. In the further opinion ofBond Counsel, such interest is exempt from California personal income taxes. See the caption "TAX MATTERS." $20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

Dated: Date of Delivery Due: September 1, as shown on the inside front cover page The City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds") are being issued and delivered by the City of Azusa (the "City"), County of Los Angeles, California, for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District") to: (i) finance the acquisition and construction of certain public improvements of the City and certain public improvements of the Azusa Unified School District (the "School District"); (ii) purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premium for a municipal bond insurance policy.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to a Fiscal Agent Agreement, dated as of December 1, 2019 (the "Fiscal Agent Agreement"), by and between the City, for and on behalf of the District, and Wilmington Trust, National Association, as fiscal agent (the "Fiscal Agent"). The Bonds are special limited obligations of the District and are payable solely from revenues derived from certain annual Special Taxes ( as such term is defined in this Official Statement) to be levied on and collected from the owners of the taxable land within Improvement Area No. 2 of the District ("Improvement Area No. 2") (less certain administrative expenses) and from certain other funds that have been pledged under the Fiscal Agent Agreement, all as further described in this Official Statement. The Special Taxes are to be levied according to the Rate and Method of Apportionment of Special Taxes (the "Rate and Method"), which has been approved by the City Council of the City and the qualified electors within Improvement Area No. 2. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Rate and Method of Apportionment of Special Taxes." The City Council of the City is the legislative body of the District.

The Bonds are issuable in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Individual purchases may be made in principal amounts of integral multiples of $5,000 and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described in this Official Statement. Interest on the Bonds will be payable on March 1, 2020 and each September 1 and March 1 thereafter. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants, which are obligated to remit such payments to the Beneficial Owners of the Bonds. See the caption 'THE BONDS-Description of the Bonds" and Appendix E.

Neither the faith and credit nor the taxing power of the City, the School District, the County of Los Angeles, the State of California or any political subdivision of the State ofCalifornia (except the District to the limited extent set forth in the Fiscal Agent Agreement) is pledged to the payment ofthe Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are special limited tax obligations of the District that are payable solely from Special Taxes and other amounts that are held under the Fiscal Agent Agreement, as more fully described in this Official Statement.

The Bonds are subject to optional redemption, mandatory redemption from Special Tax Prepayments and mandatory sinking fund redemption prior to maturity. See the caption "THE BONDS-Redemption."

The scheduled payment of principal of and interest on the Bonds maturing September 1, 2044 and September 1, 2049 (the "Insured Bonds"), when due will be guaranteed under an insurance policy (the "Policy") to be issued concurrently with the delivery of the Bonds by ASSURED GUARANTY MUNICIPAL CORP. ("AGM"). See "BOND INSURANCE" herein.

The Reserve Fund will be funded with the purchase of a municipal bond debt service reserve insurance policy relating to the Bonds issued by AGM (the "Reserve Policy") concurrently with the delivery of the Bonds.

~/~S- ..."\ ... "S'LTR'l i.. } .L.,r:: I)., (;lJARAl'rIY'' MUNKWAL THE POLICY DOES NOT INSURE THE BONDS MA TURING SEPTEMBER 1, 2020 THROUGH SEPTEMBER 1, 2039 (THE "UNINSURED BONDS"). THE UNINSURED BONDS WILL NOT BE RA TED.

CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUE. AS A RESULT, THE BONDS INVOLVE SIGNIFICANT RISKS AND ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. SEE THE CAPTION "SPECIAL RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH IN THIS OFFICIAL STATEMENT, IN EVALUATING THE INVESTMENT QUALITY OF THE BONDS.

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information that is essential to an informed investment decision.

MATURITY SCHEDULE (See Inside Cover Page) The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel, and subject to certain other conditions. Best Best & Krieger LLP, Riverside, California is serving as disclosure counsel to the City and the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, California, for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California, and for the Fiscal Agent by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities ofDTC on or about December 18, 2019.

Dated: December 3, 2019 $20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

MATURITY SCHEDULE

Base CUSIP No. 055032t

Maturity Date Principal Interest CUSIP® (Selltember 1) Amount Rate Yield Price No. 055032t 2020 $340,000 3.000% 1.150% 101.290 EK8 2021 85,000 3.000 1.210 103.006 EL6 2022 105,000 4.000 1.340 107.036 EM4 2023 135,000 4.000 1.490 109.007 EN2 2024 160,000 4.000 1.660 110.541 EP7 2025 190,000 4.000 1.760 112.101 EQ5 2026 220,000 5.000 1.860 119.698 ER3 2027 250,000 5.000 1.950 121.713 ESl 2028 285,000 5.000 2.050 123.400 ET9 2029 325,000 5.000 2.120 122.774c EU6 2030 365,000 5.000 2.190 122.152c EV4 2031 410,000 5.000 2.270 121.445c EW2 2032 455,000 5.000 2.310 121.094c EXO 2033 505,000 4.000 2.500 l l l.663c EY8 2034 550,000 4.000 2.560 lll.167c EZ5 2035 600,000 5.000 2.430 120.046c FA9 2036 655,000 5.000 2.470 119.699C FB7 2037 715,000 3.000 3.060 99.181 FC5 2038 765,000 3.000 3.090 98.726 FD3 2039 815,000 3.000 3.120 98.240 FEl

$5,140,000 5.000% Term Bonds due September 1, 2044*, Yield 2.550%, Price: l 19.009c CUSIP®t No. FF8

$7,455,000 5.000% Term Bonds due September 1, 2049*, Yield 2.600%, Price l 18.580c CUSIP®t No. FG6

* Insured. c Priced to the first optional redemption date of September I, 2028 at par. t CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP by CUSIP Global Services which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence LLC, a division ofS&P Global Inc. Copyright© 2019 CUSIP Global Services. All rights reserved This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Global Services database. CUSIP® numbers are providedfor convenience of reference only. Neither the District nor the Underwriters take any responsibility for the accuracy of such numbers. NEW ISSUE-BOOK-ENTRY ONLY EXPECTED INSURED BONDS RATING: S&P "AA" UNINSURED BONDS: NO RATING See "RATING" herein. In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes ofcalculating the federal alternative minimum tax. In the further opinion ofBond Counsel, such interest is exempt from Calzfornia personal income taxes. See the caption "TAX MATTERS." $20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) Dated: Date of Delivery Due: September 1, as shown on the inside front cover page The City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds") are being issued and delivered by the City of Azusa (the "City"), County of Los Angeles, California, for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District") to: (i) finance the acquisition and construction of certain public improvements of the City and certain public improvements of the Azusa Unified School District (the "School District"); (ii) purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premium for a municipal bond insurance policy.

The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to a Fiscal Agent Agreement, dated as of December I, 2019 (the "Fiscal Agent Agreement"), by and between the City, for and on behalf of the District, and Wilmington Trust, National Association, as fiscal agent (the "Fiscal Agent"). The Bonds are special limited obligations of the District and are payable solely from revenues derived from certain annual Special Taxes ( as such term is defined in this Official Statement) to be levied on and collected from the owners of the taxable land within Improvement Area No. 2 of the District ("Improvement Area No. 2") (less certain administrative expenses) and from certain other funds that have been pledged under the Fiscal Agent Agreement, all as further described in this Official Statement. The Special Taxes are to be levied according to the Rate and Method of Apportionment of Special Taxes (the "Rate and Method"), which has been approved by the City Council ofthe City and the qualified electors within Improvement Area No. 2. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Rate and Method of Apportionment of Special Taxes." The City Council of the City is the legislative body of the District.

The Bonds are issuable in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Individual purchases may be made in principal amounts of integral multiples of $5,000 and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described in this Official Statement. Interest on the Bonds will be payable on March 1, 2020 and each September 1 and March 1 thereafter. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants, which are obligated to remit such payments to the Beneficial Owners of the Bonds. See the caption "THE BONDS-Description of the Bonds" and AppendixE.

Neither the faith and credit nor the taxing power ofthe City, the School District, the County ofLos Angeles, the State ofCalzfornia or any political subdivision of the State ofCalifornia (except the District to the limited extent set forth in the Fiscal Agent Agreement) is pledged to the payment ofthe Bonds. Except for the Special Taxes, no other taxes are pledged to the payment ofthe Bonds. The Bonds are special limited tax obligations ofthe District that are payable solely from Special Taxes and other amounts that are held under the Fiscal Agent Agreement, as more fully described in this Official Statement.

The Bonds are subject to optional redemption, mandatory redemption from Special Tax Prepayments and mandatory sinking fund redemption prior to maturity. See the caption "THE BONDS-Redemption."

THE POLICY DOES NOT INSURE THE BONDS MATURING SEPTEMBER 1, 2020 THROUGH SEPTEMBER 1, 2039 (THE "UNINSURED BONDS"). THE UNINSURED BONDS WILL NOT BE RATED.

MATURITY SCHEDULE (See Inside Cover Page)

The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel, and subject to certain other conditions. Best Best & Krieger LLP, Riverside, California is serving as disclosure counsel to the City and the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, Calzfornia,for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California, and for the Fiscal Agent by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities ofDTC on or about December 18, 2019. STIFEL

Dated: December 2, 2019 $20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

MATURITY SCHEDULE

Base CUSIP No. 055032t

Maturity Date Principal Interest CUSIP® (SeJ!tember 1) Amount Rate Yield Price No. 055032t 2020 $340,000 3.000% 1.150% 101.290 EK8 2021 85,000 3.000 1.210 103.006 EL6 2022 105,000 4.000 1.340 107.036 EM4 2023 135,000 4.000 1.490 109.007 EN2 2024 160,000 4.000 1.660 110.541 EP7 2025 190,000 4.000 1.760 112.101 EQ5 2026 220,000 5.000 1.860 119.698 ER3 2027 250,000 5.000 1.950 121.713 ESl 2028 285,000 5.000 2.050 123.400 ET9 2029 325,000 5.000 2.120 122.774c EU6 2030 365,000 5.000 2.190 122.152c EV4 2031 410,000 5.000 2.270 121.445c EW2 2032 455,000 5.000 2.310 121.994c EXO 2033 505,000 4.000 2.500 ll l.663c EY8 2034 550,000 4.000 2.560 ll l.167c EZ5 2035 600,000 5.000 2.430 120.046c FA9 2036 655,000 5.000 2.470 119.699c FB7 2037 715,000 3.000 3.060 99.181 FC5 2038 765,000 3.000 3.090 98.726 FD3 2039 815,000 3.000 3.120 98.240 FEl

$5,140,000 5.000% Term Bonds due September 1, 2044*, Yield 2.550%, Price: l 19.009c CUSIP®t No. FF8

$7,455,000 5.000% Term Bonds due September 1, 2049*, Yield 2.600%, Price l 18.580c CUSIP®t No. FG6

CITY COUNCIL Joseph Romero Rocha, Mayor Edward J. Alvarez, Mayor Pro Tern Angel A Carrillo, Council Member Robert Gonzales, Council Member Uriel E. Macias, Council Member

CITY OFFICIALS Sergio Gonzalez, City Manager Talika Johnson, Director of Administrative Services Best Best & Krieger LLP, City Attorney

Bond and Disclosure Counsel Municipal Advisor Best Best & Krieger LLP Urban Futures, Inc. Riverside, California Tustin, California

Fiscal Agent Special Tax Consultant Wilmington Trust, National Association Special District Financing & Administration, LLC Costa Mesa, California Escondido, California Except where otherwise indicated, all information that is set forth in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Fiscal Agent or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Fiscal Agent or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements that are contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact. This Official Statement, including any supplement or amendment, is intended to be deposited with a nationally recognized municipal securities depository. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information that is set forth in this Official Statement has been obtained from 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 City, the District, the Fiscal Agent or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made under this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District or any other parties described in this Official Statement since the date of this Official Statement. All summaries of the Fiscal Agent Agreement or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is made to such documents on file with the City for further information. Assured Guaranty Municipal Corp. ("AGM") makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading "BOND INSURANCE" and "APPENDIX G - Specimen Municipal Bond Insurance Policy." Although the City maintains an Internet website for various purposes, none of the information on its website is incorporated by reference into this Official Statement. Certain statements that are included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as "plan," "expect," "estimate," "project," "budget" or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the captions "SOURCES OF PAYMENT FOR THE BONDS," and "IMPROVEMENT AREA NO. 2." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS THAT ARE CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT ARE DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 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 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. Table of Contents

INTRODUCTION ...... 1 Disclosures to Future Purchasers ...... 3 3 The District ...... 1 Special Tax Delinquencies ...... 34 Property Ownership and Development Status .... 2 Non-Cash Payments of Special Taxes ...... 34 Sources of Payment for the Bonds ...... 2 Payment of the Special Tax is not a Personal Limited Liability ...... 3 Obligation of the Owners ...... 35 No Parity Bonds Except for Refunding ...... 4 Land Values ...... 35 Description of the Bonds ...... 4 Assessment Appeals and Proposition 8 ...... 3 5 Tax Matters ...... 4 Value-to-Lien Ratios ...... 3 6 Professionals Involved in the Offering ...... 4 Potential Early Redemption of Bonds from Continuing Disclosure ...... 5 Prepayments ...... 36 Bond Owners' Risks ...... 5 IRS Audit of Tax-Exempt Bond Issues ...... 36 Other Information ...... 5 FDIC/Federal Government Interests in Properties THE FINANCING PLAN ...... 6 ...... 37 Estimated Sources and Uses ofFunds ...... 6 Billing of Special Taxes ...... 38 THEBONDS ...... 7 Cybersecurity ...... 3 8 Authority for Issuance ...... 7 Bankruptcy and Foreclosure ...... 39 Purpose of the Bonds ...... 7 No Acceleration Provision ...... 40 Description of the Bonds ...... 7 Loss of Tax Exemption ...... 40 Redemption ...... 8 Limitations on Remedies ...... 40 Notice of Redemption ...... 9 Limited Secondary Market ...... 40 Effect of Redemption ...... 10 Bond Insurance Risk Factors ...... 41 Transfer and Exchange of Bonds ...... 10 Proposition 218 ...... 41 Debt Service Schedule for the Bonds ...... 11 Ballot Initiatives ...... 42 SOURCES OF PAYMENT FOR THE BONDS ..... 12 CONTINUING DISCLOSURE ...... 43 Special Taxes ...... 12 TAX MATTERS ...... 43 Rate and Method of Apportionment of Special LEGAL MATTERS ...... 44 Tax ...... 12 LITIGATION ...... 44 Prepayment of Special Taxes ...... 14 RATING ...... 45 One-Time Special Tax ...... 14 UNDERWRITING ...... 45 Collection and Application of Special Taxes ... 16 PENDING LEGISLATION ...... 45 Proceeds of Foreclosure Sales ...... 17 MUNICIPAL ADVISOR ...... 45 Reserve Fund ...... 18 ADDITIONAL INFORMATION ...... 46 No Parity Bonds Except for Refunding ...... 18 Projected Special Tax Levy ...... 18 APPENDIX A AMENDED AND RESTATED IMPROVEMENT AREA NO. 2 ...... 21 RATE AND METHOD OF General Description of the District and APPORTIONMENT FOR Improvement Area No. 2 ...... 21 IMPROVEMENT AREA NO. 2 OF Direct and Overlapping Debt...... 21 CITY OF AZUSA COMMUNITY Assessed Value-to-Lien Ratio ...... 22 FACILITIES DISTRICT Assessed Valuation ...... 25 NO. 2005-1 (ROSEDALE) ...... A-1 Delinquency History ...... 25 APPENDIX B SUMMARY OF FISCAL AGENT The Development and Property Ownership ..... 27 AGREEMENT ...... B-1 BOND INSURANCE ...... 27 APPENDIX C FORM OF CONTINUING Bond Insurance Policy ...... 2 7 DISCLOSURE CERTIFICATE OF Assured Guaranty Municipal Corp ...... 27 THE CITY ...... C-1 SPECIAL RISK FACTORS ...... 29 APPENDIX D FORM OF OPINION OF BOND Concentration of Ownership; Levy Limitation on COUNSEL ...... D-1 Developed Residential Property ...... 29 APPENDIX E BOOK-ENTRY ONLY SYSTEM Limited Obligations ...... 29 ...... Sl Insufficiency of Special Taxes ...... 3 0 APPENDIX F GENERAL INFORMATION Natural Disasters ...... 31 CONCERNING THE CITY OF Hazardous Substances ...... 32 AZUSA AND THE REGION ..... F-1 Shapiro Decision ...... 3 2 APPENDIX G SPECIMEN MUNICIPAL BOND Parity Taxes and Special Assessments ...... 33 INSURANCE POLICY ...... G-1

$20,525,000 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

INTRODUCTION

The purpose of this Official Statement, which includes the front cover page, the inside front cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by the City of Azusa (the "City"), for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District"), of the $20,525,000 City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds").

The proceeds of the Bonds will be used to: (i) finance the acquisition and construction of certain public improvements of the City and certain public school facilities of the Azusa Unified School District (the "School District"); (ii) purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premium for a municipal bond insurance policy.

The Bonds are authorized to be issued pursuant to the Act (as such term is defined in this Official Statement) and a Fiscal Agent Agreement, dated as of December 1, 2019 (the "Fiscal Agent Agreement"), by and between the City, acting on behalf of the District, and Wilmington Trust, National Association, as fiscal agent (the "Fiscal Agent"). The Bonds are secured under the Fiscal Agent Agreement by a pledge of and lien upon Special Tax Revenues (as such term is defined in this Official Statement) and all moneys that are deposited in the Special Tax Fund, the Bond Fund and the Reserve Fund.

This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information in the entire Official Statement and the documents that are summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms that are used in this Official Statement and not defined have the meanings that are set forth in Appendix B.

The District

The District was formed on June 5, 2006 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the "Act"). The Act was enacted by the State of California (the "State") legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as such term is defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. The City Council of the City acts as the legislative body of the District.

Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of special taxes on taxable property within the boundaries of the District, including Improvement Area No. 2, and to incur a bonded indebtedness within the District, including Improvement Area No. 2. Following a noticed public hearing that was conducted pursuant to the provisions of the Act, the City Council adopted resolutions to establish the District and call a special election to submit the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District. On June 5, 2006, at an election that was held pursuant to the Act, the landowners who comprised the qualified voters of Improvement Area No. 2 authorized the District to incur bonded indebtedness in the aggregate principal amount not to exceed $30,000,000 for Improvement Area No. 2 to be secured by the levy of Special Taxes on taxable property within Improvement Area No. 2. On that same date, the landowners within Improvement Area No. 2 approved the rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2 to pay the principal of and interest on the bonds of

1 Improvement Area No. 2. Pursuant to the Act, on October 17, 2011 the City Council adopted a resolution of consideration to amend and restate the rate and method of apportionment for Improvement Area No. 2 to implement, among other things, changes to the rates of special tax to be levied on parcels of property in I mprovementArea No. 2. On November 21, 2011 the landO/Vners within Improvement Area No. 2 approved the amended and restated rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2. The Amended and Restated Rate and Method of Api:ortionment for Improvement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "Rate and Method") is set forth in Appendix A hereto. The facilities authorized to be financed b{ the District are referenced herein as the "Facilities."

Special Tax.A (as defined in the Rate and Method) is the special tax that will be levied to pay debt service on the Bonds. Special Tax.A is referred to in this Official Statement as the "Special Tax'' orthe "Special Taxes." Atthe ti me of the establishment of the District and I mprovement Area No. 2 therein and as part of the change proceedings described aoove, special taxes were also approved to be levied in Improvement Area No. 2 to fund services (i.e. i:olice protection, fire protection and suppression services, maintenance of park, parkways and open space, and any other services perrritted to be financed p..1rsuant to the Act) (the "Services Special Taxes"). The Services Special Taxes are not pl edged to repay the Bonds.

The District contains the Rosedale master-planned community that encompasses approximately 517 acres of which approximately 187 acres have been developed into residential units. The District is located north of the 210 FreeNay atthe l:ase of the San Gabriel Mountains. The District is comprised of two improvement areas. Improvement Area No. 1 ("Improvement Area No. l") consists of approximately 220 gross acres, contains 792 single family homes and is fully built out. Neither the special taxes levied in Improvement Area No. 1 nor the property in Improvement Area No. 1 is security for the Bonds. Improvement Area No. 2 consists of approximately 35 gross acres, approximately 27 acres of which have been developed into 435 residential dwelling units. All of the residential dwelling units are currently suqject to the levy of all or a i:ortion of the Special Tax under the Rate and Method. The ralance of the acreage in the District represents tax-exempt parcels, parks, open space and public right-of-way. The Bonds are secured and payable solely from Special Tax Revenues of two zones within Improvement Area No. 2, including foreclosure proceeds obtained within each zone. See the caption "IM PROV EM ENT AREA NO. 2-The Development and Property Ownership'' for a description of the property within I mprovementArea No. 2.

Property Ownership and Development Status

The District is a master-planned community called "Rosedale," consisting of residential and recreational uses. All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are 0/Vned b{ individual homeCM'ners as of November 1, 2019.

Sources of Payment for the Bonds

Special Tax Revenues. As used in this Official Statement, the term "Special Tax'' is that tax which has been authorized p..1rsuant to the Act to be levied against certain land within Improvement Area No. 2 p..1rsuant to the Act and in accordance with the Rate and Method. See the caption "SOURCES OF PAYMENT FOR THE BONDS Special Taxes" and Appendix A.Under the Fiscal Agent Agreement, the City has pledged to repay the Bonds from the Special Tax Revenues (as such term is defined bel0/\1), except the amount that will be dei:osited in the Administrative Expense Fund for each Fiscal Year, which shall not exceed $60,000 for Fiscal Year endingJ une 30, 2021, which amount shall escalate annually by two percent (2%) on each July 1 thereafter (the "Maximum Administrative Expense Amount"), and amounts that are on deposit in the Special Tax Fund, the Bond Fund and the Reserve Fund established under the Fiscal Agent Agreement. The City has elected to fund the Reserve Fund b{ the purchase of the Reserve Policy to be issued by Assured Guaranty Municipal Corp. ("AG M ").

"Special Tax Revenues" are defined in the Fiscal Agent Agreement to include the proceeds of the Special Taxes received b{ the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon. The Special Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds that are available to pay the debt service on the Bonds are amounts held b{ the Fiscal Agent, including arrounts held in the Reserve Fund.

2 Bond Insurance. The scheduled payment of principal of and interest on the Bonds maturing September 1, 2044 and September 1, 2049 (the "Insured Bonds"), when due will be guaranteed under a municipal bond insurance policy to be issued by AGM concurrently with the delivery of the Bonds. See "BOND INSURANCE" herein.

The municipal bond insurance policy does not insure the Bonds maturing September 1, 2020 through September 1, 2039 (the "Uninsured Bonds").

Foreclosure Covenant. The City has covenanted for the benefit of owners of the Bonds: (i) that it will order, and cause to be commenced,judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of $10,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) that it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City is not required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists (or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales."

The maximum amount of the Special Taxes that could be levied on parcels of property in Improvement Area No. 2 is equal to at least 110% of annual debt service on the Bonds plus Administrative Expenses in an amount not to exceed the Maximum Administrative Expense Amount. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Projected Special Tax Levy." Pursuant to the terms of the Fiscal Agent Agreement, the City has covenanted not to issue Parity Bonds (as such term is defined in the Fiscal Agent Agreement) except for the purpose of refunding a portion of the Bonds. See the caption "SOURCES OF PAYMENT FOR THE BONDS-No Parity Bonds Except for Refunding."

Assessed Values do not Reflect Market Values. There is no assurance that the property within Improvement Area No. 2 can be sold for the assessed values that are set forth in this Official Statement or for a price that is sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by current or future landowners within Improvement Area No. 2. See the caption "SPECIAL RISK FACTORS-Land Values." Other taxes and/or special assessments with liens that are equal in priority to the continuing lien of the Special Taxes may also be levied on the property within Improvement Area No. 2. See the caption "SPECIAL RISK FACTORS Parity Taxes and Special Assessments." Special taxes that are levied on property within Improvement Area No. 1 are not pledged to or security for the Bonds.

Limited Obligations. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NEITHER GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM SPECIAL TAXES LEVIED IN IMPROVEMENT AREA NO. 2 AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

Limited Liability

Although the unpaid Special Taxes constitute a lien on the real property within Improvement Area No. 2, they do not constitute a personal indebtedness of any landowner within Improvement Area No. 2, or any future property owner in Improvement Area No. 2. There is no assurance that the current owners of property within Improvement Area No. 2, or any future property owners within Improvement Area No. 2 will be financially able to pay the Special Taxes or that it will pay the Special Taxes even though financially able to do so.

THE BONDS ARE PAYABLE SOLELY FROM THE PROCEEDS OF THE SPECIAL TAX TO BE LEVIED ANNUALLY ON THE LAND WITHIN IMPROVEMENT AREA NO. 2 AND AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE FISCAL AGENT AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN OF THE DISTRICT, TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT)

3 IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF OR CHARGE, LIEN OR ENCUMBRANCE UPON ANY OF THE PROPERTY OR REVENUES OF THE CITY, AND THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF OR REDEMPTION PREMIUMS, IF ANY, ON THE BONDS IS NOT A GENERAL DEBT, LIABILITY OR OBLIGATION OF THE CITY OR THE DISTRICT.

No Parity Bonds Except for Refunding

The District and the City have covenanted in the Fiscal Agent Agreement that they will not issue any other obligations that are payable from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues that is superior to or on a parity with the lien of the Bonds. Nothing in the Fiscal Agent Agreement, however, precludes the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as or under any other law of the State, which are payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds. See the caption "SOURCES OF PAYMENT FOR THE BONDS-No Parity Bonds Except for Refunding" and Appendix B.

However, other entities and districts can issue indebtedness that is secured by special taxes, ad valorem taxes or assessments that are payable from all or a portion of the property within Improvement Area No. 2 which may have a lien on such property that is on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 2 or the willingness of property owners to pay the Special Taxes. Seethe caption "SPECIAL RISK FACTORS-Parity Taxes and Special Assessments."

Description of the Bonds

The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the "Beneficial Owners") in the denominations of integral multiples of $5,000, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system that is described in this Official Statement is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Fiscal Agent Agreement. See Appendix E.

Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC. Disbursement of such payments to DTC Participants is the responsibility ofDTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Fiscal Agent, all as described in the Fiscal Agent Agreement.

The Bonds are subject to optional redemption, mandatory redemption from Special Tax Prepayments and mandatory sinking fund redemption as described under the caption "THE BONDS-Redemption." For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption "THE BONDS" and Appendix B.

Tax Matters

In the opm10n of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of computing the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See the caption "TAX MATTERS."

4 Professionals Involved in the Offering

Wilmington Trust, National Association, Costa Mesa, California, will act as Fiscal Agent under the Fiscal Agent Agreement. Stifel, Nicolaus & Company, Incorporated is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Best Best & Krieger LLP, Riverside, California, Bond Counsel. Best Best & Krieger LLP, Riverside, California is serving as Disclosure Counsel to the City and the District with respect to the Bonds. Urban Futures, Inc., Tustin, California, is acting as Municipal Advisor for the City in connection with the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, California, City Attorney, and for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California. Other professional services have been performed by Special District Financing & Administration, LLC, Escondido, California, as Special Tax Consultant (the "Special Tax Consultant").

Continuing Disclosure

The City, for and on behalf of the District, has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system, which is available on the Internet at http://www.emma.msrb.org/, certain annual financial information and operating data. Such information is provided pursuant to Rule l 5c2-12(b )(5) adopted by the Securities and Exchange Commission (the "Rule"). The City has further agreed to provide, in a timely manner, notice of certain events as set forth in the Rule.

The covenants of the City have been made in order to assist the Underwriter in complying with the Rule. See the caption "CONTINUING DISCLOSURE" and Appendix C for a description of the specific nature of the reports to be filed by the City, the notices of enumerated events and a summary description of the terms of the continuing disclosure certificate pursuant to which reports are to be made.

Bond Owners' Risks

Certain events could affect the timely repayment of the principal of and interest on the Bonds when due. See the caption "SPECIAL RISK FACTORS" for a discussion of certain factors that should be considered, in addition to the other matters that are set forth in this Official Statement, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors.

Other Information

This Official Statement speaks only as of its date, and the information in this Official Statement is subject to change.

Brief descriptions of the Bonds and the Fiscal Agent Agreement are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references in this Official Statement to the Fiscal Agent Agreement, the Bonds and the Constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Fiscal Agent Agreement. Capitalized terms that used in this Official Statement but not otherwise defined have the meanings that are set forth in the Fiscal Agent Agreement.

Copies of the Fiscal Agent Agreement and other documents and information referred to in this Official Statement are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 213 East Foothill Blvd, Azusa, California 91702, Attention: Director of Administrative Services.

5 THE FINANCING PLAN

The City and Azusa Land Partners, LLC ("ALP") entered into that certain Funding and Acquisition Agreement dated as of August 1, 2005 (the "Original Agreement"), as amended by a First Amendment to Funding and Acquisition Agreement dated as of June 1, 2019 (the "First Amendment") by and between the City and Rosedale Land Partners II, LLC (the "Developer"), assignee of ALP, and a Second Amendment to Funding and Acquisition Agreement dated as of December 1, 2019 (the "Second Amendment" and together with the Original Agreement and the First Amendment, the "Funding Agreement") by and between the City and the Developer for, among other things, the purpose of forming the District and establishing a plan for the financing of the acquisition, design and construction of improvements of the City, the School District and other public entities.

The Bonds are being issued to finance: (i) backbone streets and in-tract improvements; (ii) neighborhood parks and a transit plaza; (iii) parkway and median landscaping and (iv) a great park (the "City Facilities"), all of which are authorized to be financed by the District and the Funding Agreement. A portion of the Bond proceeds will be deposited into the City Facilities Account of the Improvement Fund to pay costs or to reimburse costs to the Developer relating to the City Facilities. A portion of the Bond proceeds will be deposited into the School Facilities Account of the Improvement Fund to finance certain school facilities (the "School Facilities"). The disbursement of the proceeds of the Bonds for the School Facilities will be subject to that certain Amended and Restated Joint Community Facilities Agreement dated as of November 1, 2019 (the "Amended and Restated Agreement") by and among the City, for and on behalf of the District, the Developer and the School District.

Estimated Sources and Uses of Funds

The following table sets forth the expected uses of Bond proceeds:

Sources of Funds Principal Amount $20,525,000.00 Plus Net Original Issue Premium 3,271,303.20 TOTAL SOURCES $23,796,303.20

Uses of Funds City Facilities Account of Improvement Fund $16,004,832.02 School Facilities Account of Improvement Fund 7 ,250,000.00 Cost of Issuance Fund(tJ 367,008.68 Underwriter's Discount 174,462.50 TOTAL USES $23,796,303.20

(!) Costs of Issuance include legal fees, City administrative costs, printing costs, Special Tax Consultant fees, Municipal Advisor fees, Fiscal Agent fees, rating agency fees, bond insurance and reserve fund policy premiums and other miscellaneous costs of issuance.

6 THE BONDS

Authority for Issuance

The Bonds in the aggregate principal amount of $20,525,000 are authorized to be issued by the City for the District under and subject to the terms of the resolution authorizing the issuance of the Bonds, as described below, the Fiscal Agent Agreement, the Act and other applicable laws of the State.

Resolutions of Intention. On April 17, 2006, the City Council of the City adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax, and a resolution declaring its intention to incur bonded indebtedness for the District in an amount not to exceed $110,000, 000 ($80, 000, 000 within Improvement Area No. 1 and $30,000,000 within Improvement Area No. 2).

Resolutions ofFormation. Immediately following a noticed public hearing on June 5, 2006, the City Council of the City adopted a resolution that established the District and authorized the levy of a special tax within the District and a resolution declaring the necessity to incur bonded indebtedness within the District.

Resolution Calling Election. The resolutions that were adopted by the City Council of the City on June 5, 2006 also called for an election by the landowners in the District on that date on the questions of the levy of the Special Tax, the incurring of bonded indebtedness in the District, and the establishment of an appropriations limit.

Landowner Election and Declaration ofResults. On June 5, 2006, an election was held at which the owner of property in Improvement Area No. 1 and Improvement Area No. 2, as the sole landowner and qualified voter within the District, approved ballot propositions authorizing the issuance of up to $80,000,000 of bonds for Improvement Area No. 1, $30,000,000 of bonds for Improvement Area No. 2, the levy of the Special Tax within Improvement Area No. 1 and Improvement Area No. 2 and the establishment of an appropriations limit for Improvement Area No. 1 and Improvement Area No. 2. On June 5, 2006, the City Council adopted a resolution approving the canvass of the votes and declaring the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit.

Change Proceedings. Pursuant to the Act, on October 17, 2011, the City Council adopted a resolution of consideration to amend and restate the rate and method of apportionment for Improvement Area No. 2 to implement, among other things, changes to the rates of special tax to be levied on parcels of property in Improvement Area No. 2. On November 21, 2011, the City Council conducted a public hearing, adopted a resolution of change and held a special election where the landowners within Improvement Area No. 2 approved the Rate and Method.

Special Tax Lien and Levy. A Notice of Special Tax Lien for Improvement Area No. 2 was recorded in the real property records of the County of Los Angeles (the "County") on June 12, 2006, as amended by the Amendment to Notice of Special Tax Lien, recorded in the real property records of the County on December 2, 2011 as a continuing lien against the property in Improvement Area No. 2.

Resolution Authorizing Issuance ofthe Bonds. On November 18, 2019, the City Council adopted a resolution approving issuance of the Bonds in a principal amount not to exceed $25,000,000.

Purpose of the Bonds

The Bonds are being issued to provide funds to: (i) finance the acquisition and construction of certain public improvements of the City and certain public school facilities of the School District; (ii) fund a reserve fund for the Bonds or purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premiums for a municipal bond insurance policy and a debt service reserve insurance policy. See the caption "THE FINANCING PLAN-Estimated Sources and Uses of Funds."

Description of the Bonds

The Bonds will be issued as fully registered bonds in denominations of integral multiples of $5,000 (not exceeding the principal amount maturing at any one time), and will be dated the date of delivery. The Bonds will be

7 issued in book-entry only form and DTC will act as securities depository for the Bonds. So long as the Bonds are held in book-entry only form, the principal of, premium, if any, and interest on the Bonds will be paid directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with the procedures of DTC. See Appendix E. The Bonds will mature on September 1, in the years and principal amounts, and bear rates of interest, as shown on the inside front cover page of this Official Statement.

Interest on the Bonds will be payable semiannually on March 1, 2020 and each September 1 and March 1 thereafter ( each, an "Interest Payment Date") and will be computed on the basis of a 360-day year comprised of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication, unless: (a) it is authenticated on an Interest Payment Date, in which event it will bear interest from such Interest Payment Date; (b) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or ( c) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from its dated date; provided that if at the time of authentication of a Bond interest is then in default, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment, or from its dated date, if no interest has previously been paid or made available for payment.

Interest on the Bonds is payable by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, to the registered Owner at such registered Owner's address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Fiscal Agent prior to any Record Date, interest on such Bonds will be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request.

Redemption

Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 2028, or any date thereafter, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at par, together with accrued interest to the date of redemption.

Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption as follows:

Redemption Dates Redemption Price Any Interest Payment Date through March 1, 2026 103% September 1, 2026 and March 1, 2027 102 September 1, 2027 and March 1, 2028 101 September 1, 2028 and any Interest Payment Date thereafter 100

The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedules will be reduced by the City as nearly as practicable on a pro rata basis in multiples of $5,000 among redemption dates as a result of any prior or partial optional redemption or mandatory redemption from Special Tax Prepayments of the Bonds. The City will, as may be appropriate, provide to the Fiscal Agent a revised mandatory sinking fund schedule for the Bonds.

Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on September 1, 2044 and September 1, 2049 are subject to mandatory sinking fund redemption, in part, on September 1, 2040 and September 1, 2045, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal

8 amount to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows:

Term Bonds Maturing on September 1, 2044 Redemption Date Sinking Fund (September 1) Payment 2040 $ 870,000 2041 945,000 2042 1,025,000 2043 1,105,000 2044 (Maturity) 1,195,000

Term Bonds Maturing on September 1, 2049 Redemption Date Sinking Fund (September 1) Payment 2045 $1,285,000 2046 1,380,000 2047 1,485,000 2048 1,595,000 2049 (Maturity) 1,710,000

The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedules will be reduced by the City pro rata among redemption dates, in order to maintain substantially level debt service as a result of any prior or partial optional redemption or mandatory redemption from Special Tax Prepayments of the Bonds.

Purchase ofBonds. In lieu of payment at maturity or redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon consent of AGM and the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase, at a public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event will Bonds be purchased at a price in excess of the principal amount, plus interest accrued to the date of purchase. In such event, the City will, as may be appropriate, provide to the Fiscal Agent a revised maturity schedule or a revised mandatory sinking fund schedule for the Bonds, or both.

Notice of Redemption

The Fiscal Agent Agreement requires the Fiscal Agent to cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services selected by an Authorized Officer, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent at its Principal Office; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect in such notice, will not affect the validity of the proceedings for the redemption of such Bonds. The Fiscal Agent will also cause notice of any redemption to be mailed, in such manner and within such time, to the Underwriter.

Such notice will state the date of such notice, the date of issue of the Bonds, the place or places of redemption, the redemption date, the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, will designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed, by giving the individual CUSIP number and Bond number of each Bond to be redeemed, or will state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, will state as to any Bond called for redemption in part the portion of the principal of the Bond to be redeemed, will require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption as the said redemption price, and will state that further interest on such Bonds will not accrue from and after the redemption date. The cost of the mailing and publication of any such redemption notice will be paid by the District.

9 Any notice of optional redemption of the Bonds delivered in accordance with the Fiscal Agent Agreement may be conditional and if any condition stated in the notice of redemption has not been satisfied on or prior to the redemption date, said notice will be of no force and effect, the District will not be required to redeem such Bonds, the redemption will not be made and the Fiscal Agent will within a reasonable time thereafter give notice, to the persons and in the manner in which the notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled.

Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose will, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

If less than all of the Outstanding Bonds are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of integral multiples of $5,000, and, in selecting portions of such Bonds for redemption, the Fiscal Agent will treat each such Bond as representing the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000.

Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of a maturity or any given portion, the Fiscal Agent will select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion not previously called for redemption, by lot within a maturity, in any manner which the Fiscal Agent in its sole discretion deems appropriate.

Upon surrender of Bonds redeemed in part only, the City will execute and the Fiscal Agent will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds.

Effect of Redemption

From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds called for redemption have been deposited in the Bond Fund, such Bonds will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and interest will cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption.

All Bonds redeemed and purchased by the Fiscal Agent pursuant to the Fiscal Agent Agreement will be canceled by the Fiscal Agent.

Transfer and Exchange of Bonds

Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of the Fiscal Agent Agreement, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office of the Fiscal Agent, accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer will be paid by the District. The Fiscal Agent will collect from the Owner requesting transfer of a Bond any tax or other governmental charge required to be paid with respect to such transfer.

Whenever any Bond or Bonds are surrendered for transfer, the City will execute and the Fiscal Agent will authenticate and deliver a new Bond or Bonds of like aggregate principal amount.

No transfers of Bonds will be required to be made: (a) during the fifteen days preceding the date established by the Fiscal Agent for selection of Bonds for redemption; or (b) with respect to Bonds which have been selected for redemption.

Bonds may be exchanged at the Principal Office of the Fiscal Agent only for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity and interest rate. The cost for any services rendered or any expense incurred by the Fiscal Agent in connection with any such exchange will be paid by the District. The Fiscal

10 Agent will collect from the Owner requesting exchange of a Bond any tax or other governmental charge required to be paid with respect to such exchange.

No exchanges of Bonds will be required to be made: (a) during the fifteen days preceding the date established by the Fiscal Agent for selection of Bonds for redemption; or (b) with respect to Bonds which have been selected for redemption.

Debt Service Schedule for the Bonds

The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional redemptions or mandatory redemptions from Special Tax Prepayments. See the caption "-Redemption."

Period Ending Total (Selltember 1) Princillal Interest Debt Service 2020 $340,000.00 $671,433.89 $1,011,433.89 2021 85,000.00 945,200.00 1,030,200. 00 2022 105,000.00 942,650.00 1,047,650.00 2023 135,000.00 938,450.00 1,073,450. 00 2024 160,000.00 933,050.00 1,093,050.00 2025 190,000.00 926,650.00 1,116,650.00 2026 220,000.00 919,050.00 1,139,050.00 2027 250,000.00 908,050.00 1,158,050.00 2028 285,000.00 895,550.00 1,180,550.00 2029 325,000.00 881,300.00 1,206,300.00 2030 365,000.00 865,050.00 1,230,050.00 2031 410,000.00 846,800.00 1,256,800.00 2032 455,000.00 826,300.00 1,281,300.00 2033 505,000.00 803,550.00 1,308,550. 00 2034 550,000.00 783,350.00 1,333,350. 00 2035 600,000.00 761,350.00 1,361,350.00 2036 655,000.00 731,350.00 1,386,350.00 2037 715,000.00 698,600.00 1,413,600. 00 2038 765,000.00 677,150.00 1,442, 150. 00 2039 815,000.00 654,200.00 1,469,200.00 2040 870,000.00 629,750.00 1,499,750.00 2041 945,000.00 586,250.00 1,531,250.00 2042 1,025,000.00 539,000.00 1,564,000.00 2043 1,105,000.00 487,750.00 1,592, 750. 00 2044 1,195,000.00 432,500.00 1,627,500.00 2045 1,285,000.00 372,750.00 1,657, 750. 00 2046 1,380,000.00 308,500.00 1,688,500.00 2047 1,485,000.00 239,500.00 1,724,500.00 2048 1,595,000.00 165,250.00 1,760,250.00 2049 1710000.00 85 500.00 1 795 500.00 TOTAL $20 525 000.00 $20 455 833.89 $40 980 833.89

11 SOURCESOFPAYMENTFORTHEBONDS

The Special Taxes are the primary security for the payment of the Bonds. Pursuant to the Fiscal Agent Agreement, the City has pledged to repay the Bonds from the Special Tax Revenues and amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. "Special Tax Revenues" are defined in the Fiscal Agent Agreement to include the proceeds of the Special Taxes that are received by the City, including any scheduled payments, interest and penalties, the proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes in the amount of said lien, and interest and penalties.

NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE SCHOOL DISTRICT, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION OF THE STATE (EXCEPT THE DISTRICT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES LEVIED IN IMPROVEMENT AREA NO. 2, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT THAT ARE PAYABLE SOLELY FROM THE SPECIAL TAXES AND OTHER AMOUNTS THAT ARE PLEDGED UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

Special Taxes

The City Council, as the legislative body of the District, has covenanted in the Fiscal Agent Agreement that by August 10 of each year (or such later date as may be authorized by the Act), it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in the amount required for the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment of the Reserve Fund and an amount that is estimated to be sufficient to pay the Administrative Expenses during such calendar year.

The Special Taxes levied in any Fiscal Year may not exceed the maximum rates that are authorized pursuant to the Rate and Method. See Appendix A There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption "SPECIAL RISK FACTORS Insufficiency of Special Taxes."

Rate and Method of Apportionment of Special Tax

Terms that are used in this caption but not defined have the meanings that are set forth in the Rate and Method. See Appendix A

Classification of Property. The Rate and Method provides that for each Fiscal Year all Taxable Property in Improvement Area No. 2 is to be assigned to Zone 1 or Zone 2 and classified as either Developed Property, Other Taxable Property or Undeveloped Property.

"Assessor's Parcel" is defined as a parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number.

"Developed Property" is defined as, for each Fiscal Year, all Taxable Property, exclusive of Taxable Property Owner Association Property or Taxable Public Property, for which a building permit for new construction was issued after January 1, 2006 and as of May 1 of the previous Fiscal Year.

"One-Time Special Tax" is defined as a one-time special tax payable by a Builder prior to the issuance of a Certificate of Occupancy for a residential dwelling unit in order to reduce the Maximum Special Tax on such dwelling unit, so that the Total Tax and Assessment Obligation for the Fiscal Year in which a Certificate of Occupancy for such residential dwelling unit is expected to be issued will not exceed two percent (2. 0%) of the Value of such residential dwelling unit.

12 "Other Taxable Property" is defined as Taxable Property Owner Association Property and Taxable Public Property.

"Property Owner Association Property" is defined as, for each Fiscal Year, any Assessor's Parcel within the boundaries oflmprovement Area No. 2 that was owned by or irrevocably offered for dedication to a property owner association, including any master or sub-association, as of January 1 of the previous Fiscal Year.

"Public Property" is defined as, for each Fiscal Year, (i) any property within the boundaries of Improvement Area No. 2 that was owned or irrevocably offered for dedication to the federal government, the State, the City or any other public agency as of January 1 of the previous Fiscal Year; provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified in accordance with its use; or (ii) any property within the boundaries of the District that was encumbered, as of January 1 of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement.

"Undeveloped Property" is defined as, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property.

"Taxable Property Owner Association Property" is defined as all Assessor's Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to the Rate and Method.

"Taxable Public Property" is defined as all Assessor's Parcels of Public Property that are not exempt from the Special Tax pursuant to the Rate and Method.

"Undeveloped Property" is defined as, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property.

"Zone 1" is defined as the property identified as Zone 1 (Great Park and Transit 1) oflmprovement Area No. 2, as identified on the boundary map for the District.

"Zone 2" is defined as the property identified as Zone 2 (Transit 2) oflmprovement Area No. 2, as identified on the boundary map for the District.

The Rate and Method exempts up to 20.36 acres of Property Owner Association Property and Public Property in Zone 1 and up to 7.35 acres of Property Owner Association Property and Public Property in Zone 2.

Assessor's Parcels of Developed Property are further classified as:

Residential Property; or

Non-Residential Property.

Residential Property in Zone 1 is assigned to a Land Use Class (from classes 1-5) based on the Residential Floor Area. Non-Residential Property in Zone 1 is assigned to Land Use Class 6. Residential Property in Zone 2 is assigned to a Land Use Class (from classes 1-3) based on the Residential Floor Area. Non-Residential Property in Zone 2 is assigned to Land Use Class 4. The Land Use Classes in Zone 1 and Zone 2 are shown in Table 1 herein

Method ofApportionment. For each Fiscal Year, the City Council will levy the Special Tax until the amount of Special Taxes equals the Special Tax Requirement for Facilities. The Rate and Method defines the "Special Tax Requirement for Facilities" as that amount required in any Fiscal Year for Improvement Area No. 2 to: (i) pay debt service on all Outstanding Bonds; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay all or a portion of the Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay directly for acquisition or construction facilities eligible under the Act and authorized to be financed in Improvement Area No. 2 to the extent that inclusion of such amount does not increase the Special Tax levy on Undeveloped Property; and (vi) pay for reasonably anticipated Special Tax delinquencies based on the delinquency rate for Special Taxes levied in the previous

13 Fiscal Year; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Fiscal Agent Agreement. The Special Tax will be levied for each Fiscal Year as follows:

First: The Special Tax will be levied Proportionately on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 at up to 100% of the applicable Maximum Special Tax to satisfy the Special Tax Requirement for Facilities;

Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax will be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax for Undeveloped Property;

Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the Special Tax will be levied Proportionally on each Assessors' Parcel of Other Taxable Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax for Other Taxable Property.

Notwithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor's Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor's Parcel(s) within Improvement Area No. 2 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults.

Prepayment of Special Taxes

The Rate and Method provides that a property owner may prepay and satisfy the Special Tax obligation of an Assessor's Parcel of Developed Property or Undeveloped Property for which a building permit has been issued, and only ifthere are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment.

In the Fiscal Agent Agreement, the City will covenant that any prepayment that is made with respect to a parcel will be reviewed by the Special Tax Consultant who, as a precondition to the City's acceptance of such prepayment, must certify that: (a) following the acceptance of the prepayment and the redemption of Bonds with such prepayment, the ratio of: (i) the maximum amount of the Special Taxes that may be levied on all Developed Property in the District which following such prepayment will be subject to the levy of the Special Taxes; to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption (e.g., 1.10 to 1.0) plus Administrative Expenses, which shall not exceed the Maximum Administrative Expense Amount for the Fiscal Year in which such prepayment is made will not be less than such ratio as it existed prior to such prepayment; and (b) the maximum amount of the Special Taxes that may be levied on Developed Property at build-out of the property in Improvement Area No. 2, as then approved by the City, will be equal to at least 110% of Maximum Annual Debt Service on such Outstanding Bonds plus Administrative Expenses which shall not exceed the Maximum Administrative Expense Amount for the Fiscal Year in which such prepayment is made.

In the event that additional prepayments of Special Taxes occur in the future, the net proceeds of such prepayments will be applied to effect a mandatory redemption of the Bonds. See the caption "THE BONDS Redemption-Mandatory Redemption from Special Tax Prepayments."

One-Time Special Tax

The Rate and Method provides that a homebuilder may pay a One-Time Special Tax prior to the issuance of a certificate of occupancy in an amount that is necessary to reduce or "buy down" the Maximum Special Tax to be levied against each dwelling to a level such that the total projected tax obligation, consisting of ad valorem taxes, and other charges, including special assessments and taxes, does not exceed 2% of the sales price of the home. Of the total 435 dwelling units within the Improvement Area No. 2, these "buy-downs" have been tendered by homebuilders for 31 dwelling units. One-Time Special Taxes have resulted in the reduction of the Special Tax obligation for 31 dwelling units within Improvement Area No. 2. Certificates of Occupancy have been provided for all 435 dwelling unit in Improvement Area No. 2, so there will be no further buy-downs through payment of the One-Time Special Tax.

14 Table 1 below describes the Maximum Special Tax for each Land Use Class of Developed Property and "buy-downs" in Improvement Area No. 2

TABLE 1 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) MAXIMUM SPECIAL TAXES FOR LAND USE CLASSES OF DEVELOPED PROPERTY No. of Highest No. of Taxable Buy-down FY 2019-20 FY 2019-20 Land Taxable D/Us Percentage for Minimum Maximum Tax Use Property D/Us with without Land Special Special Zone Class UseTx~e Residential Floor Area Bux-down <1> Bux-down Use Class <2> Tax <3> Tax <4> Residential Greater than 1,9 50 Square Feet 5 83 5.68% $3,193.86 $3,386.32 2 Residential 1,751-1,950 Square Feet 16 37 6.18 2,930.38 3,123.28 3 Residential 1,551-1,750 Square Feet 0 42 0.00 2,779.82 2,779.82 4 Residential 1,401-1,550 Square Feet 0 83 0.00 2,501.84 2,501.84 5 Residential Less than 1,401 Square Feet 10 47 7.80 2,103.28 2,281.28 5 6 Non -Residential Per Taxable Acre C J 0 0 NIA 0.00 0.00

2 Residential Greater than 1,3 00 Square Feet 0 96 0.00% $2,502.98 $2,502.98 2 Residential 1,201-1,300 Square Feet 0 16 0.00 2,376.62 2,376.62 3 Residential Less than 1,201 Square Feet 0 0 0.00 2,166.42 2,166.42 5 4 Non -Residential Per Taxable Acre C J _Q_ _Q_ NIA 0.00 0.00 Taxable Dwelling Units: 31 404

OJ There are no dwelling units that have prepaid 100% of the special tax obligation. 2 C J Percentage shown represents the highest buy-down percentage payment received within each Land Use Class that was less than 100%. Percentage shown may include a reduction attributable to multiple buy-down payments. 3 C J Represents the Maximum Special Tax for each Land Use Class reduced by the highest buy-down percentage for Land Use Class. 4 C J Maximum estimated special tax rate reflects a levy requirement equal to estimated Improvement Area No. 2 administrative expenses, anticipated special tax delinquencies and additional required taxes for reimbursement of development costs as provided for in the Rate and Method and amount shown is applicable to dwelling units for which no buy-down payment has been received. 5 C J Non-Residential Property is not expected to be subject to the Special Tax. Source: Special Tax Consultant.

15 Collection and Application of Special Taxes

The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes.

The City has made certain covenants in the Fiscal Agent Agreement for the purpose of ensuring that the current maximum Special Tax Rate and Method of collection of the Special Taxes are not altered in a manner that would impair the City's ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative Expenses when due.

First, the City has covenanted that: (i) to the extent that it is legally permitted to do so, it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on then existing Developed Property in the District below the amounts that are necessary to provide Special Tax Revenues in an amount equal to the estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds; and (ii) in the event that an ordinance is adopted by initiative which purports to reduce or otherwise alter the maximum Special Tax rates, the City will pursue legal action seeking to preserve its ability to comply with the covenant that is set forth in clause (i). See the caption "SPECIAL RISK FACTORS Proposition 218."

Second, the City has covenanted: (i) not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare a special tax penalties amnesty program in any manner that would materially and adversely affect the interests of the owners of the Bonds; and (ii) not to permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender.

Although the Special Taxes constitute liens on Taxable Property within Improvement Area No. 2, they do not constitute a personal indebtedness of the owners of property within Improvement Area No. 2. Moreover, other liens for taxes and assessments already exist on the property within Improvement Area No. 2 and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in Improvement Area No. 2. See the caption "SPECIAL RISK FACTORS-Parity Taxes and Special Assessments." There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so.

Under the terms of the Fiscal Agent Agreement, not later than 30 Business Days after receipt, all Special Tax Revenues that are received by the City are to be deposited in the Special Tax Fund. As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than ten Business Days after such receipt, the Fiscal Agent will withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund an amount that is estimated by the City to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year; provided, however, that the amount deposited in the Administrative Expense Fund prior to the payment of debt service on the Bonds may not exceed the Maximum Administrative Expense Amount.

From the amount then remaining on deposit in the Special Tax Fund, the Fiscal Agent will, on or before each Interest Payment Date, the Fiscal Agent will deposit in the Interest Account and the Principal Account of the Bond Fund the amounts that required for payment of interest on and principal of the Bonds as provided in the Fiscal Agent Agreement. Thereafter, as soon as the amount on deposit in the Special Tax Fund is sufficient, deposit in the Reserve Fund the amount, if any, which the City directs in a written communication from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), to be withdrawn from the Special Tax Fund and deposited in the Reserve Fund to make the amount on deposit in the Reserve Fund equal to the Reserve Requirement. If after such deposits are made to the Administrative Expense Fund, the Reserve Fund, the Interest Account and the Principal Account there are funds remaining on deposit in the Special Tax Fund, the City will instruct the Fiscal Agent in a written communication from an Authorized Officer (upon which the Fiscal Agent may conclusively rely) to transfer such amount from the Special Tax Fund to and deposit it in the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement. Such written communication will specify the amount which is to be

16 transferred from the Special Tax Fund and deposited in the Reserve Fund. No transfer will be made without specific written communication from the City.

On September 2 of each year, beginning on September 2, 2020, after all the deposits required pursuant to the Fiscal Agent Agreement have been made, the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, as determined by the City, may not exceed the greater of: (i) one year's earnings on such amounts; or (ii) one-twelfth of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys will be transferred from the Special Tax Fund to and deposited in the Reserve Fund to the extent that the amount on deposit in the Reserve Fund is less than the Reserve Requirement. Any such excess remaining in the Special Tax Fund after any such amount is transferred from the Special Tax Fund to the Reserve Fund, will be transferred from the Special Tax Fund to and deposited in the Administrative Expense Fund. Any such excess amount may be transferred to the City to Facilities authorized pursuant to the Resolution of Formation.

Proceeds of Foreclosure Sales

The net proceeds received following a judicial foreclosure sale of land within the District resulting from a landowner's failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds.

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the City of Special Taxes in an amount which is less than the Special Tax levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a superior court action to foreclose the lien of the delinquent Special Tax installment within specified time limits. In such an action, the real property that is subject to the unpaid amount may be sold at a judicial foreclosure sale.

Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, in the Fiscal Agent Agreement, the City will covenant for the benefit of the Owners of the Bonds that (i) it will order, and cause to be commenced, judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of$10,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City shall not be required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists ( or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency.

If foreclosure is necessary and other funds (including amounts in the Reserve Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays that are associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City. See the caption "SPECIAL RISK FACTORS-Bankruptcy and Foreclosure." Moreover, no assurance can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption "SPECIAL RISK FACTORS-Land Values." Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.

17 Reserve Fund

In order to secure further the payment of principal of and interest on the Bonds, the City is required, upon delivery of the Bonds, to deposit $1,724,621.50 into the Reserve Fund and thereafter to maintain in the Reserve Fund an amount equal to the Reserve Requirement. The Fiscal Agent Agreement defines the Reserve Requirement on the date of any calculation, as determined by the City and provided in writing to the Fiscal Agent, the lesser of: (a) 10% of the proceeds of the sale of the Bonds, (b) Maximum Annual Debt Service on the Bonds, or (c) 125% of average Annual Debt Service on the Bonds; provided, however that such amount shall not exceed the Reserve Requirement calculated on the Closing Date and that the City may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements set forth in the Fiscal Agent Agreement. The prior written consent of AGM shall be a condition precedent to the deposit of any Qualified Reserve Fund Credit Instrument, other than the Reserve Policy, provided in lieu of a cash deposit into the Reserve Fund. Notwithstanding anything to the contrary set for in the Fiscal Agent Agreement, amounts on deposit in the Reserve Fund shall be applied solely to the payment of debt service due on the Bonds.

The Reserve Requirement with respect to the Bonds shall be satisfied by the delivery of the Reserve Policy to the Fiscal Agent. The Fiscal Agent shall credit the Reserve Policy to the Reserve Fund. See Appendix B for a discussion of provisions related to the Reserve Policy.

Subject to the limitation of the maximum amounts of the Special Tax that may be levied on taxable property within Improvement Area No. 2, as described in Appendix A, the City has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax Revenues, to maintain the balance in the Reserve Fund at the Reserve Requirement. Amounts in the Reserve Fund are to be applied: (i) to pay debt service on the Bonds, to the extent that other moneys are not available; (ii) to redeem the Bonds in whole or in part; and (iii) to pay the principal and interest due in the final year of maturity of the Bonds. See Appendix B.

No Parity Bonds Except for Refunding

Projected Special Tax Levy

Pursuant to the Rate and Method, the Special Taxes are apportioned first up to the Maximum Special Tax proportionately to each Assessor's Parcel of Developed Property in Zone 1 and Zone 2. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Rate and Method of Apportionment of Special Taxes" and Appendix A The principal amount of the Bonds has been determined based on the amount of Special Tax Revenues that are estimated to be generated from the levy of Special Taxes on Developed Property pursuant to the Rate and Method.

18 The table below summarizes Land Use Class and Maximum Special Taxes within Improvement Area No. 2.

TABLE2 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

SUMMARY OF ACTUAL AND MAXIMUM SPECIAL TAXES BY LAND USE CATEGORY

Average Taxable FY 2019-20 Maximum Land Dwelling Assigned Special Tax FY 2019-20 Percent Tax Use Residential Units for Special Tax Capacity for Special of Total Zone Class Description Floor Area FY 2019-20 Per Unit (l) FY 2019-20 <2) Tax Leyy <3) Levy 1 1 Residential Property > 1,950 SF 88 $3,381.53 $297,575 $297,575 24.94% 1 2 Residential Property 1,751-1,950 SF 53 3,093.62 163,962 163,962 13.74 1 3 Residential Property 1,551-1,750 SF 42 2,779.82 116,752 116,752 9.79 1 4 Residential Property 1,401-1,550 SF 83 2,501.84 207,653 207,653 17.41 1 5 Residential Property < 1,401 SF 57 2,259.64 128,799 128,799 10.80 1 6 Non - Residential Property Non-Res 0 0 0 0.00 2 1 Residential Property > 1,300 SF 96 2,502.98 240,286 240,286 20.14 2 2 Residential Property 1,201-1,300 16 2,376.62 38,026 38,026 3.18 2 3 Residential Property < 1,201 SF 0 0 0 0.00 2 4 Non - Residential Property Non-Res 0 0 0 0.00 Total 435 $1,193,053 $1,193,053 100.00%

OJ Rate shown reflects the applicable average Maximum Special Tax for Fiscal Year 2019-20 based on the special tax buy-downs received as of November 1, 2019. 2 C J Amount shown reflects the applicable average Maximum Special Tax for Fiscal Year 2019-20 based on the special tax buy-downs received as of November 1, 2019. 3 C J Total levy for Fiscal Year 2019-20 was $1, 193,053.40 and amount shown reflects rounding down to even cents as required by the County of Los Angeles. Source: Special Tax Consultant.

19 The table bel/o aoove the amount that would have been levied in such Fiscal Year had there never been any such delinquency or default.

TABLE 3 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) DEBT SERVICE COVERAGE BASED UPON FISCAL YEAR 2019-20MAXIMUM SPECIAL TAX Estimated Less Estimated Net Period Maximum Estimated Special Taxes Estimated Ending Tax Administrative L essAnticipated Available for Debt Service Sept 1 Debt Service(ll Ca~citv Ex12enses (2l Delinguencies (3l Debt Service Covera~ 2020 $1,011,434 $1, 193,053 ($60,000) ($20,000) $1, 113,053 110.05% 2021 1,030,200 1,216,914 (61,200) (20,400) 1,135,314 110.20 2022 1,047,650 1,241,253 (62,424) (20,808) 1, 158,021 110.54 2023 1,073,450 1,266,078 (63,672) (21,224) 1, 181, 181 110.04 2024 1,093,050 1,291,399 (64,946) (21,649) 1,204,805 110.22 2025 1, 116,650 1,317,227 (66,245) (22,082) 1,228,901 110.05 2026 1, 139,050 1,343,572 (67,570) (22,523) 1,253,479 110.05 2027 1, 158,050 1,370,443 (68,921) (22,974) 1,278,548 110.41 2028 1, 180,550 1,397,852 (70,300) (23,433) 1,304,119 110.47 2029 1,206,300 1,425,809 (71,706) (23,902) 1,330,202 110.27 2030 1,230,050 1,454,325 (73, 140) (24,380) 1,356,806 110.30 2031 1,256,800 1,483,412 (74,602) (24,867) 1,383,942 110.12 2032 1,281,300 1,513,080 (76,095) (25,365) 1,411,621 110.17 2033 1,308,550 1,543,342 (77,616) (25,872) 1,439,853 110.03 2034 1,333,350 1,574,209 (79, 169) (26,390) 1,468,650 110.15 2035 1,361,350 1,605,693 (80,752) (26,917) 1,498,023 110.04 2036 1,386,350 1,637,807 (82,367) (27,456) 1,527,984 110.22 2037 1,413,600 1,670,563 (84,014) (28,005) 1,558,543 110.25 2038 1,442, 150 1,703,974 (85,695) (28,565) 1,589,714 110.23 2039 1,469,200 1,738,054 (87,409) (29, 136) 1,621,509 110.37 2040 1,499,750 1,772,815 (89, 157) (29,719) 1,653,939 110.28 2041 1,531,250 1,808,271 (90,940) (30,313) 1,687,018 110.17 2042 1,564,000 1,844,436 (92,759) (30,920) 1,720,758 110.02 2043 1,592,750 1,881,325 (94,614) (31,538) 1,755,173 110.20 2044 1,627,500 1,918,952 (96,506) (32, 169) 1,790,277 110.00 2045 1,657,750 1,957,331 (98,436) (32,812) 1,826,082 110.15 2046 1,688,500 1,996,477 (100,405) (33,468) 1,862,604 110.31 2047 1,724,500 2,036,407 (102,413) (34, 138) 1,899,856 110.17 2048 1,760,250 2,077,135 (104,461) (34,820) 1,937,853 110.09 2049 1,795,500 2, 118,678 (106,551} (35,517) 1,976,610 110.09 Total $40,980,834 $48,399,885 ($2,434,085) ($811,362) $45, 154,438

(1) Reflects debt service for Series 2019 IA2 Special Tax Bonds. (2) Assurres $60,000 for CFO adninistrative expenses and escalates 2% annually. (3) Assurres $20,000 for anticipated delinquencies and escalates 2% annually. The RMA provides that the Special Tax Requirerrent for Facilities to be levied each year include an annunt for anticipated delinquencies. HOltVever, such annunt is only available after payrrent of debt service and priority CFO Adninistrative Expenses. Source: Special Tax Consultant.

20 IMPROVEMENT AREA NO. 2

General Description of the District and Improvement Area No. 2

The District contains the Rosedale master-planned community that encompasses approximately 517 acres of which approximately 187 acres have been developed into residential units. The District is located north of the 210 Freeway at the base of the San Gabriel Mountains. The District is comprised of two improvement areas. Improvement Area No. 2 consists of approximately 35 gross acres, is fully built out and contains 435 residential dwelling units, all of which are currently subject to the levy of all or a portion of the Special Tax under the Rate and Method. The balance of the acreage in the District represents tax-exempt parcels, parks, open space and public right-of-way. The Bonds are secured and payable solely from Special Tax Revenues of both zones within Improvement Area No. 2, including foreclosure proceeds obtained within each zone. See the caption "-the Development and Property Ownership" for a description of the property within Improvement Area No. 2.

All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are owned by individual homeowners as of November 1, 2019.

Direct and Overlapping Debt

The ability of the owners ofland within Improvement Area No. 2 to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. Certain of these taxes relate to direct and overlapping tax and assessment debt as set forth in the below table (the "Debt Report"). The Debt Report has been derived from data that was assembled and reported to the City by California Municipal Statistics Inc. None of the City, the District or the Underwriter has independently verified the information in the Debt Report and such parties do not guarantee its completeness or accuracy. The Debt Report sets forth those entities that have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or other special taxes that do not secure debt. The Debt Report is included for general information purposes only.

21 TABLE4 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) DIRECT AND OVERLAPPING DEBT SUMMARY (As of October 1, 2019) 2019-20 Local Secured Assessed Valuation: $185,071,674

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 10/1/19 Metropolitan Water District 0.006% $2,863 Citrus Community College District 0.595 518,061 Azusa Unified School District 2.460 3,313,059 - (1) City of Azusa Community Facilities District No. 2005-1 I.A. No. 2 100.000 ---- TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $3,833,983

OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.011% $271,039 Los Angeles County Superintendent of Schools Certificates of Participation 0.011 592 Los Angeles County Sanitation District No. 22 Authority 0.419 12,358 Azusa Unified School District Certificates of Participation 2.460 121,035 City of Azusa General Fund Obligations 3.553 30 025 TOTAL OVERLAPPING GENERAL FUND DEBT $435,049

2 COMBINED TOTAL DEBT $4,269,032 < )

Ratios to 2019-20 Local Secured Assessed Valuation: Direct Debt ...... O.OOo/o Total Overlapping Tax and Assessment Debt ...... 2.07% Combined Total Debt ...... 2.31%

OJ Excludes issue to be sold. 2 < J Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

Assessed Value-to-Lien Ratio

The value of the land within the District is significant because in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Dividing the assessed value of the property within Improvement Area No. 2 by the sum of the principal amount of the Bonds of $20,525,000 results in an assessed value-to-lien ratio of 9.02 to 1 for property in Improvement Area No. 2. Dividing the assessed value of property in Improvement Area No. 2 by the sum of the principal amount of the Bonds and the $3,833,983 of additional overlapping general obligation bond debt that is allocable to property within the District as set forth under the caption"- Direct and Overlapping Debt" results in an assessed value-to-lien ratio of 7.60 to 1 for property in Improvement Area No. 2. The assessed value-to-lien ratios for individual parcels vary.

22 The table below sets forth sample tax bills for six different land use classes in Improvement Area No. 2.

TABLES CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SAMPLE TAX BILLS FOR FISCAL YEAR 2019-20

Tax Zone 1 Tax Zone 2 CFD ImprArea2 ImprArea2 ImprArea2 ImprArea2 ImprArea2 ImprArea2 Dwelling Type SFA (12J SFA (12J SFA(12J SFA (12J SFA (12J SFA (12J Land Use Class 4 I I 2 2 I Dwelling Unit Square Footage 1,519 2,090 2,092 1,816 1,254 1,664 Buy-down Percentage 0.0000% 0.0000% 2.2766% 0.0000% 0.0000% 0.0000% Assessor's Parcel Number 8625-047-086 8625-035-230 8625-035-088 8625-035-162 8625-056-019 8625-056-014 Project Parson's Place Palmetto Sage Gardenia Citrus+ Palm Citrus + Palm Lot 98 46-D 171 254 37 32 Assessed Value $445,706 $555,900 $493,460 $504,073 $440,640 $507,960

Ad Valorem Property Taxes: Basic Levy $4,457.06 $5,559.00 $4,934.60 $5,040.73 $4,406.40 $5,079.60 Metropolitan Water District 15.60 19.45 17.27 17.64 15.42 17.78 Community College 96.83 120.77 107.20 109.51 95.73 110.35 Unified Schools 508.83 634.64 563.35 575.47 503.05 579.91 Total General Property Taxes $5,078.32 $6,333.86 $5,622.42 $5,743.35 $5,020.60 $5,787.64

Assessments, Special Taxes & Parcel Charges: Direct Assessments San Gabriel Valley Mosquito and Vector Control District (l) $13.84 $13.84 $13.84 $13.84 $13.84 $13.84 County Sanitation District No. 22 (2) 127.50 127.50 127.50 127.50 127.50 127.50 3 Regional Park and Open Space District Measure A ( ) 23.10 32.51 32.08 28.14 20.38 25.80 4 Metropolitan Water District No. 15 Standby ( ) 9.26 9.26 9.26 9.26 9.26 9.26 City of Azusa CFD 2005-1 Services Improvement Area No. 2 (5) 396.70 396.70 396.70 396.70 374.66 374.66 City of Azusa CFD 2005-1 Facilities Improvement Area No. 2 (6) 2,501.84 3,386.32 3,309.22 3,123.28 2,376.62 2,502.98 Upper San Gabriel Valley Municipal Water District (7) 10.00 10.00 10.00 10.00 10.00 10.00 3 Trauma and Emergency Services ( ) 61.22 86.15 85.01 74.58 54.01 68.39 Flood Control (9) 12.17 26.57 7.42 18.30 123.88 123.88 Safe Clean Water (lo) 46.79 43.50 30.32 46.48 0.00 0.00 Fire Department - Azusa (ll) ___1Q_J_Q_ ___1Q_J_Q_ ___1Q_J_Q_ ___1Q_J_Q_ ___1Q_J_Q ___1Q_J_Q Total Assessments& Parcel Charges $3,272.52 $4,202.45 $4,091.45 $3,918.18 $3,180.25 $3,326.41

Projected Total Property Tax $8,350.84 $10,536.31 $9,713.87 $9,661.53 $8,200.85 $9,114.05 Projected Effective Tax Rate 1.87% 1.90% 1.97% 1.92% 1.86% 1.79%

OJ Based on Fiscal Year 2019-20 single-family residential rate of$13.84. C2l Based on Fiscal Year 2019-20 single-family residential rate of$127.50. 3 ( ) Measure A assessment is $0.015 per square foot of developed property. 4 ( ) Based on Fiscal Year 2019-20 per parcel charge of$9.26. C5l Based on Fiscal Year 2019-20 Maximum Special Tax B of$396.70 per dwelling unit in Tax Zone I and $374.66 per dwelling unit in Tax Zone 2. 6 ( ) Based on Fiscal Year 2019-20 Maximum Special Tax A. (7) Based on Fiscal Year 2019-20 per acre or per parcel charge of$10.00. 3 ( ) Based on Fiscal Year 2019-20 charge of $0 .0409 per square foot of structural improvement of the residence. 9 ( ) Flood Control Assessment is based on a charge of $28.85 in Flood Control Zone I or $5.95 in Flood Control Zone 2, multiplied by the area of parcel times an applicable runoff factor for the land use category, and then divided by 0.0637. (lo) Based on Fiscal Year 2019-20 charge of$0.025 per square foot of impermeable surface of property (e.g. roof, porch, concrete). (ll) Based on Fiscal Year 2019-20 single-family residential rate of$70.10. 02l Single Family Attached Source: Special Tax Consultant.

23 The table below set forth the value-to-lien ratio among all parcels in Improvement Area No. 2.

TABLE6 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) PARCELS VALUE-TO-LIEN RA TIO FOR FISCAL YEAR 2019-20 Fiscal Year Percentage Fiscal Year Par Amount Outstanding Total Average Value-to- 2019-20 Taxed of 2019-20 Special Gross Assessed of Other Outstanding Value-to- Lien Ratio Parcels (l) Parcels Tax Levy Value <2) Bonds <3) Debt <4) Debt Lien 0.82 to 1 0.24% $ 2,281 $ 32,690 (5) $ 39,247 $ 677 $ 39,924 0.82:1 1.01 to 3 2 0.48 20,024 921,531 (6) 344,485 19,091 363,576 2.53:1 3.01 to 10 406 97.60 1,153,229 180,137,510 (5)(6) 19,839,863 3,731,766 23,571,629 7.64:1 Greater than 10 7 1.68 17 520 3 979 943 301 405 82 449 383 854 10.37:1 416 100.00% $1,193,053 $185,071,674 $20,525,000 $3,833,983 $24,358,983 7.60:1

OJ All parcels were levied for FY 2019-20, with the exception of one commercial parcel that is owned by the City. The County has yet to segregate four of the levied parcels (consisting of 23 dwelling units) which means that for FY 2019-20, of the 435 taxed dwelling units, 412 dwelling units were levied taxes on segregated parcels. Additionally, there are 27 Developed parcels (consisting of four unsegregated and 23 segregated parcels) that have yet to be assigned improvement value by the County. <2J Represents the gross assessed value as shown on the unequalized FY 2019-20 tax roll of the Los Angeles County Assessor. C3J Par Amount of Bonds for CFD No. 2005-1 has been allocated to the taxed parcels in proportion to their respective FY 2019-20 special tax obligation. 4 C J Includes estimated share of direct and overlapping debt of the Metropolitan Water District, Azusa Unified School District, and Citrus Community College District as of October 1, 2019. All debt is allocated on assessed valuation. 5 C J There are a total of two fully constructed and occupied homes in the Improvement Area with reduced valuations as a result of Senior Citizen's Replacement Dwelling Benefit property transfers authorized by State Proposition 60 and State Proposition 90. 6 C J This value-to-lien range includes two unsegregated parcels that have not yet been assigned improvement value. Source: Special Tax Consultant, Los Angeles County Assessor, and California Municipal Statistics, Inc.

24 Assessed Valuation

The table below summarizes the assessed valuation of the taxable property in Improvement Area No. 2 as shown on the County Assessor's roll for Fiscal Years 2015-16 through 2019-20.

TABLE 7 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SUMMARY OF ASSESSED VALUATIONS OF TAXABLE PROPERTY Land Improvement Total Percentage Fiscal Year Assessed Value Assessed Value Assessed Value Change 2015-16 $52,809,887 $66,670, 700 $119,480,587 NIA 2016-17 59,427,221 76,749,250 136,176,471 13.97% 2017-18 61,939,276 78,559,978 140,499,254 3.17 2018-19 65,086,605 80,475,746 145,562,351 3.60 2019-20 83,990,018 101,081,656 185,071,674 27.14

Source: Special Tax Consultant and Los Angeles County Assessor

Delinquency History

Under the provisions of the Act, the Special Taxes, from which funds for the payment of principal of, and interest on, the Bonds are derived, will be billed to property owners in Improvement Area No. 2 on their regular property tax bills. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot generally be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See the caption "SPECIAL RISK FACTORS-Special Tax Delinquencies." The table below summarizes collections, delinquencies and delinquency rates of Special Taxes levied in Improvement Area No. 2 as of August 5, 2019.

25 TABLES CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

SPECIAL TAX COLLECTIONS, DELINQUENCIES AND DELINQUENCY RATES

Delinquencies at Fiscal Year End Delinquencies of 08/05/2019 Parcels Amount Aggregate Fiscal Year Fiscal Year Fiscal Year Delinquent Delinquent Remaining Fiscal Parcels Special Parcels Amount Delinquency as of as of Delinquency Year Levied Tax Delinguent Delinguent Leyy Rate 8/5/2019 8/5/2019 Rate 2013-14 133 $ 378,948.32 4 $4,728.60 1.25% 0 $ 0.00 0.00% 2014-15 196 768,379.00 8 10,508.68 1.37 0 0.00 0.00 2015-16 290 845,078.90 9 16,817.20 1.99 1 3,128.44 0.37 2016-17 323 861,980.00 13 21,252.73 2.47 1 2,357.54 0.27 2017-18 323 879,220.02 2 5,659.50 0.64 2 5,659.50 0.64 2018-19 327 1,035,686.00(l) 3 8,876.40 0.86 3 8,876.40 0.86

OJ Delinquencies for Fiscal Year 2018-19 are as of August 5, 2019 reflecting payments posted on the Tax-Collector's website. Source: Los Angeles County Auditor-Controller.

See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales" for a discussion of the provisions that apply, and procedures that the District is obligated to follow, in the event of delinquency in the payment of Special Tax installments.

26 The Development and Property Ownership

All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are occupied by individual homeowners as of August 1, 2019. No property owner in Improvement Area No. 2 is presently responsible for more than 0.68% of the Special Taxes levied within Improvement Area No. 2.

The Rate and Method provides that a homebuilder may pay a One-Time Special Tax prior to the issuance of a certificate of occupancy in an amount that is necessary to reduce or "buy down" the Maximum Special Tax to be levied against each dwelling to a level such that the total projected tax obligation, consisting of ad valorem taxes, and other charges, including special assessments and taxes, does not exceed 2% of the sales price of the home. Of the total 435 dwelling units within Improvement Area No. 2, these "buy-downs" have been tendered by homebuilders for 31 dwelling units. Through August 5, 2019, One-Time Special Taxes have resulted in the reduction of the Special Tax obligation for 31 residential units within Improvement Area No. 2. Certificates of Occupancy have been provided for all 435 dwelling units in Improvement Area No. 2, so there will be no further buy-downs through the payment of the One-Time Special Tax.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Bonds, AGM will issue its Municipal Bond Insurance Policy (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds maturing September 1, 2044 and September 1, 2049 (the "Insured Bonds"), when due as set forth in the form of the Policy included as an exhibit to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp.

AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO". AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and international public finance (including infrastructure), and structured finance markets and, as of October 1, 2019, asset management services. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM's financial strength is rated "AA" (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), "AA+" (stable outlook) by Kroll Bond Rating Agency, Inc. ("KBRA") and "A2" (stable outlook) by Moody's Investors Service, Inc. ("Moody's"). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM's long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings

On November 7, 2019, S&P announced it had affirmed AGM's financial strength rating of "AA" (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.

27 On August 13, 2019, Moody's announced it had affirmed AGM's insurance financial strength rating of "A2" (stable outlook). AGM can give no assurance as to any further ratings action that Moody's may take.

On December 21, 2018, KBRA announced it had affirmed AGM's insurance financial strength rating of"AA+" (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take.

For more information regarding AGM's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Capitalization ofAGM

At September 30, 2019:

• The policyholders' surplus of AGM was approximately $2,473 million.

• The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. ("MAC") (as described below) were approximately $1,100 million. Such amount includes 100% of AGM's contingency reserve and 60.7% ofMAC's contingency reserve.

• The net unearned premium reserves and net deferred ceding commission income of AGM and its subsidiaries (as described below) were approximately $1,829 million. Such amount includes (i) 100% of the net unearned premium reserve and deferred ceding commission income of AGM, (ii) the net unearned premium reserves and net deferred ceding commissions of AGM's wholly owned subsidiary Assured Guaranty (Europe) plc ("AGE"), and (iii) 60.7% of the net unearned premium reserve of MAC.

The policyholders' surplus of AGM and the contingency reserves, net unearned premium reserves and deferred ceding commission income of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves and net deferred ceding commissions of AGE were determined in accordance with accounting principles generally accepted in the United States of America.

Incorporation ofCertain Documents by Reference

Portions of the following documents filed by AGL with the Securities and Exchange Commission (the "SEC") that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (filed by AGL with the SEC on March 1, 2019);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 (filed by AGL with the SEC on May 10, 2019);

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 (filed by AGL with the SEC on August 8, 2019); and

(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019 (filed by AGL with the SEC on November 8, 2019).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof "furnished" under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC's website at http://www.sec.gov, at AGL's website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications

28 Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL's website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption "BOND INSURANCE - Assured Guaranty Municipal Corp." or included in a document incorporated by reference herein (collectively, the "AGM Information") shall be modified or superseded to the extent that any subsequently included AGM Information ( either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

SPECIAL RISK FACTORS

The following is a discussion ofcertain risk factors that should be considered, in addition to other matters that are set forth in this Offzcial Statement, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more of the events that are discussed below could adversely affect the value of the property in Improvement Area No. 2. Moreover, the occurrence ofone or more ofthe events that are discussed below could adversely affect the ability or willingness ofproperty owners in Improvement Area No. 2 to pay their Special Taxes when due. Such a failure to pay Special Taxes could result in the inability of the District to make full and punctual payments on the Bonds.

Concentration of Ownership; Levy Limitation on Developed Residential Property

No property owner in Improvement Area No. 2 is presently responsible for more than 0.68% of the Special Taxes levied within Improvement Area No. 2. See the caption "IMPROVEMENT AREA NO. 2." There may be subsequent transfers of ownership of the property within Improvement Area No. 2. Failure of the owners of property to pay the annual Special Taxes when due could result in a default in payments of the principal of and interest on the Bonds, which could result in the inability of the District to make payments of the principal of and interest on the Bonds when due. Such risk may be greater or its consequence more severe when ownership is concentrated and may be expected to decrease as ownership is diversified through development and sales.

Pursuant to the Act, under no circumstances will the Special Taxes that are levied against any parcel of Residential Property within Improvement Area No. 2 be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquency or default. As a result, it may not be possible to levy Special Taxes at the maximum Special Tax amount.

None of the owners of property in Improvement Area No. 2 is obligated in any manner to continue to own, or to develop, any of such property. The Special Taxes are not a personal obligation of the owners of the property on which such Special Taxes are levied, and no assurances can be given that the current property owners within Improvement Area No. 2 will be financially able to pay the Special Taxes levied on such property or that they will choose to pay even if financially able to do so. See the caption "-Payment of the Special Tax is Not a Personal Obligation of the Owners." Such risk is greater and its consequence more severe when ownership is concentrated and may be expected to decrease when ownership is diversified.

Limited Obligations

The Bonds are revenue bonds, payable exclusively from Special Taxes and other funds provided in the Fiscal Agent Agreement. The Bonds are not payable from the general funds or other moneys of the City or moneys derived from the District. Except with respect to the Special Taxes from Improvement Area No. 2, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest on the Bonds, and, except as provided in the Fiscal Agent Agreement, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City's or the District's property or upon any of the City's or the District's income, receipts or revenues, except the

29 Special Taxes and other amounts that are pledged under the Fiscal Agent Agreement. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Special Taxes."

Insufficiency of Special Taxes

Under the Rate and Method, the annual amount of Special Tax to be levied on each parcel of Taxable Property in Improvement Area No. 2 will generally be based on whether such parcel is categorized as Undeveloped Property or as Developed Property and on the land use class to which a parcel of Developed Property is assigned. See Appendix A and the caption "SOURCES OF PAYMENT FOR THE BONDS-Rate and Method of Apportionment of Special Taxes."

The Rate and Method expressly exempts up to 20.36 acres of Property Owner Association Property and Public Property in Zone 1 and up to 7.35 acres of Property Owner Association Property and Public Property in Zone 2. If for any reason property within Improvement Area No. 2 becomes exempt Public Property, including, but not limited to, schools, streets, parks, storm drainage facilities, urban runoff facilities and fire and police stations, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within Improvement Area No. 2. All special tax modeling has assumed that there will be 27.71 acres of exempt property, and maximum special tax rates have been determined accordingly. If more than the originally anticipated 27.71 acres becomes exempt, this could result in the owners or tenants of such property paying a greater amount of the Special Tax (subject at all times to the Maximum Special Tax) and could have an adverse impact upon the ability and willingness of the owners or tenants of such property to pay the Special Tax when due.

Moreover, if a substantial portion of land within Improvement Area No. 2 became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining property within Improvement Area No. 2 might not be sufficient to pay principal of and interest on the Bonds when due and a default could occur with respect to the payment of such principal and interest.

The Special Taxes will be billed to the properties within Improvement Area No. 2 on the ad valorem property tax bills that are sent to owners of such properties. The Act provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. Significant delinquencies in the payment of Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in depletion of the Reserve Fund and a default in the payment of the Bonds. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales" for a discussion of the provisions that apply, and the procedures that the District has covenanted to follow, in the event of delinquencies in the payment of Special Taxes. See the captions "-FDIC/Federal Government Interests in Properties" and "-Bankruptcy and Foreclosure" for a discussion of the policy of the Federal Deposit Insurance Corporation (the "FDIC") regarding the payment of special taxes and assessments and limitations on the District's ability to foreclose on the lien of the Special Taxes in certain circumstances.

The annual levy of the Special Tax is subject to the maximum tax rates that are authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds. Other funds that might be available include moneys and reserve fund surety policies or similar instruments that are deposited in the Reserve Fund, funds that are derived from the payment of penalties on delinquent Special Taxes and funds that are derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent.

The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular property and the amount of the levy of the Special Tax against such property. Thus, there will rarely, if ever, be a uniform relationship between the value of such property and the proportionate share of debt service on the Bonds, and certainly not a direct relationship.

The Act provides that if any property within Improvement Area No. 2 that is not otherwise exempt from Special Taxes is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Taxes will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that if property that is subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to such property is to be treated as if it were a special assessment and

30 paid from the eminent domain award. The constitutionality and operative effect of these provisions has not been tested in the courts. If for any reason property that is subject to Special Taxes becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency that asserts immunity from the Special Tax, subject to the limitation of the maximum Special Tax rates, the Special Taxes will be reallocated to the remaining properties within Improvement Area No. 2. This would result in the owners of such properties paying a greater amount of the Special Taxes and could have an adverse effect on the timely payment of the Special Taxes. Because of the problems associated with collecting taxes from public agencies, if a substantial portion of land within Improvement Area No. 2 were to become owned by public agencies, collection of the Special Taxes might become more difficult and could result in collections that might not be sufficient to pay principal of and interest on the Bonds when due, and a default could occur with respect to the payment of such principal and interest.

Natural Disasters

The District, like all communities in the State, may be subject to unpredictable seismic activity, fires, floods, high winds, drought, landslides or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within Improvement Area No. 2 in the event of an earthquake. There is significant potential for destructive ground-shaking during the occurrence of a major seismic event. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such an event. Improvement Area No. 2 is proximate to the Sierra Madre Fault Zone and two other faults. The local fault systems are active and required 40-foot to 100-foot setbacks for habitable structures away from the fault line which was designed into the Rosedale development.

In recent years, wildfires have caused extensive damage throughout the State. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires which occurred in 2018 damaged or destroyed property in areas that were not previously considered to be at risk for such events. Major wildfires have occurred in portions of the City in 2016, 2014 and 2003. In 2016, the Fish Fire burned away from the City and burned approximately 4,000 acres, should a wind shift have occurred, the City would have been threatened. In 2014, the Colby Fire started in Angeles National Forest and quickly threatened the City and the City of Glendora, in the fire area footprint, 1860 structures were saved, 15 structures were destroyed and 8 structures were damages. In 2003, over 80,000 acres and over 500 homes were destroyed in wildfires in the San Gabriel and San Bernardino Mountains near Improvement Area No. 2. The majority of structures destroyed were in San Bernardino County. In addition, the land within Improvement Area No. 2 is located within a designated flood hazard zone. If a flood were to occur, the flooding would be channeled away from the structures to mitigate the impact of the flooding to the structures within Improvement Area No. 2.

In the event of a severe earthquake, fire, flood, high wind event, drought, landslide or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.

On October 21, 2019, the City adopted a Local Hazard Mitigation Plan (LHMP), which covers natural disasters. The City of Azusa prepared the LHMP to help guide hazard mitigation planning and better protect the people and property of the City from the effects of hazardous events. This LHMP demonstrates the Community's commitment to reducing risks from hazards and serves as a tool to help decision makers direct mitigation activities and resources. This LHMP was also developed so the City can be eligible for certain federal disaster assistance, specifically, the Federal Emergency Management Agency's (FEMA) Hazard Mitigation Grant Program (HMGP), Pre-Disaster Mitigation (PDM) program, and the Flood Mitigation Assistance (FMA) program

Hazard mitigation is defined by FEMA as "any sustained action taken to reduce or eliminate long-term risk to human life and property from a hazardous event." The results of a three-year congressionally mandated independent study to assess future savings from mitigation activities provides evidence that mitigation plans are highly cost effective. On average, each dollar spent on mitigation saves society an average of $6 in avoided future losses in addition to saving lives and preventing injuries (National Institute of Building Science Natural Hazard Mitigation Saves 2017 Interim Report).

31 Hazard mitigation planning is the process through which hazards that threaten communities are identified, likely impacts determined, mitigation goals set, and appropriate mitigation strategies determined, prioritized, and implemented. This LHMP documents the City's hazard mitigation planning process and identifies relevant hazards, vulnerabilities, and mitigation strategies the City will use to decrease vulnerability and increase resiliency and sustainability in the community.

The Azusa LHMP is a single jurisdictional plan that geographically covers the entire area within the City's jurisdictional boundaries. This plan was prepared pursuant to the requirements of the Disaster Mitigation Act of 2000 (Public Law 106-390) and the implementing regulations set forth by the Interim Final Rule published in the Federal Register on February 26, 2002, (44 CFR §201.6) and finalized on October 31, 2007. (Hereafter, these requirements and regulations will be referred to collectively as the Disaster Mitigation Act (DMA) or DMA 2000.) This planning effort also follows FEMA's most current Plan Preparation and Review Guidance. The DMA 2000 emphasized the need for mitigation plans and more coordinated mitigation planning and implementation efforts. Pursuant to the DMA, the City established the City of Azusa 1-2 Local Hazard Mitigation Plan of October 2018. This LHMP by the City satisfies the requirements that local hazard mitigation plans must meet in order for a local jurisdiction to be eligible for certain federal disaster assistance and hazard mitigation funding under the Robert T. Stafford Disaster Relief and Emergency Act (Public Law 93- 288). Because the City is subject to many kinds of hazards, access to these programs and funding is vital.

Hazardous Substances

Neither the City nor the District is aware of the presence of any hazardous substances on the property within Improvement Area No. 2. However, if such substance was later identified, the value of a parcel may be substantially reduced. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.

Further, it is possible that liabilities may arise in the future with respect to any of the parcels in Improvement Area No. 2 resulting from the existence, currently, on the parcel of a substance that is presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance that is not presently classified as hazardous but which may in the future be so classified. Such liabilities may also arise not simply from the existence of a hazardous substance but from the method of handling it. Any of these possibilities could significantly affect the willingness or ability of the owner of any parcel to pay the Special Taxes or the value of a parcel that is realizable upon a delinquency.

Shapiro Decision

On August 1, 2014, the California Court of Appeal, Fourth Appellate District, Division One (the "Court"), issued its opinion in City ofSan Diego v. Melvin Shapiro, et al. (0063997) ("Shapiro"). The case involved a Convention Center Facilities District (the "CCFD") that was established by the City of San Diego. The CCFD was a financing district that was formed pursuant to the City of San Diego's charter (the "Charter") and was intended to function much like a community facilities district established under the provisions of the Act. The CCFD was comprised of all of the real property in the entire City of San Diego. However, the special tax to be levied within the CCFD was to be levied only on properties that were improved with a hotel located within the CCFD.

At the election to authorize such special tax, the Charter proceeding limited the electorate to owners of hotel properties and lessees of real property that was owned by a governmental entity on which a hotel is located. Thus, the election was limited to owners and lessees of properties on which the special tax would be levied, and not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was based on Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on

32 residential property, the legislative body may provide that the vote will be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election did not comply with applicable requirements of Article XIIIA, Section 4, and Article XIIIC, Section 2, of the State Constitution, or with applicable provisions of the City of San Diego's Charter, because the electors in such an election were not the registered voters residing within the district.

In the case of the CCFD, at the time of the election there were several hundred thousand registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). In the case of the District, there were no registered voters within the District at the time of the elections to authorize the special tax levy for the District, and fewer than five landowners. In Shapiro, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court's holding does not apply to the special tax election in the District. Moreover, Section 53341 of the Act provides that any "action or proceeding to attack, review, set aside, void or annul the levy of a special tax ... shall be commenced within 30 days after the special tax is approved by the voters." Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act or the levy of special taxes authorized pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds or the special tax. Voters approved the Special Taxes and the issuance of bonds for the District in compliance with all applicable requirements of the Act in 2006. Therefore, under the provisions of Sections 53341 and 53359 of the Act, the statute of limitations period to challenge the validity of the Special Taxes for the District has expired.

Parity Taxes and Special Assessments

Property within Improvement Area No. 2 is subject to taxes and assessments that are imposed by other public agencies with jurisdiction over the land within the District. See the caption "IMPROVEMENT AREA NO. 2-Direct and Overlapping Debt."

The Special Taxes and any related penalties will constitute a lien against the lots and parcels ofland on which they will be annually imposed until they are paid. Such lien is on parity with all special taxes and special assessments that are levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property, except for liens or security interests held by the FDIC. See the captions "-Bankruptcy and Foreclosure" and "-FDIC/Federal Government Interests in Properties."

Neither the City nor the District has control over the ability of other entities and districts to issue indebtedness that is secured by special taxes, ad valorem taxes or assessments that are payable from all or a portion of the property within Improvement Area No. 2. In addition, the landowners within Improvement Area No. 2 may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness that is secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property that is on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 2 or the willingness of property owners to pay the Special Tax.

Disclosures to Future Purchasers

The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization when the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum rate and the risk of such a levy and, at the time of such a levy, has the ability to pay it as well as other expenses and obligations. The City has caused a notice of the Special Tax lien to be recorded in the Office of the County Recorder against each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within Improvement Area No. 2 or lending of money that is secured by such property.

The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel or unit that is subject to special taxes under the Act of the existence and

33 maximum amount of such special taxes using a statutorily prescribed form. California Civil Code Section l 102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Taxes, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.

Special Tax Delinquencies

Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, are customarily billed to the properties within Improvement Area No. 2 on the ad valorem property tax bills that are sent to the owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.

Significant delinquencies in the payment of annual Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in default in depletion of the Reserve Fund and default in payment of debt service on the Bonds. See the caption "IMPROVEMENT AREA NO. 2-Delinquency History" for historical delinquency information with respect to property in Improvement Area No. 2.

The Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, is not available for community facilities districts such as the District. The collection of Special Taxes is therefore subject to the risk of delinquency, while the District is also entitled to collect penalties and interest on delinquent Special Taxes.

See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales" for a discussion of the provisions which apply, and procedures which the City is obligated to follow under the Fiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See the caption "-Bankruptcy and Foreclosure" for a discussion of the policy of the FDIC regarding the payment of special taxes and assessment and limitations on the City's ability to foreclosure on the lien of the Special Taxes in certain circumstances.

In addition, the Act provides that the Special Taxes levied against any parcel of residential property may not be increased by more than 10% as a consequence of delinquency or default by the owner of any other parcel or parcels within Improvement Area No. 2.

Non-Cash Payments of Special Taxes

Under the Act, the City Council, as the legislative body of the District, may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties. A Bond so tendered is to be accepted at par and credit is to be given for any interest that has accrued to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes that are applicable to such parcel by tendering a Bond. Such a practice would decrease the cash flow that is available to the District to make payments with respect to other Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds.

In order to provide some protection against the potential adverse impact on cash flows that might be caused by the tender of Bonds in payment of Special Taxes, the Fiscal Agent Agreement includes a covenant pursuant to which the District will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Collection and Application of Special Taxes."

34 Payment of the Special Tax is not a Personal Obligation of the Owners

The obligation to pay Special Taxes levied within Improvement Area No. 2 does not constitute a personal obligation of the current or subsequent owners of the property in Improvement Area No. 2. Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the County Superior Court. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales." There is no assurance that any current or subsequent owner of a parcel subject to Special Taxes will be able to pay the Special Taxes, or that an owner will choose to pay such installments even if such owner is financially able to do so.

Land Values

The value of the property within Improvement Area No. 2 is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the City's only remedy is to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, natural disasters or military or terrorist activities, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See the caption "IMPROVEMENT AREA NO. 2-Estimated Assessed Value-to-Lien Ratio."

The assessed values that are set forth in this Official Statement do not represent market values that were arrived at through an appraisal process. Rather, assessed values reflect the sales price of a parcel when the parcel is acquired by its current owner, adjusted annually by an amount that is determined by the County Assessor, generally not to exceed an increase of more than 2% per Fiscal Year, and value increases attributable to new construction. In the last several years such upward adjustment has been less than 2% annually and in certain years, the assessed value for specific parcels within Improvement Area No. 2 may have been revised downward. In recent years, many counties in the State, including the County, have reassessed certain properties that were acquired in recent years at the peak of the real estate market. The City and the District cannot predict whether the County will reduce assessed values within Improvement Area No. 2 in future years. If the County did decide to broadly reassess assessed valuations in the County, it is possible that in future years the assessed values shown in this Official Statement could be adjusted downward.

Prospective purchasers of the Bonds should not assume that the land within Improvement Area No. 2 could be sold for the assessed values that are described in this Official Statement at a foreclosure sale for delinquent Special Taxes.

No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosed upon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See the caption "SOURCES OF PAYMENT FOR THE BONDS Proceeds of Foreclosure Sales."

Assessment Appeals and Proposition 8

Pursuant to State law, a property owner may apply for a reduction of the property tax assessment for such owner's property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. A property owner may also informally request a reduction.

A property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be submitted by November 30 of such tax year. Following a review of each application by the staff of the County Assessor's Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces or confirms the assessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal's filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre-reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as "ongoing hardship"), the County Assessor has the power to grant a reduction not only for the year for which application was originally made,

35 but also for the then current year as well. Appeals for reduction in the "base year" value of an assessment, which generally must be made within three years of the date of change in ownership or completion of new construction that determined the base year, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. Moreover, in the case of any reduction in any one year of assessed value granted for "ongoing hardship" in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, property tax revenues attributable to such properties will be reduced in the then current year. In practice, such a reduced assessment may remain in effect beyond the year in which it is granted.

Proposition 8, which was approved by State voters in 1978 (California Revenue and Taxation Code Section 5l(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions pursuant to Proposition 8 may be initiated by the County Assessor or requested by the property owner, and such reductions apply only to a single tax year.

After a roll reduction is granted pursuant to Proposition 8, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the 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.

The County Assessor has the ability to use Proposition 8 criteria to apply blanket reductions in valuation to classes of property affected by particular negative economic conditions. There can be no assurance that reductions will not be made in the future.

For assessed valuations in Improvement Area No. 2, see the caption "IMPROVEMENT AREA NO. 2- Assessed Valuation."

Value-to-Lien Ratios

The estimated value-to-lien ratios that are set forth under the caption "IMPROVEMENT AREA NO. 2- Estimated Assessed Value-to-Lien Ratio" are based on the assessed values of property in Improvement Area No. 2 and the direct and overlapping debt that is currently allocable to such property. No assurance can be given that such value to-lien ratios will be maintained over time. As discussed in this Official Statement, many factors that are beyond the control of the City and the District could adversely affect the property values within Improvement Area No. 2. Neither the City nor the District has any control over the amount of additional indebtedness that may be issued by other public agencies, the payment of which, through the levy of a tax or an assessment, is on a parity with the Special Taxes. See the captions "-Parity Taxes and Special Assessments" and "IMPROVEMENT AREA NO. 2-Direct and Overlapping Debt." A decrease in the property values in Improvement Area No. 2 or an increase in the parity liens on property in Improvement Area No. 2, or both, could result in a lowering of the value-to-lien ratios of the property in Improvement Area No. 2.

Potential Early Redemption of Bonds from Prepayments

Property owners within Improvement Area No. 2 are permitted to prepay their Special Taxes at any time. Such prepayments will result in a redemption of Bonds. See the caption "THE BONDS-Redemption- Mandatory Redemption from Special Tax Prepayments."

IRS Audit of Tax-Exempt Bond Issues

The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit ( or by an audit of similar bonds or securities).

36 No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Internal Revenue Code ( or the interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value.

FDIC/Federal Government Interests in Properties

General. The ability of the District to collect the Special Taxes and interest and penalties as specified by State law, and to foreclose the lien of delinquent Special Taxes, may be limited in certain respects with regard to properties in which the FDIC, the Federal National Mortgage Association ("FNMA"), the IRS, the Drug Enforcement Administration or other similar federal governmental agencies has or obtains an interest.

Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government's interest. This means that, unless the United States Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes (including Special Taxes) and assessments levied on the parcel, the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.

Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in a parcel and the District wishes to foreclose on the parcel to satisfy a lien of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount that is sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the "Ninth Circuit"), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government-sponsored entities, see the caption " Insufficiency of Special Taxes."

The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels that are subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding.

FDIC In the event that any financial institution that has made a loan which is secured by real property within the District is taken over by the FDIC, and the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties as specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. On June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property that is owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes that are assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent that the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will neither pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent.

37 The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed when the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent that such lien purports to secure the payment of any such amounts. Special taxes that are imposed under the Act and a special tax formula that determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes under the Act. With respect to property in the State that was owned by the FDIC on January 9, 1997 and that was owned by the Resolution Trust Company (the "RTC") on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes that are imposed pursuant to the Act if the taxes were imposed prior to the R TC' s acquisition of an interest in the property. All other special taxes may be challenged by the FDIC.

The City and the District are unable to predict what effect the FDIC's application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce the number of persons who would be willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the Bonds.

Billing of Special Taxes

A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts (although not in the District), taxpayers have refused to pay the special tax and have commenced litigation to challenge the special tax, the community facilities district and bonds issued by the community facilities district.

Under provisions of the Act, the Special Taxes are to be billed to the properties within the District that were entered on the Assessment Roll of the County Assessor by January 1 of the previous Fiscal Year. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales" for a discussion of the provisions that apply, and that procedures that the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes.

Cybersecurity

As a recipient and provider of personal, private and sensitive information, the City and its departments face multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems.

The City has been the target of multiple attempts to breach the City's digital estate. In October 2018, the City's police department, which operates on a separate IT system, was hit by malware. The cyberattack was specific to the Police Department IT and did not affect other City operations. Following the incident, law enforcement industry standards were implemented, the entire network was re-engineered and the security package was updated. In response to the incident, the City has heightened its internal control procedures, provided additional employee training and placed more stringent requirements for third-party vendors it works with. No assurances can be given that the City's security and operational control measures will be successful in guarding against any and each cyber threat and attack. The results of any attack on the City's computer and information technology systems could impact its operations and damage the City's digital networks and systems, and the costs of remedying any such damage could be substantial.

The City has Cy ber Liability insurance coverage with its insurance provider, California Joint Powers Insurance Authority, for up to $1,000,000 per occurrence and a total of $1,000,000 per coverage year, with a $50,000 deductible

38 per occurrence; this coverage was utilized for 2018 cyberattack and helps the City to mitigate its financial exposure to such attacks.

Bankruptcy and Foreclosure

The various legal opinions to be delivered concurrently with the issuance of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws that affect the rights of creditors generally.

The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent Special Tax may be limited by bankruptcy, insolvency or other laws that affect creditors' rights or by the laws of the State relating to judicial foreclosure.

Bankruptcy, insolvency and other laws that affect creditors' rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners' taxes and the ability of the District to foreclose the lien of delinquent unpaid Special Taxes pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws that affect creditors' rights (such as the Soldiers' and Sailors' Relief Act of 1940 discussed below) or by the laws of the State relating to judicial foreclosure. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Proceeds of Foreclosure Sales." In addition, the prosecution of a foreclosure could be delayed for many reasons, including crowded local court calendars or lengthy procedural delays.

Second, the United States Bankruptcy Code might prevent moneys that are on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against a landowner in the District and if the court found that any of such landowners had an interest in such moneys within the meaning of Section 54l(a)(l) of the United States Bankruptcy Code.

Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, the amount and priority of any lien on property that secures the payment of delinquent Special Taxes could be reduced or modified if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Further, bankruptcy of a property owner could result in an unwillingness to pay Special Taxes, a stay or other delay in prosecuting Superior Court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent Special Tax installments not being paid in full.

On July 30, 1992, the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries ("Glasply"). In that case, the court held that ad valorem property taxes that were levied by Snohomish County, Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes that were imposed before the bankruptcy petition, unpaid taxes that were imposed after the filing of the bankruptcy petition were declared to be "administrative expenses" of the bankruptcy estate, payable after the payment of all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes.

The Bankruptcy Reform Act of 1994 included a provision which excepts from the United States Bankruptcy Code's automatic stay provisions, "the creation of a statutory lien for an ad valorem property tax imposed by ... a political subdivision of a state if such tax comes due after the filing of the petition [by a debtor in bankruptcy court]." This amendment effectively makes the Glasply holding inoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale of the Glasply ruling could still result in the treatment of post-petition special taxes as "administrative expenses," rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings.

According to the court's ruling, as administrative expenses, post-petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes.

39 The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Taxes, the amount of Special Taxes received from parcels whose owners declare bankruptcy could be reduced.

Other laws generally affecting creditors' rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as: (i) a stay in enforcement of the foreclosure covenant; (ii) a six month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment; and (iii) a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service.

No Acceleration Provision

The Bonds and the Fiscal Agent Agreement do not provide for the acceleration of the Bonds in the event of a payment default or other default under the Bonds or the Fiscal Agent Agreement. Similarly, there is no provision in the Act for the acceleration of the Special Taxes in the event of a payment default by an owner of a parcel within the District, or upon any adverse change in the tax status of interest on the Bonds. See Appendix C for a description of remedies that are available to Bond Owners in the event of a default under the Fiscal Agent Agreement.

Loss of Tax Exemption

As discussed under the caption "TAX MATTERS," interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of a failure of the City to comply with certain provisions of the Internal Revenue Code of 1986, as amended, or certain legislative changes that occur after the issuance of the Bonds. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Fiscal Agent Agreement.

Limitations on Remedies

Remedies that are available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.

Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws that affect the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds.

Limited Secondary Market

There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the City has committed to provide certain statutorily-required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See the captions "CONTINUING DISCLOSURE." The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, 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 then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Bond Insurance Risk Factors

40 The City will acquire the Policy to guarantee the scheduled payment of principal and interest on the Insured Bonds. The following are risk factors relating to bond insurance.

In the event of default of the payment of principal or interest with respect to the Insured Bonds when all or a portion becomes due, any Owner of the Insured Bonds shall have a claim under the Policy for such payments. The Policy does not insure against redemption premium. The payment of principal and interest in connection with mandatory or optional redemption of the Insured Bonds by the City which is recovered by the City from the Owner as a voidable preference under applicable bankruptcy law is covered by the Policy; however, such payments will be made by AGM at such time and in such amounts as would have been due absent such redemption by the City unless AGM chooses to pay such amounts at an earlier date.

Under most circumstances, default of payment of principal and interest does not obligate acceleration of the obligations of AGM without appropriate consent. AGM may direct and must consent to any remedies and AGM's consent may be required in connection with amendments to any applicable legal documents.

In the event AGM is unable to make payment of principal and interest on the Insured Bonds as such payments become due under the Policy, the Insured Bonds are payable solely from the moneys received pursuant to the applicable legal documents. In the event AGM becomes obligated to make payments with respect to the Insured Bonds, no assurance is given that such event will not adversely affect the market price of the Insured Bonds or the marketability (liquidity) for the Insured Bonds.

The long-term ratings on the Insured Bonds are dependent in part on the financial strength of AGM and its claims-paying ability. AGM's financial strength and claims-paying ability are predicated upon a number of factors which could change over time. No assurance is given that the long-term ratings of AGM and of the ratings on the Insured Bonds insured by AGM will not be subject to downgrade and such event could adversely affect the market price of the Insured Bonds or the marketability (liquidity) for the Insured Bonds. See description of "RATINGS" herein.

The obligations of AGM are contractual obligations and in an event of default by AGM, the remedies available may be limited by applicable bankruptcy law or state law related to insolvency of insurance companies.

None of the City, the District or the Underwriter has made independent investigation into the claims-paying ability of AGM and no assurance or representation regarding the financial strength or projected financial strength of AGM is given. Thus, when making an investment decision, potential investors should carefully consider the ability of the City, for and on behalf of the District, to pay principal and interest on the Insured Bonds and the claims-paying ability of AGM, particularly over the life of the investment. See "BOND INSURANCE" for further information provided by AGM regarding AGM and the Policy and for instructions for obtaining current financial information concerning AGM.

Proposition 218

An initiative measure, Proposition 218, which is referred to as the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the "Title and Summary" of the Initiative that was prepared by the State Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes that are available to the District to pay the principal of and interest on the Bonds as described below.

Among other things, Section 3 of Article XIIIC states that " ... the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or to terminate the levy of any special tax that is pledged to repay any debt that was incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere

41 with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that:

"Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution."

Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds.

It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the Bonds, but that does reduce the maximum amount of Special Taxes that may be levied in any year below existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts that are greater than the amount that is necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses.

Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels of Developed Property within the District below the amounts that are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the current Fiscal Year plus an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds. See the caption "SOURCES OF PAYMENT FOR THE BONDS-Collection and Application of Special Taxes." In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event that an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.

The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See the caption "-Limitations on Remedies."

Ballot Initiatives

The Initiative was adopted pursuant to a measure that qualified for the ballot pursuant to the State's Constitutional initiative process, and the State Legislature has in the past enacted legislation that has altered the spending limitation or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiative. From time to time, other initiative measures could be adopted by State voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment oflegislation might place limitations on the ability of the State, the County or local districts to increase revenues or appropriations or on the ability of a property owner to develop or redevelop property within the District.

CONTINUING DISCLOSURE

Pursuant to a Continuing Disclosure Certificate, dated as of December 1, 2019 (the "Disclosure Certificate"), the City, for and on behalf of the District, has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system certain annual financial information and operating data concerning the District (the "Annual Report"). The Annual Report is to be filed not later than nine (9) months after the end of the City's fiscal year (currently March 31 based on the City's fiscal year end of June 30), beginning

42 March 31, 2020, and is to include audited financial statements of the City. The requirement that the City file its audited financial statements as a part of the Annual Report has been included in the Disclosure Certificate solely to satisfy the provisions of the Rule. The inclusion of such information does not mean that the Bonds are secured by any resources or property of the City other than as described in this Official Statement. See the caption "SOURCES OF PAYMENT FOR THE BONDS" and "SPECIAL RISK FACTORS-Limited Obligations."

The proposed form of the Disclosure Certificate is set forth in Appendix C.

The City and its related entities have previously entered into continuing disclosure undertakings under the Rule in connection with the issuance of municipal obligations. A review of compliance with continuing disclosure undertakings for filings required by the City within the last five years indicates that the City may not have fully complied with its prior continuing disclosure undertakings under the Rule. Identification of the below described events does not constitute a representation by the City that the late filings were material. In the past five years, the City did not timely file annual reports for its prior continuing disclosure undertakings, such filings were made between 1 and 406 days late. Further, the City is aware that not all of the required information was included in certain years with respect to the continuing disclosure undertaking entered into in connection with the issuance of its 2003 Lease Revenue Refunding Certificates of Participation. The City has made supplemental filings and believes that it is currently in compliance with its continuing disclosure undertakings.

In order to promote compliance by the City and its related entities with their respective continuing disclosure undertakings, the City has retained Urban Futures, Inc. and Special District Financing & Administration, LLC.

TAX MATTERS

In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City, for and on behalf of the District, has covenanted to comply with certain restrictions designed to insure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes 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) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners from realizing the full current benefit of the tax status of such interest. As one example, legislative proposals are announced from time to time which generally would limit the exclusion from gross income of interest on obligations like the Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Certain requirements and procedures contained or referred to in the Fiscal Agent Agreement, 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 the exclusion from gross income of interest on any Bond if any

43 such change occurs or action is taken or omitted upon the advice or approval of counsel other than Best Best & Krieger LLP.

The IRS has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds).

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect an Owner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Bondowner or the Owner's other items of income or deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences.

A copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D.

LEGAL MATTERS

The legal opinion of Best Best & Krieger LLP, Riverside, California, approving the validity of the Bonds, in substantially the form set forth in Appendix D, will be made available to purchasers at the time of original delivery. A copy of the legal opinion for the Bonds will be provided with each definitive bond. Best Best & Krieger LLP, Riverside, California is serving as Disclosure Counsel to the City and the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, California, as City Attorney, for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California, and for the Fiscal Agent by its counsel.

LITIGATION

No litigation is pending or threatened concerning the validity of the Bonds or the pledge of Special Taxes to repay the Bonds, and a certificate of the City to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. The City is not aware of any litigation, pending or threatened, that questions the existence of the District or the City or contests the authority of the City to levy and collect the Special Taxes or to issue the Bonds.

In 2015, the School District filed a lawsuit against developers within the District, the City and numerous other parties. The School District claimed that the master developer within the District was in violation of a 2004 agreement and sought to compel the City to cease issuing building permits for property within the District based on various theories and causes of action. The trial court denied the School District's request for a writ of mandate and found for the City, and against the School District, on all the causes of action directed against the City. The School District appealed that decision. The Court of Appeal upheld the trial court's ruling and judgment, affirming that the City had no liability to the School District. Subsequently, the School District dismissed from its action, with prejudice, all other defendants except the Developer. Thus, the Developer was the only party who remained in the action.

As ofNovember 18, 2019, the School District and the Developer executed a Settlement Agreement and Mutual General Release ("Settlement Agreement") under which the School District will dismiss the Developer, with prejudice, from the action and grant the Developer a full release of all its claims in consideration of the financing of $7.25 million in School Facilities from the proceeds of the Bonds pursuant to the Amended and Restated Agreement. The Settlement Agreement operates as full mitigation of the project for school facilities and the payment of the settlement amount satisfies any and all statutory or other school fees for the project.

RATING

The Uninsured Bonds have not been rated by any securities rating agency. The Insured Bonds are expected to be assigned a rating of "AA" by S&P Global Ratings, a Standard & Poor' s Financial Services LLC business ("S&P") based on the issuance of the Policy. Such rating reflects only the views of S&P, and any desired explanation of the significant of such rating may be obtained from S&P. Generally, a rating agency bases its rating on the information and materials that are furnished to it and on investigations, studies and assumptions of its own. Such rating is not a recommendation to buy, sell or hold the Insured Bonds. There is no assurance that such rating will remain in effect for any given period of time or such rating will not be revised, either downward or upward, or withdrawn entirely by S&P

44 if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal could have an adverse effect on the market price of the Insured Bonds.

UNDERWRITING

The Underwriter has agreed to purchase the Bonds at a price of $23,621,840.70 (being $20,525,000.00 aggregate principal amount of the Bonds, less Underwriter's discount of $174,462.50 and plus a net original issue premium of $3,271,303.20). The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions.

The initial offering prices stated on the inside front cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than said public offering prices.

PENDING LEGISLATION

The City is not aware of any significant pending legislation that would have material adverse consequences on the Bonds or the ability to pay the principal of and interest on the Bonds when due.

MUNICIPAL ADVISOR

The District has retained Urban Futures, Inc., Tustin, California, as municipal advisor (the "Municipal Advisor") in connection with the sale of the Bonds. The Municipal 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 that is contained in this Official Statement.

The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

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45 ADDITIONAL INFORMATION

The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Summaries and explanations of the Bonds and related documents in this Official Statement do not purport to be complete, and reference is made to such documents for frill and complete statements and their provisions.

This Official Statement is submitted only in connection with the sale of the Bonds for the District, This Official Statement does not constitute a contract with the purchasers of the Bonds.

The execution and delivery of this Official Statement by the City Manager of the City have been duly authorized by the City Council of the City, acting in its capacity as the legislative body of the District.

CITY OF AZUSA for and on behalf of CITY OF AZUSA COMMUNITY FACILITIES DISTRlCT NO. 2005-1 (ROSEDALE)

~aJP~ .....:> """7:r-~ By: ______····-·····-----····------·-"------City Manager

46 APPENDIX A

AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE)

A-1 [THIS PAGE INTENTIONALLY LEFT BLANK] AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE)

Special Taxes as hereinafter defined shall be levied on all Assessor's Parcels in Improvement Area No. 2 ("IA No. 2") of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) ("CFD No. 2005-1 ") and collected each Fiscal Year commencing in Fiscal Year 2012-2013, in an amount determined by the Council through the application of the appropriate Special Tax for "Developed Property," "Other Taxable Property," and "Undeveloped Property" as described below. All of the property in IA No. 2, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

A. DEFINITIONS

This Amended and Restated Rate and Method of Apportionment employs terms defined below and terms defined in the Rate and Method of Apportionment for Improvement Area No. I. When necessary, terms defined in the latter shall be distinguished from terms defined in the former by including the words "IA No. 1" prior to the defined term. The terms hereinafter set forth have the following meanings:

"Acre" or "Acreage" means the area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the area is not shown on an Assessor's Parcel Map, the area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California.

"Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of IA No. 2 and each Zone therein: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, IA No. 2 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, IA No. 2 or any designee thereof of complying with City, IA No. 2 or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes or the Bonds; the costs of the City, IA No. 2 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; that portion ofthe City's overhead and staff time related to the administration ofIA No. 2; and the City's third party expenses. Administrative Expenses shall also include amounts estimated or advanced by the City or IA No. 2 for any other

City ofAzusa October 24, 2011 IA No. 2 o/CFD No. 2005-1 (Rosedale) Page I administrative purposes ofIA No. 2, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes.

"Assessor's Parcel" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number.

"Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel number.

"Backup Special Tax A" means a special tax payable by a property owner that may be required to be paid subsequent to the issuance of the first series of Bonds as a result of changes in development, as determined in accordance with Section D below.

"Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by IA No. 2 under the Act.

"Builder" means an entity which owns a residential dwelling unit immediately prior to the issuance of a Certificate of Occupancy, and then enters into a contract to sell that dwelling unit for its Value to an Original Homeowner.

"Certificate of Occupancy" means a document issued by the City which permits the initial habitation of one or more newly constructed residential dwelling units or non-residential space.

"CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services, and providing for the levy and collection of the Special Taxes.

"CFD No. 2005-1" means City of Azusa Community Facilities District No. 2005-1 (Rosedale).

"City" means the City of Azusa.

"Council" means the City Council of the City, acting as the legislative body of CFD No. 2005-1.

"County" means the County of Los Angeles.

"Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Property Owner Association Property or Taxable Public Property, for which a building permit for new construction was issued after January 1, 2006 and as of May 1 ofthe previous Fiscal Year.

"Fiscal Year" means the period starting July 1 and ending on the following June 30.

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page2 "Improvement Area No. 1" or "IA No. 1" means Improvement Area No. 1 of CFD No. 2005-1, as identified on the boundary map for CFD No. 2005-1, and includes each zone therein.

"Improvement Area No. 2" or "IA No. 2" means Improvement Area No. 2 ofCFD No. 2005-1, as identified on the boundary map for CPD No. 2005-1, and includes each Zone therein.

"Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time.

"Land Use Class" means any of the classes listed in Table I, Table 2, or Table 4.

"Maximum Special Tax" means the Maximum Special Tax A and/or Maximum Special Tax B, as applicable.

"Maximum Special Tax A" means the Maximum Special Tax A, determined in accordance with Section C. l below, that can be levied in any Fiscal Year on an Assessor's Parcel within IA No. 2.

"Maximum Special Tax B" means the Maximum Special Tax B, determined in accordance with Section C.2 below, that can be levied in any Fiscal Year on an Assessor's Parcel within IA No. 2.

"Non-Residential Property" means all Assessor's Parcels ofDeveloped Property for which a building permit(s) was issued for a non-residential use.

"One-Time Special Tax" means a one-time special tax payable by a Builder prior to issuance of a Certificate of Occupancy for a residential dwelling unit in order to reduce the Maximum Special Tax A on such dwelling unit, so that the Total Tax and Assessment Obligation for the Fiscal Year in which a Certificate of Occupancy for such residential dwelling unit is expected to be issued will not exceed two percent (2.00%) of the Value of such residential dwelling unit.

"Original Homeowner" means the first homeowner expected to purchase and close escrow on a residential dwelling unit from a Builder after the issuance of a Certificate of Occupancy.

"Other Taxable Property" means Taxable Property Owner Association Property and Taxable Public Property.

"Outstanding Bonds" means all Bonds which are deemed to be outstanding under the Indenture.

"Planning Area" means a geographic area within IA No. 2 which has been designated as a Planning Area as identified in Exhibit A herein.

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page3 "Post-Bond Certificate of Occupancy" means a Certificate of Occupancy that is issued after the issuance of the first series of Bonds.

"Property Owner Association Property" means, for each Fiscal Year, any Assessor's Parcel within the boundaries of IA No. 2 that was owned by or irrevocably offered for dedication to a property owner association, including any master or sub-association, as of January 1 of the previous Fiscal Year.

"Proportionately" means for Developed Property that the ratio of the actual Special Tax A levy to the Maximum Special Tax A is equal for all Assessor's Parcels of Developed Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Developed Property, except to the extent that the Special Tax levy on Residential Property is limited as described in Section G below. For Undeveloped Property and Other Taxable Property, "Proportionately" means that the ratio of the actual Special Tax A levy per Acre to the Maximum Special Tax A per Acre is equal for all Assessor's Parcels of Undeveloped Property or Other Taxable Property and that the ratio of the actual Special Tax B levy to the Maximum Special Tax B is equal for all Assessor's Parcels of Undeveloped Property or Other Taxable Property.

"Public Property" means, for each Fiscal Year, (i) any property within the boundaries of IA No. 2 that was owned by or irrevocably offered for dedication to the federal government, the State, the City or any other public agency as of January 1 of the previous Fiscal Year; provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 ofthe Act shall be taxed and classified in accordance with its use; or (ii) any property within the boundaries ofCFD No. 2005-1 that was encumbered, as of January 1 of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement.

"Residential Floor Area" for any Residential Property means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The CFD Administrator shall determine the Residential Floor Area of each dwelling unit based on the building permit, condominium plan, or other available information.

"Residential Property" means all Assessor's Parcels of Developed Property for which a building permit has been issued for purposes of constructing one or more residential dwelling units.

"RMA" means this Amended and Restated Rate and Method of Apportionment.

"Special Tax" means the Special Tax A, Special Tax B, Backup Special Tax A, and/or One Time Special Tax, as applicable.

"Special Tax A" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Facilities.

"Special Tax B" means the annual special tax to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Services.

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page4 "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for IA No. 2 to: (i) pay debt service on all Outstanding Bonds; (ii) pay periodic costs on the Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay all or a portion of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay directly for acquisition or construction of facilities eligible under the Act and authorized to be financed in IA No. 2 to the extent that inclusion of such amount does not increase the Special Tax A levy on Undeveloped Property; and (vi) pay for reasonably anticipated Special Tax A delinquencies based on the delinquency rate for Special Taxes levied in the previous Fiscal Year; less (vii) a credit for funds available to reduce the annual Special Tax A levy, as determined by the CFD Administrator pursuant to the Indenture.

"Special Tax Requirement for Services" means that amount required in any Fiscal Year for CFD No. 2005-1 to: (i) pay directly for all public services eligible under the Act; (ii) pay Administrative Expenses not funded through the Special Tax Requirement for Facilities as determined by the CPD Administrator and IA No. 1 Administrative Expenses not funded through the IA No. 1 Special Tax Requirement for Facilities; less (iii) a credit for funds available to reduce the annual Special Tax B levy and the IA No. 1 Special Tax B levy, as determined by the CFD Administrator. The Special Tax Requirement for Services represents the total amount to be levied in any Fiscal Year within IA No. 1 and IA No. 2.

"State" means the State of California.

"Taxable Property" means all of the Assessor's Parcels within the boundaries ofIA No. 2 which are not exempt from the Special Tax pursuant to law or Section H below.

"Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to Section H below.

"Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt from the Special Tax pursuant to Section H below.

"Total Tax and Assessment Obligation" means for any residential dwelling unit, the sum of the projected ad valorem taxes and any other charges, special assessments, or taxes which are expected to be included on the annual property tax bill for the Fiscal Year in which the calculation is being performed assuming such residential dwelling unit had been completed, sold, and subject to such levies and impositions in such Fiscal Year. For purposes of this calculation, the CFD Administrator shall include the Maximum Special Tax A and Maximum Special Tax B for CFD No. 2005-1 plus estimated amounts for all other items expected to appear on the property tax bill.

"Trustee" means the trustee or fiscal agent under the Indenture.

"Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property.

City ofAzusa October 24, 2011 IA No. 2 oJCFD No. 2005-1 (Rosedale) Page5 "Value" means the full sales price of a residential dwelling unit as determined prior to the close of escrow by the Builder and the Original Homeowner, as listed on the preliminary escrow closing statement prepared by the title company for such sale, or if such preliminary escrow closing statement is unavailable, as reasonably determined by the CFD Administrator.

"Zone" means Zone 1 and/or Zone 2, as applicable.

"Zone 1" means the property identified as Zone 1 (Great Park and Transit 1) ofIA No. 2, as identified on the boundary map for CFD No. 2005-1.

"Zone 2" means the property identified as Zone 2 (Transit 2) ofIA No. 2, as identified on the boundary map for CFD No. 2005-1.

B. ASSIGNMENT TO LAND USE CATEGORIES

Each Fiscal Year, all Taxable Property within IA No. 2 shall be assigned to Zone 1 or Zone 2 and classified as Developed Property, Other Taxable Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this RMA. Developed Property shall be classified as Residential Property and Non-Residential Property.

C. MAXIMUM SPECIAL TAX RATE

1. Special Tax A

a. Developed Property

Residential Property in Zone 1 shall be assigned to Land Use Classes 1 through 5 in Table 1, and Non-Residential Property in Zone 1 shall be assigned to Land Use Class 6 in Table 1. Residential Property in Zone 2 shall be assigned to Land Use Classes 1 through 3 in Table 2, and Non Residential Property in Zone 2 shall be assigned to Land Use Class 4 in Table 2. The Maximum Special Tax A for Residential Property shall be based on the number of residential dwelling units and the Residential Floor Area of such residential dwelling units located on the Assessor's Parcel. The Maximum Special Tax A for Non-Residential Property shall be based on the Acreage of the Assessor's Parcel.

The Maximum Special Tax A as set forth in Sections C.l .(a)(i) and C.1.(a)(ii) below may be reduced in accordance with, and subject to the conditions set forth in, Section F below.

(i) Maximum Special Tax A - Zone 1

The Fiscal Year 2012-2013 Maximum Special Tax A for each Land Use Class within Zone 1 is shown below in Table 1.

City ofAzusa October 24, 2011 IA No. 2 oJCFD No. 2005-1 (Rosedale) Page6 TABLE 1 Ma:ximum Special Tax A for Developed Property Fiscal Year 2012-2013 Zone 1

Zonel Land Use ... Resi.denti~l. Flqor {Gr¢at :Park and TransjH) Class Dest!riV:tfo~ .. A:rea M~i:ximum :s pecia[Tax A

1 Residential Property > 1,950 SF $2,948 per dwelling unit

2 Residential Property 1,751 - 1,950 SF $2,719 per dwelling unit

3 Residential Property 1,551 - 1,750 SF $2,420 per dwelling unit

4 Residential Property 1,401 - 1,550 SF $2, 178 per dwelling unit

5 Residential Property < 1,401 SF $1,986 per dwelling unit

6 Non-Residential Property NA $15,000 per Acre

On each July 1, commencing July 1, 2013, the Maximum Special Tax A for each Land Use Class shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

(ii) Maximum Special Tax A - Zone 2

The Fiscal Year 2012-2013 Maximum Special Tax A for each Land Use Class within Zone 2 is shown below in Table 2.

TABLE2 Ma:ximum Special Ta:x A for Developed Property Fiscal Year 2012-2013 Zone2 . . Zone2 La.ndUs.e · Residential Floor (Transit2) Class Descriptipn Area Maximum Specia:I Tax A

1 Residential Property > 1,300 SF $2, 179 per dwelling unit

2 Residential Property 1,201 -1,300 SF $2,069 per dwelling unit

3 Residential Property < 1,201 SF $1,886 per dwelling unit

4 Non-Residential Property NA $15,000 per Acre

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 7 On each July 1, commencing July 1, 2013, the Maximum Special Tax A for each Land Use Class shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

b. Undeveloped Property and Other Taxable Property

The Fiscal Year 2012-20B Maximum Special Tax A for Undeveloped Property and Other Taxable Property within each Zone is shown below in Table 3.

TABLE 3. Maximum Special Tax A for Undeveloped Property and Other Taxable Property Fiscal Year 2012-2013 Zone 1 and Zone 2

Ff 2012-201;3 :Zone. Maxinium;S,pecial Tax A $127,870 per Acre 2 $146,625 per Acre

On each July 1, commencing July 1, 2013, the Maximum Special Tax A for Undeveloped Property and Other Taxable Property in Zone 1 and Zone 2 shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

(iv) Multiple Land Use Classes

In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax A that can be levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax A that can be levied for all Land Use Classes located on that Assessor's Parcel. For an Assessor's Parcel that contains both Residential Property and Non-Residential Property, the Acreage of such Assessor's Parcel shall be allocated to each type of property based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final.

2. Special Tax B

a. Developed Property

(i) Maximum Special Tax B

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 8 The Fiscal Year 2012-2013 Maximum Special Tax B for each Assessor's Parcel classified as Developed Property in Zone I and Zone 2 shall be the amount shown below in Table 4.

TABLE4 Maximum Special Tax B for Developed Property Fiscal Year 2012-2013 Zone 1 and Zone 2

Zonel Zone2 .LandUs.e F¥20:'U2)20f3 FY 20If2'"20[3 Class Maximunt·.speQial Maximum·Special TaXB TaxB Residential Property $345.35 per dwelling unit $326.17 per dwelling unit 2 Non-Residential Property $4,907.78 per Acre $4,887.67 per Acre ~

On each July 1, commencing July 1, 2013, the Maximum Special Tax B for Developed Property in Zone 1 and Zone 2 shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

(ii) Multiple Land Use Classes

In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax B levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax B for all Land Use Classes located on that Assessor's Parcel. For an Assessor's Parcel that contains both Residential Property and Non-Residential Property, the Acreage of such Assessor's Parcel shall be allocated to each type ofproperty based on the amount of Acreage designated for each land use as determined by reference to the site plan approved for such Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final.

b. Undeveloped Property

The Fiscal Year 2012-2013 Maximum Special Tax B for Undeveloped Property within each Zone is shown below in Table 5.

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page9 TABLES Maximum Special Tax B for Undeveloped Property Fiscal Year 2012-2013 Zone 1 and Zone 2

F¥ 2012,,2013 Mmmuw &P~cial'.I'axB $1,997.20 per Acre 2 $I, 997 .20 per Acre

On each July I, commencing July I, 2013 the Maximum Special Tax B for Undeveloped Property in Zone 1 and Zone 2 shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year.

c. Property Owner Association Property and Public Property

There shall be no Special Tax B levied on Property Owner Association Property and Public Property.

D. BACKUP SPECIAL TAX A

All of the requirements of this Section D, which describes the need for a Backup Special Tax A payment resulting from a change in development, shall only apply after the issuance ofthe first series of Bonds. Prior to the issuance of the first series of Bonds, no Backup Special Tax A calculation shall be necessary and no Backup Special Tax A payment shall be required.

Prior to the issuance of a Post-Bond Certificate of Occupancy for an Assessor's Parcel of Developed Property (the "Subject Property"), the CFD Administrator shall make a determination of whether or not a Backup Special Tax A payment is required for the Planning Area in which the Subject Property is located. The CFD Administrator shall charge a fee for providing this determination and shall follow the steps listed below.

Step No.:

1. Required Special Tax A Revenues

As of the date of the issuance of any series of Bonds, the Required Special Tax A Revenues for IA No. 2 shall be established to equal (i) 1.1 times the discounted maximum annual gross debt service for all Outstanding Bonds (including those Bonds currently being issued, if any), which shall be computed by determining the Fiscal Year in which occurs the maximum aggregate annual gross debt service for all Bonds and discounting that amount from such Fiscal Year to the current Fiscal Year using a discount rate

City ofAzusa October 24, 2011 IA No. 2 oJCFD No. 2005-1 (Rosedale) Page 10 reflecting the actual rate of increase (if any) of the debt service on the Bonds, plus (ii) anticipated Administrative Expenses in the next Fiscal Year. The CFD Administrator shall allocate such Required Special Tax A Revenues to each Planning Area based on the current Expected Special Tax A Revenues and identify such allocation in the records oflA No. 2. Such allocation shall remain valid except as adjusted under l.(a) or l.(b) below:

(a) On each July 1, the Required Special Tax A Revenues for each Planning Area shall be increased by an amount equal to the annual percentage increase in the debt service on the Bonds.

(b) The CFD Administrator shall reduce the Required Special Tax A Revenues for any Planning Area as necessary to reflect reduced revenues required as a result of a Backup Special Tax A payment, One-Time Special Tax payment, or prepayment made with respect to an Assessor's Parcel in such Planning Area.

2. Expected Special Tax A Revenues

Prior to the issuance of a Post-Bond Certificate of Occupancy for the Subject Property, the CFD Administrator shall estimate the Expected Special Tax A Revenues that will be generated at buildout ofthe Planning Area in which the Subject Property is located based on the Maximum Special Tax A rates then in effect and the current development plan for such Planning Area based on building permits issued to date, expected building pennits to be issued in the future, and all other relevant development information available to the CFD Administrator.

3. Determination of Need for Backup Special Tax

If the CFD Administrator determines that the Expected Special Tax A Revenues that will be generated at buildout in the Planning Area in which the Subject Property is located are less than such Planning Area's Required Special Tax A Revenues (as adjusted to the date of calculation), then a Backup Special Tax A payment will be required for such Planning Area. However, if it is determined that the Expected Special Tax A Revenues are greater than or equal to the Planning Area's Required Special Tax A Revenues (as adjusted to the date of calculation), then no Backup Special Tax A payment will be required.

4. Calculation of Backup Special Tax

If a Backup Special Tax A payment is required pursuant to step 3 above, such payment shall equal that Prepayment Amount calculated pursuant to Section K.3.

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 11 5. Payment

The Backup Special Tax A computed under this section shall be paid by the owner of the Subject Property prior to the issuance of the Certificate of Occupancy for the Subject Property.

E. ONE-TIME SPECIAL TAX

Prior to the issuance of a Certificate of Occupancy for a residential dwelling unit, the CFD Administrator shall make a one-time determination of whether or not a One-Time Special Tax payment is required for such dwelling unit. The CFD Administrator shall charge a fee for providing this determination.

A One-Time Special Tax payment shall be paid by the Builder for a residential dwelling unit if the Total Tax and Assessment Obligation is expected to be greater than two percent (2.00%) of the Value for such residential dwelling unit. The amount of the One-Time Special Tax for such residential dwelling unit shall equal that Partial Prepayment Amount calculated pursuant to Section K.2 which shall be sufficient to reduce the Total Tax and Assessment Obligation to two percent (2.00%) of the Value for such residential dwelling unit.

If the Total Tax and Assessment Obligation for a residential dwelling unit is expected to be less than or equal to two percent (2.00%) of the Value of such residential dwelling unit, no One-Time Special Tax will be required.

F. SPECIAL TAX REDUCTION

Any Special Tax Reduction determined pursuant to this section will not apply to dwelling units for which One-Time Special Tax calculations were prepared prior to the date of the Price Point Study, whether or not such calculations resulted in a One-Time Special Tax payment.

The following definitions apply to this Section F:

"Independent Price Point Consultant" means any consultant or firm of such consultants selected by CFD No. 2005-1 that (a) has substantial experience in performing price point studies for residential units within community facilities districts or otherwise estimating or confirming pricing for residential units in community facilities districts, (b) is well versed in analyzing economic and real estate data that relates to the pricing of residential units in community facilities districts, ( c) is in fact independent and not under the control of CFO No. 2005-1 or the City, ( d) does not have any substantial interest, direct or indirect, with or in (i) CFD No. 2005-1, (ii) the City, (iii) any owner ofreal property in CFD No. 2005-1, or (iv) any real property in CFD No. 2005-1, and (e) is not connected with CFD No. 2005-1 or the City as an officer or employee thereof, but who may be regularly retained to make reports to CFD No. 2005-1 or the City.

"Plan Type" means a discrete residential plan type (generally consisting of residential dwelling units that share a common product type (e.g., single family, multi-family, senior)

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 12 and that have nearly identical amounts of living area) that is constructed or expected to be constructed within a Planning Area ofIA No. 2 as identified in the Price Point Study.

"Price Point" means, with respect to the residential dwelling units in each Plan Type, as of any date, the minimum base price of such residential dwelling units, estimated as of such date, including any incentives and concessions, but excluding potential appreciation or premiums, options or upgrades, based upon their actual or expected characteristics, such as living area and lot size.

"Price Point Study" means a price point study or a letter updating a previous price point study, which (a) has been prepared by an Independent Price Point Consultant, (b) sets forth the Plan Types constructed or expected to be constructed within IA No. 2, ( c) sets forth the estimated number of constructed and expected residential dwelling units for each Plan Type, (d) sets forth such Independent Price Point Consultant's estimate of the Price Point for each Plan Type, and (e) uses a date for establishing such Price Points that is no earlier than 60 days prior to the date the Price Point Study is delivered to the CFD Administrator. Dwelling units for which One-Time Special Tax calculations have been prepared previously will not be included in the Price Point Study.

Prior to the issuance of the first series of Bonds, the following steps shall be taken:

Step No.:.

1. At least 30 days prior to the expected issuance date of the first series of Bonds, IA No. 2 shall cause a Price Point Study to be delivered to the CFD Administrator.

2. As soon as practicable after receipt of the Price Point Study, the CFD Administrator shall calculate the Total Tax and Assessment Obligation for each Plan Type included in the Price Point Study.

3. The CFD Administrator shall determine the Expected Special Tax A Revenues for each Planning Area by taking the sum of the Maximum Special Tax A revenues expected to be generated at buildout based on building permits issued to date, expected future development identified in the Price Point Study, and all other relevant development information available to the CFD Administrator

4. Separately, for each Land Use Class, the CFD Administrator shall determine whether or not the Total Tax and Assessment Obligation for all Plan Types in a Land Use Class is less than or equal to 2.00% of the Price Point for such Plan Type.

a. If the Total Tax and Assessment Obligation for all Plan Types in a Land Use Class is less than or equal to 2.00% of the Price Point for such Plan Type, then there shall be no change in the Maximum Special Tax A for such Land Use Class.

b. If the Total Tax and Assessment Obligation for any Plan Type in a Land Use Class is greater than 2.00% of the Price Point for such Plan Type, the CFD Administrator shall calculate a revised Maximum Special Tax A for such Land

City ofAzusa October 24, 20ll IA No. 2 o/CFD No. 2005-1 (Rosedale) Page 13 Use Class, which revised Maximum Special Tax A shall be the highest amount (rounded to the nearest whole dollar) that will not cause the Total Tax and Assessment Obligation for any Plan Type in such Land Use Class to exceed 2.00% of the Price Point for such Plan Type. The amount of the change in the Maximum Special Tax A for a particular Land Use Class is not required to be proportional to changes in the Maximum Special Tax A made for other Land Use Classes.

5. If the Maximum Special Tax A for any Land Use Class is revised pursuant to step 4.b. above, the CPD Administrator shall prepare and execute a Certificate of Reduction in Special Taxes substantially in the form of Exhibit B hereto and shall deliver such Certificate of Reduction in Special Taxes to CFD No. 2005-1. The Certificate of Reduction in Special Taxes shall be completed for all Land Use Classes and shall set forth, as applicable, either (i) the reduced Maximum Special Tax A for a Land Use Class as calculated pursuant to step 4.b., or (ii) the Maximum Special Tax A as identified in Table 1 or Table 2 in Section C. l .(a) for a Land Use Class that was not revised as determined pursuant to step 4.a.

6. Ifthe first series of Bonds is issued within 90 days of the date ofreceipt of the Price Point Study by the CFD Administrator, CFD No. 2005-1 shall execute the acknowledgement on such Certificate ofReduction in Special Taxes, dated as of the date of such issuance, and, upon the issuance of such first series of Bonds, the Maximum Special Tax A for each Land Use Class shall, ipso facto, be, for all purposes, as set forth in such Certificate of Reduction in Special Taxes ( except for Assessor's Parcels excluded from the reduction as identified in Attachment B to the Certificate of Reduction in Special Taxes). If the first series of Bonds is not issued within 90 days of the date of receipt of the Price Point Study by the CFD Administrator, such Certificate of Reduction in Special Taxes shall not be acknowledged by CFD No. 2005-1 and shall, as of such date, be void and of no further force and effect. In such case, if subsequently, a first series of Bonds is expected to be issued, at least 30 days prior to the expected issuance date of such first series of Bonds, the CFD Administrator shall cause a new Price Point Study to be delivered to the CFD Administrator and, following such delivery, steps 2 through 5 of this section shall be performed based on such new Price Point Study.

7. As soon as practicable after the execution by CPD No. 2005-1 of the acknowledgement on the Certificate of Reduction in Special Taxes, CFD No. 2005-1 shall cause to be recorded in the records of the County Recorder an Amended Notice of Special Tax Lien for IA No. 2 reflecting the Maximum Special Tax A for all Land Use Classes set forth in such Certificate of Reduction in Special Taxes only for those Assessor's Parcels listed in Exhibit A to such notice (Assessor's Parcels for which a One-Time Special Tax was not previously calculated).

8. If the Maximum Special Tax A is not required to be changed for each Land Use Class based on the calculations performed above, there shall be no reduction in the Maximum Special Tax A, and no Certificate of Reduction in Special Taxes shall be required. However the CFD Administrator shall prepare and deliver to CFD No. 2005-1 a Certificate of No Reduction in Special Taxes substantially in the form of

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 14 Exhibit C hereto dated as of the date of the issuance of the first series of Bonds that states that the calculations required pursuant to this Section F have been made and that no changes to the Maximum Special Tax A are necessary.

9. CFD No. 2005-1 and the CFD Administrator shall take no further actions under this Section F upon the earlier to occur of the following: (i) the execution of the acknowledgement by CFD No. 2005-1 on a Certificate ofReduction in Special Taxes pursuant to step 6 above; or (ii) the delivery by the CFD Administrator of a Certificate of No Reduction in Special Taxes pursuant to step 8 above.

G. METHOD OF APPORTIONMENT OF THE SPECIAL TAX

1. Special Tax A

Commencing with Fiscal Year 2012-2013 and for each following Fiscal Year, the Council shall levy the Special Tax A until the amount of Special Tax A equals the Special Tax Requirement for Facilities. The Special Tax A shall be levied each Fiscal Year as follows:

First: The Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 at up to 100% of the applicable Maximum Special Tax A as needed to satisfy the Special Tax Requirement for Facilities;

Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax A for Undeveloped Property;

Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Other Taxable Property in Zone 1 and Zone 2 at up to the Maximum Special Tax A for Other Taxable Property.

2. Special Tax B

Commencing with Fiscal Year 2012-2013 and for each following Fiscal Year, the Council shall determine the Special Tax Requirement for Services and levy the Special Tax B, taking into consideration the levy ofthe IA No. 1 Special Tax B, until the amount of Special Tax B and IA No. 1 Special Tax B equals the Special Tax Requirement for Services. The Special Tax B shall be levied each Fiscal Year as follows:

First: The Special Tax B shall be levied Proportionately on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 at up to 100% of the applicable Maximum Special Tax B as needed to satisfy the Special Tax Requirement for Services; and the Council shall be notified that under the terms of the IA No. 1 RMA, the IA No. 1 Special Tax B shall be levied on each Assessor's Parcel of IA No. 1 Developed

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 15 Property in Zone 1 and Zone 2 at up to 100% of the applicable IA No. 1 Maximum Special Tax B as needed to satisfy the Special Tax Requirement for Services;

Second: If additional monies are needed to satisfy the Special Tax Requirement for Services after the first step has been completed, the Special Tax B shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax B for Undeveloped Property; the Council shall be notified that under the terms of the IA No. I RMA, the IA No. 1 Special Tax B shall be levied Proportionately on each Assessor's Parcel ofIA No. 1 Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the IA No. 1 Maximum Special Tax B for Undeveloped Property.

3. Backup Special Tax A

The Backup Special Tax A payment may be levied on any Assessor's Parcel as required in Section D.

4. One-Time Special Tax

The One-Time Special Tax may be levied on any Assessor's Parcel as required in Section E.

Notwithstanding the above, under no circumstances will the Special Tax A or Special Tax B levied in any Fiscal Year against any Assessor's Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor's Parcel(s) within IA No. 2 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. To the extent that the levy of the Special Tax A or Special Tax B on Residential Property is limited by the provision in the previous sentence, the levy of the Special Tax A or Special Tax Bon each Assessor's Parcel ofNon-Residential Property shall continue in equal percentages at up to I 00% of the Maximum Special Tax.

H. EXEMPTIONS

1. Special Tax A

No Special Tax A shall be levied on up to 20.36 Acres of Property Owner Association Property and Public Property in Zone 1 and up to 7 .35 Acres of Property Owner Association Property and Public Property in Zone 2. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property its tax-exempt status will be revoked.

Property Owner Association Property or Public Property that is not exempt from Special Tax A under this section shall be subject to the levy of the Special Tax A and shall be taxed Proportionately as part of the third step in Section G.1 above, at up to 100% of the applicable Maximum Special Tax A for Other Taxable Property.

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005~1 (Rosedale) Page 16 2. Special Tax B

No Special Tax B shall be levied on Property Owner Association Property and Public Property.

I. APPEALS AND INTERPRETATIONS

Any landowner or resident may file a written appeal of the Special Tax on his/her property with the CPD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CPD Administrator shall review the appeal, meet with the appellant if the CPD Administrator deems necessary, and advise the appellant of its determination. If the CPD Administrator agrees with the appellant, the CPD Administrator shall eliminate or reduce the Special Tax on the appellant's property and/or provide a refund to the appellant. If the CPD Administrator disagrees with the appellant and the appellant is dissatisfied with the determination, the appellant then has 30 days in which to appeal to the Council by filing a written notice of appeal with the City Clerk, provided that the appellant is current in his/her payments of Special Taxes. The second appeal must specify the reasons for its disagreement with the CPD Administrator's determination.

Interpretations may be made by the Council by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Amended and Restated Rate and Method of Apportionment.

J. MANNER OF COLLECTION

The Special Tax A and Special Tax B shall be collected in the same manner and at the same time as ordinary advalorem property taxes; provided, however, that IA No. 2 may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act.

The Backup Special Tax A and One-Time Special Tax shall be paid directly to the City by, or on behalf of, the Builder or property owner.

K. PREPAYMENT OF SPECIAL TAX

The following definitions apply to this Section K:

"CFD Public Facilities" means either $11.5 million in 2012 dollars, which shall increase by the Construction Inflation Index on July I, 2013, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CPD Administrator as sufficient to provide the public facilities to be provided by IA No. 2 under the authorized bonding program for IA No. 2, or (ii) shall be determined by the Council concurrently with a covenant that it will not

City ofAzusa October 24, 2011 IA No. 2 of CFD No. 2005-1 (Rosedale) Page 17 issue any more Bonds to be supported by Special Taxes levied under this Amended and Restated Rate and Method of Apportionment.

"Construction Inflation Index" means the annual percentage change in the Engineering News-Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News-Record Building Cost Index for the City of Los Angeles.

"Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance public facilities costs.

"Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct facilities eligible under the Act.

"Outstanding Bonds" means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year.

"Previously Issued Bonds" means all Bonds that have been issued by IA No. 2 prior to the date of prepayment.

1. Prepayment in Full

The obligation of an Assessor's Parcel to pay the Special Tax A may be prepaid and permanently satisfied as described herein; provided that a prepayment may be made only for Assessor's Parcels of Developed Property or Undeveloped Property for which a building permit has been issued, and only ifthere are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax A obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner ofthe prepayment amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given to the Trustee pursuant to the Indenture.

The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized tenns as defined below):

Bond Redemption Amount plus Redemption Premium plus Future Facilities Amount plus Defeasance Amount

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 18 plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Prepayment Amount

As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows:

Paragraph No.:

1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel.

2. For Assessor's Parcels of Developed Property, compute the Maximum Special Tax A. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Maximum Special Tax A for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel.

3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total estimated Maximum Special Tax A for the entire IA No. 2 based on the Developed Property Special Tax A which could be charged in the current Fiscal Year on all expected development through buildout of IA No. 2, excluding any Assessor's Parcels which have been prepaid.

4. Multiply the quotient computed pursuant to paragraph 3 by the Outstanding Bonds to compute the amount of Outstanding Bonds to be retired and prepaid (the "Bond Redemption Amount").

5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the "Redemption Premium").

6. Compute the current Future Facilities Costs.

7. Multiply the quotient computed pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount").

8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds.

9. Determine the Special Tax A levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid.

10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Future Facilities Amount

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 19 and the Administrative Fees and Expenses from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment.

11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount").

12. Verify the administrative fees and expenses of IA No. 2, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses").

13. The reserve fund credit ("Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associate with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.

14. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the "Capitalized Interest Credit").

15. The Special Tax A prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Prepayment Amount").

16. From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by IA No. 2.

The Special Tax A Prepayment Amount may be sufficient to redeem other than a $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of bonds or to make debt service payments.

As a result ofthepaymentofthe current Fiscal Year's Special Tax A levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Tax A

City ofAzusa October 24, 2011 IA No. 2 oJCFD No. 2005~1 (Rosedale) Page 20 and the release of the Special Tax A lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall cease.

Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Maximum Special Tax A that may be levied on Taxable Property (based on expected development at build out) after the proposed prepayment, less expected Administrative Expenses, shall be at least I. I times the regularly scheduled annual interest and principal payments on all Outstanding Bonds ( excluding Bonds to be redeemed by such prepayment and all prior prepayments) in each future Fiscal Year and such prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator.

The Special Tax B may not be prepaid.

2. Prepayment in Part

The Special Tax A on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The Partial Prepayment Amount shall be calculated as in Section K. I; except that a partial prepayment shall be calculated according to the following formula:

PP= [(PE-AE) x F] + AE

These terms have the following meaning: AE the Administrative Fees and Expenses PP the partial prepayment PE the Prepayment Amount calculated according to Section K. l F the percentage by which the owner of the Assessor's Parcel is partially prepaying the Special Tax A.

The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax A for an Assessor's Parcel within thirty (30) days ofthe request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City shall (i) distribute the funds remitted to it according to Section K.I, and (ii) indicate in the records of IA No. 2 that there has been a partial prepayment of the Special Tax A and that a portion of the Special Tax A with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel pursuant to Section G.

Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Maximum Special Tax A that may be levied on Taxable Property (based on expected development at build out) after the proposed prepayment, less expected Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all Outstanding Bonds (excluding Bonds to be redeemed by such

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 21 prepayment and all prior prepayments) in each future Fiscal Year and such partial prepayment will not impair the security of all Outstanding Bonds, as reasonably determined by the CFD Administrator.

3. Bond Call based on Backup Special Tax A

The Prepayment Amount for a Backup Special Tax A payment shall equal the amount necessary to call Bonds based on steps 4, 5, 12, 13, and 14 of Section K.1. above such that the total Special Tax A revenues available in any Fiscal Year (i.e., the Expected Special Tax A Revenues from step 2 of Section D above for the Planning Area for which the Backup Special Tax A payment is being made plus the Required Special Tax A Revenues from all other Planning Areas as adjusted to the date of calculation and both escalated by 2% per Fiscal Year) less anticipated annual Administrative Expenses as of the date of calculation will be approximately equal to (but not less than) 110% of the debt service on the Outstanding Bonds during the current Fiscal Year and all future years.

From the Backup Special Tax A payment, the amounts computed pursuant to paragraphs 4, 5, 13, and 14 shall be used to retire Outstanding Bonds. The amount computed pursuant to paragraph 12 shall be retained by IA No. 2.

The Maximum Special Tax A shall not be reduced as a result of a Backup Special Tax A payment.

L. TERM OF SPECIAL TAX

The Special Tax A, Backup Special Tax A, and One-Time Special Tax shall be levied for a period not to exceed fifty years commencing with Fiscal Year 2012-2013. The Special Tax B shall be levied as long as necessary to meet the Special Tax Requirement for Services.

K:\CLIENTS2\Azusa.cty\Mello\cfd2005-l \RMA \IA 2 Amended RMA \IA2 _ RMA _ 09.doc

City ofAzusa October 24, 2011 IA No. 2 ofCFD No. 2005-1 (Rosedale) Page 22 APPENDIXB

SUMMARY OF FISCAL AGENT AGREEMENT

The following is a summary of certain provisions ofthe Fiscal Agent Agreement which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the respective agreements for a full and complete statement of the provisions thereof

AUTHORITY AND DEFINITIONS

Definitions

Unless the context otherwise requires, the terms defined in the Agreement shall, for all purposes of the Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document mentioned in the Agreement, have the meanings specified therein. All references in the Agreement to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Agreement, and the words "herein," "hereof," "hereunder" and other words of similar import refer to the Agreement as a whole and not to any particular Article, Section or subdivision thereof.

"2019 Bonds Insurance Policy" means the insurance policy issued by the 2019 Bonds Insurer guaranteeing the scheduled payment of principal of and interest on the Insured 2019 Bonds when due.

"2019 Bonds Insurer" means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof.

"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53 311) of Part 1 of Division 2 of Title 5 of the California Government Code.

"Administrative Expenses" means any or all of the following: the fees and expenses of the Fiscal Agent (including any fees or expenses of its counsel), the expenses of the City in carrying out its duties under the Agreement (including, but not limited to, the levying and collection of the Special Taxes) including the fees and expenses of its counsel, an allocable share of the salaries of City staff directly related thereto and a proportionate amount of City general administrative overhead related thereto, any amounts paid by the City from its general funds pursuant to the Agreement, the fees and expenses of the Municipal Advisor and the Special Tax Consultant, the costs of the District, the City or any designee of either thereof of complying with the arbitrage rebate requirements; the costs to the District, the City or any designee of either thereof of complying with the District, City or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the District, or City, or any designee of either thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the District's annual administration fee and third party expenses, and all other costs and expenses of the City or the Fiscal Agent incurred in connection with the discharge of their respective duties under the Agreement and, in the case of the City, in any way related to the administration of the District with respect to Improvement Area No. 2.

"Administrative Expense Fund" means the fund by that name established by the Agreement.

"Agreement" or "Fiscal Agent Agreement" means the Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions of the Agreement.

"Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds scheduled to be paid.

B-1 "Auditor" means the Auditor-Controller of the County of Los Angeles.

"Authorized Officer" means the City Manager, or the Director of Administrative Services of the City, and their designees, and any other officers or employees of the City authorized by the City Council or by an Authorized Officer to undertake the action referenced in the Agreement as required to be undertaken by an Authorized Officer.

"Bond Counsel" means any attorney or firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities.

"Bond Fund" means the fund by that name established by the Agreement.

"Bond Year" means the period beginning on the Closing Date and ending on September 1, 2020 and thereafter the period beginning on each September 2 and ending on the following September 1.

"Bonds" means, unless otherwise expressly provided, the Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa 2019 Special Tax Bonds (Improvement Area No. 2), authorized by and at any time Outstanding pursuant to the Act and the Agreement.

"Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of California or in any state in which the Fiscal Agent has its Principal Office are authorized or obligated by law or executive order to be closed.

"City" means the City of Azusa.

"City Council" means the City Council of the City.

"City Facilities" means the public facilities of the City the construction and acquisition of which are to be financed with the proceeds deposited in the City Facilities Account.

"City Facilities Account" means the account by that name established in the Improvement Fund by the Agreement.

"Closing Date" means the date upon which there is an exchange of the Bonds for the proceeds representing payment of the purchase price of the Bonds by the Original Purchaser.

"Code" means the Internal Revenue Code of 1986, as amended.

"Continuing Disclosure Certificate" means the Continuing Disclosure Certificate of the City, dated as of the Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

"Costs oflssuance" means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, including but not limited to the preliminary official statement and official statement regarding the Bonds, closing costs, filing and recording fees, premiums for any reserve fund, surety bond or bond insurance policy, initial fees and charges of the Fiscal Agent including its initial annual administration fee and the fees of its counsel, expenses incurred by the City in connection with the issuance of the Bonds and the change proceedings with respect to Improvement Area No. 2, Bond (underwriter's) discount, legal fees and charges, including the fees of Bond Counsel and counsel to the Underwriter, Municipal Advisor's fees, fees of a Special Tax Consultant, fees of a market absorption consultant, charges for authentication, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing.

"Costs of Issuance Fund" means the fund by that name established by the Agreement. B-2 "Defeasance Securities" means, for purposes of the Agreement, the following:

(i) Cash;

(ii) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series - "SLGs");

(iii) Direct obligations of the United States Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities;

(iv) Resolution Funding Corporation (REFCORP) obligations; provided that only the interest component of REF CORP strips which have been stripped by request of the Federal Reserve Bank of New York in book-entry form are acceptable;

(v) Subject to 2019 Bonds Insurer's prior written consent, pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's; provided, however, that if the issue is only rated by Standard & Poor's (i.e., there is no Moody's rating), then the pre-refunded bonds must have been pre-refunded with cash, direct United States or United States guaranteed obligations, or "AAA" rated pre refunded municipal bonds; and

(vi) Obligations issued by the following agencies which are backed by the full faith and credit of the United States of America:

(a) U.S. Export-Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership

(b) Federal Financing Bank

( c) General Services Administration Participation certificates

( d) United States Maritime Administration Guaranteed Title XI financing

(e) United States Department of Housing and Urban Development Project notes Local Authority Bonds New Communities Debentures - United States government guaranteed debentures United States Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds.

"Developed Property" means all Assessor's Parcels of taxable property, exclusive of Taxable Association Property and Taxable Public Property (as those terms are defined in the Rates and Method of Apportionment of Special Tax), for which a Final Subdivision was recorded as of March 1 and a building permit for new construction was issued as of March 1 of the Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied.

"District" means Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa, County of Los Angeles, State of California.

"DTC" or the "Depository" means The Depository Trust Company, New York, New York and its successors and assigns.

B-3 "Facilities" means the public facilities which are to be financed with the proceeds of the sale of the bonds of the District as described in Resolution No. 06-C39 adopted by the Board of Directors on June 5, 2006.

"Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein:

(i) Cash; and

(ii) Direct general obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America and CATS and TIGRS), or obligations, the payment of principal of and interest on which is unconditionally guaranteed by the United States of America.

"Final Subdivision" means a subdivision of property by recordation of a final subdivision map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code Section 1352 that creates individual lots for which building permits may be issued without further subdivision.

"Fiscal Agent" means Wilmington Trust, National Association, the Fiscal Agent appointed by the City, acting as an independent fiscal agent with the duties and powers provided in the Agreement, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in the Agreement.

"Fiscal Year" means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive.

"Improvement Area No. 2" means Improvement Area No. 2 of the District.

"Improvement Fund" means the fund by that name established by the Agreement.

"Independent Financial Consultant" means a firm of certified public accountants, a financial consulting firm, including a Municipal Advisor, a consulting engineering firm or engineer which is not an employee of, or otherwise controlled by, the City.

"Information Services" means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org) or such service or services as the City may designate in a certificate delivered to the Fiscal Agent.

"Insured 2019 Bonds" means the term bonds maturing on September 1, 2044 and September 1, 2049.

"Interest Account" means the account by that name established in the Bond Fund by the Agreement.

"Interest Payment Dates" means March 1 and September 1 of each year, commencing March 1, 2020, until the maturity or redemption of all Outstanding Bonds.

"Investment Earnings" means all interest earned and any gains and losses on the investment of moneys in any fund or account created by the Agreement, excluding interest earned and gains and losses on the investment of moneys in the Rebate Fund.

"Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank, N.A., at its principal office in The City of New York, New York, as its prime or base lending rate ("Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank, N.A.) plus 3%, and (ii) the then applicable highest rate B-4 of interest on the Insured Obligations and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. In the event JPMorgan Chase Bank, N.A., ceases to announce its Prime Rate, the Prime Rate shall be the prime or base lending rate of such other bank, banking association or trust company as BAM, in its sole and absolute discretion, shall designate. Interest at the Late Payment Rate on any amount owing to BAM shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

"Maximum Administrative Expense Amount" means $60,000 for Fiscal Year ended June 30, 2021, which amount shall escalate annually by 2% on each July I thereafter.

"Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds.

"Moody's" shall mean Moody's Investors Service, a national rating service with offices in New York, New York.

"Municipal Advisor" means an independent financial consulting firm appointed by the City to advise the City as to financial matters relating to the Bonds.

"Officer's Certificate" means a written certificate of the City signed by an Authorized Officer of the City.

"Ordinance" means any ordinance of the City or resolution of the City Council levying the Special Taxes.

"Original Purchaser" means the first purchaser of the Bonds from the City.

"Outstanding," when used as of any particular time with reference to the Bonds, means (subject to the provisions of the Agreement) all Bonds except:

(i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation;

(ii) Bonds called for redemption which, for the reasons specified in the Agreement, are no longer entitled to any benefit under the Agreement other than the right to receive payment of the redemption price therefor;

(iii) Bonds paid or deemed to have been paid within the meaning of the Agreement; and

(iv) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City and authenticated by the Fiscal Agent pursuant to the Agreement or any Supplemental Agreement.

"Owner" means any person who shall be the registered owner of any Outstanding Bond.

"Parity Bonds" means bonds issued by the District, in addition to the Bonds, that are secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Agreement on a parity with the Outstanding Bonds pursuant to the Agreement.

"Permitted Investments" means:

(i) Federal Securities;

(ii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): B-5 (a) U.S. Export-Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership

(b) Federal Financing Bank

( c) Federal Housing Administration Debentures

( d) General Services Administration Participation certificates

(e) Government National Mortgage Association (GNMA) GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations

(f) U.S. Maritime Administration Guaranteed Title XI financing

(g) U.S. Department of Housing and Urban Development Project Notes Local Authority Bonds New Communities Debentures - United States government guaranteed debentures U.S. Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds;

(iii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies (stripped securities are only permitted if they have been stripped by the agency itself):

(a) Federal Home Loan Bank System Senior debt obligations

(b) Federal Home Loan Mortgage Corporation Participation Certificates Senior debt obligations

( d) Student Loan Marketing Association Senior debt obligations

(e) Resolution Funding Corporation (REFCORP) obligations

(f) Farm Credit System Consolidated systemwide bonds and notes;

(iv) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by Standard & Poor's of "AAAm-G," "AAA-m" or "AA-m" and, if rated by Moody's, rated "Aaa," "Aal" or "Aa2" by Moody's, including funds for which the Fiscal Agent, its parent holding company, if any, or any affiliates or subsidiaries of the Fiscal Agent or such holding company receive and retain a fee for services provided to the fund whether as a custodian, transfer agent, investment advisor or otherwise; B-6 (v) Certificates of deposit secured at all times by collateral described in clauses (i) and/or (ii) above. Such certificates must be issued by commercial banks, including the Fiscal Agent and its affiliates, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Fiscal Agent on behalf of the Owners of the Bonds must have a perfected first security interest in the collateral;

(vi) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF including those that may be issued or provided by the Fiscal Agent and its affiliates;

(vii) Investment agreements with domestic or foreign banks, insurance companies or corporations the long-term debt or claims paying ability of which or, in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a mono line financial guaranty insurance company, the claims paying ability or financial strength, of the guarantor is rated in at least the double A category by Standard & Poor's and Moody's; provided that, by the terms of the investment agreement:

(a) interest payments are to be made to the Fiscal Agent at times and in amounts as necessary to pay Annual Debt Service on the Bonds (if the funds invested pursuant to the investment agreement are from the Reserve Fund);

(b) the investment agreement shall provide that the invested funds are available for withdrawal without penalty or premium at any time upon not more than seven (7) days' prior notice (The City and the Fiscal Agent shall give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium payable.);

( c) the investment agreement shall provide that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof;

(d) the City and the Fiscal Agent receive the opinion of domestic counsel (which opinion shall be addressed to the City and the Fiscal Agent) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable, and addressed to, the City and the Fiscal Agent;

( e) the investment agreement shall provide that if during its term:

(1) the provider's (or its guarantor's) rating by either Standard & Poor's or Moody's falls below "AA-" or "Aa3", respectively, the provider shall, at its option, within ten (10) days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with the applicable state and federal laws ( other than by means of entries on the provider's books) to the City, the Fiscal Agent or a third party acting solely as agent therefor (the "Holder of the Collateral") collateral free and clear of any third-party liens or claims, the market value of which collateral is maintained at one hundred four percent (104%) of securities identified in clauses (i) and (ii) of this definition; or (ii) assign the investment agreement and all of its obligations thereunder to a financial institution mutually acceptable to the provider, the City and the Fiscal Agent which is rated either in the first or second highest category by Standard & Poor's and Moody's; and

(2) the provider's ( or its guarantor's) rating by either Standard & Poor' s or Moody's is withdrawn or suspended or falls below "A-" or "A3", respectively, the provider must, at the direction of the City or the Fiscal Agent, within ten (10) days of

B-7 receipt of such direction, repay the principal of and accrued but unpaid interest on the invested funds, in either case with no penalty or premium to the City or the Fiscal Agent; and

(f) the investment agreement shall provide and an opm10n of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this shall mean the Holder of the Collateral is in possession of such collateral); and

(g) the investment agreement shall provide that if during its term:

(1) the provider shall default in its payment obligations, the provider's obligations under the investment agreement shall, at the direction of the City or the Fiscal Agent, be accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate; and

(2) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ("event of insolvency"), the provider's obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate;

(viii) Commercial paper rated, at the time of purchase, "Prime - l" by Moody's and "A-1" or better by Standard & Poor' s;

(ix) Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one of the two highest rating categories assigned by them;

(x) Federal funds or bankers acceptances with a maximum term of one year of any bank, including the Fiscal Agent and its affiliates, which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - l" or "A3" or better by Moody's and "A-1" or better by Standard & Poor's;

(xi) Repurchase agreements which satisfy the following criteria:

(a) Repurchase agreements must be between the City or the Fiscal Agent and an entity which is:

(1) A primary dealer on the Federal Reserve reporting dealer list which is rated "A" or better by Standard & Poor's and Moody's, or

(2) A bank rated "A" or above by Standard & Poor' s and Moody's; or

(3) A corporation the long-term debt or claims paying ability of which, or in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a monoline financial guaranty insurance company, the claims paying ability or financial strength of the guarantor, is rated in at least the double A category by Standard & Poor's and Moody's.

(b) The written agreement must include the following:

(1) Securities which are acceptable for transfer are:

B-8 (A) direct obligations of the United States government, or

(B) obligations of federal agencies backed by the full faith and credit of the United States of America ( or the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)),

(2) The collateral must be delivered to the City or the Fiscal Agent (if the Fiscal Agent is not supplying the collateral) or a third party acting as agent for the Fiscal Agent (if the Fiscal Agent is supplying the collateral) before or simultaneous with payment (perfection by possession of certificated securities),

(3) (A) The securities must be valued weekly, marked-to-market at current market price plus accrued interest, and

(B) The value of the collateral must be at least equal to one hundred four percent (104%) of the amount of money transferred by the Fiscal Agent to the dealer, bank or corporation under the agreement plus accrued interest. If the value of the securities held as collateral is reduced below one hundred four percent (104%) of the value of the amount of money transferred by the Fiscal Agent, then additional acceptable securities and/or cash must be provided as collateral to bring the value of the collateral to one hundred four percent (104% ); provided, however, that if the securities used as collateral are those of FNMA or FHLMC, then the value of the collateral must equal to one hundred five percent (105%) of the amount of money transferred by the Fiscal Agent;

(xii) Forward delivery agreements (FDA) or forward purchase and sale agreements (FPSA) having as the underlying investment property investments of the type which are identified in the Agreement; and

(xiii) the Local Agency Investment Fund in the State Treasury of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code.

"Person" means natural persons, firms, corporations, limited liability companies, partnerships, associations, trusts and other entities.

"Principal Account" means the account by that name established in the Bond Fund by the Agreement.

"Principal Office" means the principal corporate trust office of the Fiscal Agent in Los Angeles, California or such other addresses as may be specified in writing by the Fiscal Agent; provided, however, that for purposes of the transfer, registration, exchange, payment and surrender of Bonds "Principal Office" means the office or agency of the Fiscal Agent at which, at any time, its corporate trust agency business shall be conducted or such other office or address as may be specified in writing by the Fiscal Agent.

"Proceeds," when used with reference to the Bonds, means the aggregate principal amount of the Bonds, plus accrued interest and premium, if any, less original issue discount if any.

"Qualified Reserve Account Credit Instrument" means (i) the Reserve Policy or (ii) an irrevocable standby or direct-pay letter of credit or Reserve Policy issued by a commercial bank or insurance company and deposited with the Fiscal Agent pursuant to the Agreement, provided that all of the following requirements are met by the City at the time of delivery thereof to the Fiscal Agent: (a) the long-term credit rating of such bank or insurance company is "A" (without regard to modifier) or higher; (b) such letter of credit or Reserve Policy has a term of at least twelve ( 12) months; ( c) such letter of credit or Reserve Policy has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Agreement; ( d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit or Reserve Policy to draw thereunder B-9 an amount equal to any deficiencies which may exist from time to time in the Interest Account and the Principal Account; and ( e) prior written notice is given pursuant to the Fiscal Agent Agreement before the effective date of any such Qualified Reserve Account Credit Instrument.

"Rates and Method of Apportionment of Special Tax" means the Amended and Restated Rates and Method of Apportionment for Improvement Area No. 2 for the District in the form attached as Exhibit "A" to the Amended Notice of Special Tax Lien, recorded with the County Recorder of Los Angeles County as instrument number 20111632574.

"Rebate Certificate" means the certificate delivered by the City upon the delivery of the Bonds relating to Section 148 of the Code, or any functionally similar replacement certificate.

"Rebate Fund" means the fund by that name established by the Agreement.

"Record Date" means the fifteenth (15th) day of the month next preceding the applicable Interest Payment Date whether or not such day is a Business Day.

"Regulations" means the temporary and permanent regulations of the United States Department of the Treasury promulgated under the Code.

"Representation Letter" means the representation letter which the City has delivered to The Depository Trust Company ("DTC") with respect to the utilization of the book-entry system maintained by DTC for the issuance and registration of bonds.

"Reserve Fund" means the fund by that name established by the Agreement.

"Reserve Policy" means a municipal bond debt service reserve insurance policy issued by the 2019 Bonds Insurer in an amount equal to the Reserve Requirement, which is deposited into the Reserve Fund relating to the Bonds.

"Reserve Requirement" means, on the date of any calculation, as determined by the City and provided in writing to the Fiscal Agent, the lesser of (i) ten percent (10%) of the proceeds of the sale of the Bonds, (ii) Maximum Annual Debt Service on the Bonds, or (iii) 125 percent of average Annual Debt Service on the Bonds; provided, however, such amount shall not exceed the Reserve Requirement calculated on the Closing Date and that the City may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements of the Agreement.

"Resolution" means Resolution No. 2019-C57, adopted by the City Council on November 18, 2019.

"Resolution of Formation" means Resolution No. 06-C39 dated June 5, 2006 together with Resolution No. l l-C890 certain amendments to the Rate and Method of Apportionment.

School District" means Azusa Unified School District.

"School District Certificate" means a certificate signed by the Superintendent or an Assistant Superintendent of the School District requesting the disbursement of funds from the School Facilities Account pursuant to the Agreement as approved by an Authorized Officer.

"School District Facilities" means the public school facilities of the School District, the construction and acquisition of which are to be financed with the Proceeds deposited in the School Facilities Account as specified in the School District Joint Community Facilities Agreement.

"School Facilities Account" means the account by that name established in the Improvement Fund by the Agreement. B-10 "School District Joint Community Facilities Agreement" means the Amended and Restated Joint Community Facilities Agreement, dated as of November 1, 2019, by and among the City, the School District and Rosedale Land Partners II.

"Securities Depositories" means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York, 10041-0099, Call Notification Department, Fax (212) 855-7232, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the City may designate in an Officer's Certificate delivered to the Fiscal Agent.

"Security Documents" shall mean the resolution, fiscal agent agreement, bond, and/or any additional or supplemental document executed in connection with the Bonds.

"Special Taxes" or "Special Tax" means the special taxes levied by the City Council on parcels of taxable property within Improvement Area No. 2 pursuant to the Act and the Rates and Method of Apportionment of Special Tax.

"Special Tax Consultant" means an engineer or financial consultant or other such person or firm with expertise in the apportionment and levy of special taxes in community facilities districts which is employed by the City to assist the City in levying the Special Taxes.

"Special Tax Fund" means the fund by that name established by the Agreement.

"Special Tax Prepayments" means amounts received by the City as prepayments of all or a portion of the Special Tax obligation of a parcel of property in Improvement Area No. 2.

"Special Tax Prepayments Account" means the account by that name established by the Fiscal Agent in the Bond Fund pursuant to the Agreement.

"Special Tax Revenues" means the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon.

"Standard & Poor's" shall mean S&P Global Ratings, a Standard & Poor's Financial Services LLC business, a national rating service with offices in New York, New York.

"Supplemental Agreement" means an agreement between the City and the Fiscal Agent that amends and supplements the Agreement as authorized by the Agreement.

THE BONDS

Parity Bonds

The District and the City covenant that except as provided below they will not issue any other obligations payable, as to principal or interest, from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues superior to or on a parity with the lien of the Bonds. Nothing in the Agreement shall, however, preclude, subject to the limitations contained under the Agreement, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California, which refunding bonds may be payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds so long as there is a debt service savings pursuant to the Act.

B-11 ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; BOND PROCEEDS FUND; SPECIAL TAX FUND; ADMINISTRATIVE EXPENSE FUND; COSTS OF ISSUANCE FUND

Improvement Fund

(A) Establishment of Improvement Fund. There is established by the Agreement, as a separate fund to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 IA No. 2 2019 Special Tax Bonds Improvement Fund." There are established as separate accounts in the Improvement Fund, to be held by the Fiscal Agent, the "City Facilities Account" and the "School Facilities Account" to the credit of which deposits shall be made as required by the Agreement. Moneys in the Improvement Fund, and all accounts therein, shall be held by the Fiscal Agent for the benefit of the City and the School District, as provided below, and shall be disbursed, except as otherwise provided in the Agreement, for the payment or reimbursement of the costs of the design, acquisition and construction of the Facilities as provided below.

(B) Procedure for Disbursement.

(1) City Facilities Account. Disbursements from the City Facilities Account shall be made by the Fiscal Agent upon receipt of a City Certificate which shall:

(a) be identified as a payment requisition and be sequentially numbered, i.e., "Requisition No. __/' ( except that no numbering shall be required if the City Certificate is a requisition for the full amount on deposit in the City Facilities Account);

(b) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid;

( c) certify that the amount required to be disbursed is for payment of costs related to the construction and acquisition of the City Facilities; and

( d) certify that no portion of the amount then being requested to be disbursed was set forth in any City Certificate previously filed with the Fiscal Agent requesting disbursement, and that the amount being requested is an appropriate disbursement from the City Facilities Account.

(2) School Facilities Account. Disbursements from the School Facilities Account shall be made by the Fiscal Agent upon receipt of a School District Certificate and shall:

(a) be identified as a payment requisition and be sequentially numbered, i.e., "Requisition No. __/' ( except that no numbering shall be required if the School District Certificate is a requisition for the full amount on deposit in the School Facilities Account);

(b) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid;

( c) certify that the amount required to be disbursed is for payment of costs related to the construction and acquisition of the School District Facilities as described in the School District Joint Community Facilities Agreement; and

( d) certify that no portion of the amount then being requested to be disbursed was set forth in any School District Certificate previously filed with the Fiscal Agent requesting disbursement, and that the amount being requested is an appropriate disbursement from the School Facilities Account; and

(e) be approved in writing by an Authorized Officer of the City. B-12 (C) Investment. Moneys in the Improvement Fund, and each account therein, shall be invested and deposited in accordance with the Fiscal Agent Agreement. Investment Earnings from amounts on deposit in the School Facilities Account shall be deposited in the City Facilities Account and used for the purposes of the City Facilities Account. Investment Earnings from amounts on deposit in the City Facilities Account shall be retained by the Fiscal Agent in such account to be used for the purposes of such account.

(D) Closing of Fund. Upon the filing of an Officer's Certificate stating that the portions of the Facilities which are to be financed with the moneys on deposit in the City Facilities Account have been completed and that all costs of such portions of the Facilities have been paid or are not required to be paid from the City Facilities Account of the Improvement Fund, and further stating that moneys on deposit in the City Facilities Account of the Improvement Fund are not needed to complete such portions of the Facilities or reimburse the cost thereof, the Fiscal Agent shall transfer the amount, if any, remaining in the City Facilities Account of the Improvement Fund to the Principal Account of the Bond Fund to be used to pay the principal of the Bonds, and the Fiscal Agent shall close the City Facilities Account of the Improvement Fund. Upon the filing of a School District Certificate stating that the portions of the Facilities which are to be financed with the moneys on deposit in the School Facilities Account have been completed and that all costs of such portions of the School Facilities have been paid or are not required to be paid from the School Facilities Account of the Improvement Fund, and further stating that moneys on deposit in the School Facilities Account of the Improvement Fund are not needed to complete such portions of the School Facilities or reimburse the cost thereof, the Fiscal Agent shall transfer the amount, if any, remaining in the School Facilities Account of the Improvement Fund to the Principal Account of the Bond Fund to be used to pay the principal of the Bonds, and the Fiscal Agent shall close the School Facilities Account of the Improvement Fund.

(E) Reliance on Certificates. Upon receipt of an Officer's Certificate or a School District Certificate delivered pursuant to the Agreement, the Fiscal Agent is authorized to act thereon without further inquiry and shall not be responsible for the accuracy of the statements made in such Officer's Certificate or School District Certificate or the application of the funds disbursed pursuant thereto, and shall be absolutely protected and incur no liability in relying on such Officer's Certificate or School District Certificate.

Special Tax Fund

(A) Establishment of Special Tax Fund. There is established by the Agreement, as a separate fund to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Special Tax Fund" to the credit of which the City shall deposit, as provided in the Agreement, not later than thirty (30) Business Days after receipt, all Special Tax Revenues received by the City. Moneys in the Special Tax Fund, and all accounts therein, shall be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds.

Notwithstanding the foregoing, any amounts received by the City which constitute Special Tax Prepayments shall be transferred by the City not later than thirty (30) Business Days after receipt to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to the Agreement.

(B) Disbursements. As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than ten (10) Business Days after such receipt, the Fiscal Agent shall withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund, an amount which is estimated by the City, in a written communication (which direction may be provided by email) from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely) to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year; provided that the amount deposited in the Administrative Expense Fund prior to the deposits to the Interest Account and the Principal Account of the Bond Fund, as provided below, shall not exceed the Maximum Administrative Expense Amount. From the amount then remaining on deposit in the Special Tax Fund, on or B-13 before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account and the Principal Account of the Bond Fund the amounts required for payment of interest on and principal of the Bonds as provided in the Agreement. Thereafter, the Fiscal Agent shall, as soon as the amount on deposit in the Special Tax Fund is sufficient, deposit in the Reserve Fund the amount, if any, which the City shall direct in a written communication (which direction may be provided by email) from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), to be withdrawn from the Special Tax Fund and deposited in the Reserve Fund to make the amount on deposit therein equal to the Reserve Requirement. No transfer shall be made without specific written communication (which direction may be provided by email) from the City.

On September 2 of each year, beginning on September 2, 2020 after all the deposits required by the Agreement have been made, the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, as determined by the City, shall not exceed the greater of (i) one year's earnings on such amounts, or (ii) one-twelfth (I/12th) of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing ( which direction may be provided by email) by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys shall be transferred from the Special Tax Fund to and deposited in the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement. Any such excess remaining in the Special Tax Fund after any such amount is transferred from the Special Tax Fund to the Reserve Fund, shall be transferred from the Special Tax Fund to and deposited in the Administrative Expense Fund. Any such excess amount may be transferred to the City to finance public improvements authorized pursuant to the Resolution of Formation.

(C) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with the Agreement. Investment Earnings shall be retained in the Special Tax Fund to be used for the purposes of such fund.

Administrative Expense Fund

(A) Establishment of Administrative Expense Fund. There is established by the Agreement, as a separate account to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 of the City of Azusa IA No. 2 2019 Special Tax Bonds Administrative Expense Fund" to the credit of which deposits shall be made as required by the Agreement. Moneys in the Administrative Expense Fund shall be held in trust by the Fiscal Agent for the benefit of the City, and shall be disbursed as provided below.

(B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent and paid to the City or its order upon receipt by the Fiscal Agent of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of such Administrative Expense.

(C) Investment. Subject to the provisions of the Agreement, moneys in the Administrative Expense Fund shall be invested and deposited in accordance with the Agreement. Investment Earnings shall be retained by the Fiscal Agent in the Administrative Expense Fund to be used for the purposes of such fund.

Costs of Issuance Fund

(A) Establishment of Costs of Issuance Fund. There is established by the Agreement, as a separate account to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Costs oflssuance Fund" to the credit of which a deposit shall be made as required by the Agreement. Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in the Agreement for the payment or reimbursement of Costs of Issuance.

B-14 (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by an Authorized Officer and delivered to the Fiscal Agent concurrently with the delivery of the Bonds. The Fiscal Agent shall pay all Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such requisition, or upon receipt of an Officer's Certificate requesting payment of a Cost oflssuance not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date. Each such invoice or Officer's Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. The Fiscal Agent shall maintain the Costs oflssuance Fund for a period of ninety (90) days from the Closing Date and shall then transfer and deposit any moneys remaining therein, including any Investment Earnings thereon, in the Interest Account of the Bond Fund.

(C) Investment. Moneys in the Costs oflssuance Fund shall be invested and deposited in accordance with the Agreement. Investment Earnings shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund.

SPECIAL TAX REVENUES; BOND FUND; RESERVE FUND

Pledge of Special Tax Revenues

The Bonds and any Parity Bonds shall be secured by a pledge of and lien upon (which shall be effected in the manner and to the extent provided in the Agreement) all of the Special Tax Revenues ( except the amount that will be deposited in the Administrative Expense Fund for each Fiscal Year pursuant to the Agreement, which shall not exceed the Maximum Administrative Expense Amount), all moneys on deposit in the Special Tax Fund, all moneys on deposit in the Bond Fund, and all moneys on deposit in the Reserve Fund. The Bonds shall be equally secured by a pledge of and lien upon the Special Tax Revenues and such moneys without priority for number, date of Bond, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premium upon the redemption of any thereof shall be and is secured by a pledge of and lien upon the Special Tax Revenues and such moneys. The Special Tax Revenues and all moneys deposited into such funds and such account are dedicated in their entirety to the payment of the principal of the Bonds, and interest and any premium on, the Bonds, as provided in the Agreement and in the Act, until all of the Bonds have been paid and retired or until moneys or Defeasance Securities have been set aside irrevocably for that purpose in accordance with the Agreement.

Bond Fund

(A) Deposits. There is established by the Agreement, as a separate account to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Bond Fund" to the credit of which deposits shall be made as required by the Agreement and any other provision therein or the Act. There are established in the Bond Fund, as separate accounts to be held by the Fiscal Agent, the "Interest Account" and the "Principal Account." There is also established in the Bond Fund, as a separate account to be held by the Fiscal Agent, the "Special Tax Prepayments Account" to the credit of which deposits shall be made as required by the Agreement. Moneys in the Bond Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.

(B) Disbursements. On or before each Interest Payment Date, the Fiscal Agent shall transfer from the Special Tax Fund and deposit into the following respective accounts in the Bond Fund, the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Special Tax Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: B-15 (1) Interest Account. On or before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on the Bonds on such date. No deposit need be made into the Interest Account on any Interest Payment Date if the amount on deposit therein is at least equal to the interest becoming due and payable on the Bonds on such date. All moneys in the Interest Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity).

(2) Principal Account. On or before each September 1, the Fiscal Agent shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds becoming due and payable on such date pursuant to the Agreement, or the redemption price of the Bonds ( consisting of the principal amount thereof and any applicable redemption premium) required to be redeemed on such date pursuant to any of the provisions of the Agreement. All moneys in the Principal Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of (i) paying the principal of the Bonds at the maturity thereof, or (ii) paying the principal of and premium (if any) on any Bonds upon the redemption thereof pursuant to the Agreement.

In the event that moneys on deposit in the Special Tax Fund will be insufficient on any Interest Payment Date for the Fiscal Agent to deposit the required amounts in the Interest Account and the Principal Account, as provided above, the Fiscal Agent shall deposit the available funds first to the Interest Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount of interest becoming due and payable on the Bonds on the Interest Payment Date, and shall then deposit the remaining available funds in the Special Tax Fund to the Principal Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount, if any, of principal becoming due and payable on the Bonds on the Interest Payment Date. If, after making such deposits to the Interest Account and the Principal Account, and after transferring moneys from the Reserve Fund to such accounts, as provided in the Agreement, the amount on deposit in the Principal Account is insufficient to pay the full amount of the principal of each of the Bonds that is to be redeemed on the Interest Payment Date, the Fiscal Agent shall make a prorated payment of the principal of each of such Bonds as specified in an Officer's Certificate provided to the Fiscal Agent.

(C) Special Tax Preoavments Account Deposits and Disbursements. Within ten (10) Business Days after receiving a Special Tax Prepayment the City shall deliver the amount thereof to the Fiscal Agent, together with an Officer's Certificate notifying the Fiscal Agent that the amount being delivered is a Special Tax Prepayment that is to be deposited in the Special Tax Prepayments Account. Upon receiving a Special Tax Prepayment from the City and such an Officer's Certificate, the Fiscal Agent shall deposit the amount of the Special Tax Prepayment in the Special Tax Prepayments Account. Such an Officer's Certificate may be combined with the Officer's Certificate that the City is required to deliver to the Fiscal Agent pursuant to the Agreement. A portion of the moneys on deposit in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent, upon receipt of an Officer's Certificate directing such transfer and specifying the amount to be transferred (upon which the Fiscal Agent may conclusively rely), to the Principal Account on the next date for which notice of the redemption of the Bonds can timely be given under the Agreement and shall be used to redeem the Bonds on the redemption date selected in accordance with the Agreement. The portion of the moneys on deposit in the Special Tax Prepayment Account representing funded interest on a portion of the Outstanding Bonds shall be transferred by the Fiscal Agent, upon receipt of an Officer's Certificate directing such transfer and specifying the amount to be transferred (upon which the Fiscal Agent may conclusively rely), to the Interest Account on or before each Interest Payment Date prior to and including the Interest Payment Date on which the redemption of such Bonds will occur. Pending such transfers, the moneys on deposit in the Special Tax Prepayments Account shall be invested in Permitted Investments, in accordance with the Agreement, of such type and at such yield as Bond Counsel shall determine is necessary to preserve the exclusion of interest on the Bonds from gross income for purposes of federal income taxation. Investment earnings on the moneys on deposit in the Special Tax Prepayments Account shall be retained in such account. The City shall provide direction in writing to the Trustee which shall include an exhibit of the Bond Counsel's determination. B-16 (D) Investment. Except as provided in the Agreement, moneys in the Bond Fund, including all accounts therein, shall be invested and deposited in accordance with the Agreement. Investment Earnings shall be retained in the Bond Fund, except to the extent they are required to be deposited by the Fiscal Agent in the Rebate Fund in accordance with the Agreement.

Amounts in the Bond Fund, including all accounts therein, shall also be withdrawn and deposited in the Rebate Fund as provided in the Agreement.

Reserve Fund

(A) Establishment of Fund. There is established by the Agreement, as a separate account to be held by the Fiscal Agent, the "Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Reserve Fund" to the credit of which a deposit shall be made as required by the Agreement, which deposit is equal to the Reserve Requirement or the deposit of a Qualified Reserve Account Credit Instrument in an amount equal to the Reserve Requirements, and to which deposits shall be made as provided in the Agreement; provided, however, the prior written consent of the 2019 Bonds Insurer shall be a condition precedent to the deposit of any Qualified Reserve Fund Credit Instrument, other than the Reserve Policy, provided in lieu of a cash deposit into the Reserve Fund. Notwithstanding anything to the contrary set forth in the Fiscal Agent Agreement, amounts on deposit in the Reserve Fund shall be applied solely to the payment of debt service due on the Bonds. Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of the principal of and interest and any premium on the Bonds and shall be subject to a lien in favor of the Owners of the Bonds.

(B) Use of Fund. Except as otherwise provided in the Agreement, all amounts on deposit in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Interest Account and the Principal Account of the Bond Fund in the event of any deficiency at any time in either of such accounts of the amount then required for payment of the principal of and interest and any premium on the Bonds or, in accordance with the provisions of the Agreement, for the purpose of redeeming Bonds.

(C) Transfer Due to Deficiency in Interest and Principal Accounts. Whenever transfer is made from the Reserve Fund to the Interest Account or the Principal Account due to a deficiency in either such account, the Fiscal Agent shall provide written notice thereof to the City.

(D) Transfer of Excess of Reserve Requirement. Whenever, on any September 2, the amount in the Reserve Fund, less Investment Earnings resulting from the investment of the funds therein that pursuant to the Agreement must be rebated to the United States, as previously directed by the City, exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the City of the amount of the excess. Upon receiving written direction (which direction may be provided by email) from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), the Fiscal Agent shall, subject to the requirements of the Agreement, transfer an amount from the Reserve Fund that will reduce the amount on deposit therein to an amount equal to the Reserve Requirement to the Interest Account and the Principal Account, in the priority specified in the Agreement, to be used for the payment of the interest on and principal of the Bonds on the next succeeding Interest Payment Date in accordance with the Agreement.

(E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund, together with the amount on deposit in the Special Tax Fund, is equal to or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall, upon receiving written direction (which direction may be provided by email) from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), transfer the amount in the Reserve Fund to the Interest Account and the Principal Account, in the priority specified in the Agreement, to be applied, on the next succeeding Interest Payment Date, to the payment and redemption, in accordance with the Agreement, of all of the Outstanding Bonds. In the event that the amount available to be so transferred from the Reserve Fund to the Interest Account and the Principal Account exceeds the amount required

B-17 to pay and redeem the Outstanding Bonds, the excess shall be transferred to the City to be used for any lawful purpose of the City.

(F) Transfers on Payment of Special Tax Obligations. Whenever the City receives a Special Tax Prepayment, the City shall by an Officer's Certificate notify the Fiscal Agent thereof and of the amount by which the Reserve Fund is to be reduced and that is transferable from the Reserve Fund to the Principal Account of the Bond Fund, which amount shall be specified in the Officer's Certificate. Each such Officer's Certificate shall be accompanied by a report of an Independent Financial Consultant verifying the accuracy of the calculation of the amount to be transferred from the Reserve Fund to the Principal Account ("Verification"). Upon receipt of each such Officer's Certificate and Verification, upon which the Fiscal Agent may conclusively rely, the Fiscal Agent shall at such time as the amount of such Special Tax Prepayment will be used to redeem Bonds, as provided in the Agreement, transfer the amount specified in such Officer's Certificate to the Principal Account and use such amount, together with the amount of such Special Tax Prepayment, to redeem Bonds, as provided in the Agreement. Notwithstanding the provisions of the Agreement, no amount shall be transferred from the Reserve Fund to the Principal Account if the amount on deposit in the Reserve Fund is, or as a result of such transfer would be, less than the Reserve Requirement.

(G) Investment. Moneys on deposit in the Reserve Fund shall be invested in Permitted Investments which do not have maturities extending beyond five (5) years; provided, however, if the Reserve Fund is invested in an investment agreement (as defined in clause (vii) of the definition of Permitted Investments in the Agreement) or a repurchase agreement (as defined in clause (xi) of such definition) such agreement may have a maturity longer than five ( 5) years if the Fiscal Agent is authorized by the provisions of such agreement to draw the full amount thereof, without penalty, if required for the purposes of the Reserve Fund. The City shall cause the Permitted Investments, other than such investment agreements, in which moneys on deposit in the Reserve Fund are invested to be valued at fair market value at least once in each Fiscal Year. Trustee's pricing service, as reflected on its monthly statements, satisfies fair market value.

(H) Provisions Related to the Reserve Policy.

(a) The District shall repay any draws under the Reserve Policy and pay all related reasonable expenses incurred by the 2019 Bonds Insurer and shall pay interest thereon from the date of payment by the 2019 Bonds Insurer at the Late Payment Rate. 'Late Payment Rate' means the lesser of (x) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate ('Prime Rate") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Bonds and (y) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the 2019 Bonds Insurer shall specify. If the interest provisions of this subparagraph (a) shall result in an effective rate of interest which, for any period, exceeds the limit of the usury or any other laws applicable to the indebtedness created herein, then all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied as additional interest for any later periods of time when amounts are outstanding hereunder to the extent that interest otherwise due hereunder for such periods plus such additional interest would not exceed the limit of the usury or such other laws, and any excess shall be applied upon principal immediately upon receipt of such moneys by the 2019 Bonds Insurer, with the same force and effect as if the District had specifically designated such extra sums to be so applied and the 2019 Bonds Insurer had agreed to accept such extra payment(s) as additional interest for such later periods. In no event shall any agreed-to or actual exaction as consideration for the indebtedness created in the Fiscal Agent Agreement exceed the limits imposed or provided by the law applicable to this transaction for the use or detention of money or for forbearance in seeking its collection.

B-18 Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw.

Amounts in respect of Policy Costs paid to the 2019 Bonds Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the 2019 Bonds Insurer on account of principal due, the coverage under the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve Policy. The obligation to pay Policy Costs shall be secured by a valid lien on all Special Tax Revenues pledged as security for the Bonds (subject only to the priority of payment provisions set forth under the Fiscal Agent Agreement).

All cash and investments in the Reserve Fund, if any, shall be transferred to the Bond Fund for payment of debt service on the Bonds before any drawing may be made on the Reserve Policy or any other Qualified Reserve Fund Credit Instrument credited to the Reserve Fund in lieu of cash ("Credit Facility"). Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Policy) on which there is available coverage shall be made on a pro-rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro-rata basis prior to replenishment of any cash drawn from the Reserve Fund. For the avoidance of doubt, "available coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative Credit Facility without regard to the legal or financial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw.

(b) If the District shall fail to pay any Policy Costs in accordance with the requirements of of the Fiscal Agent Agreement, the 2019 Bonds Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Fiscal Agent Agreement other than remedies which would adversely affect owners of the Bonds.

(c) The Fiscal Agent Agreement shall not be discharged until all Policy Costs owing to the 2019 Bonds Insurer shall have been paid in full. The District's obligation to pay such amounts shall expressly survive payment in full of the Bonds.

(d) The District shall include any Policy Costs then due and owing the 2019 Bonds Insurer in the calculation of the Additional Bonds test in the Fiscal Agent Agreement.

( e) The Fiscal Agent shall ascertain the necessity for a claim upon the Reserve Policy in accordance with the provisions of the Fiscal Agent Agreement and provide notice to the 2019 Bonds Insurer in accordance with the terms of the Reserve Policy at least five Business Days prior to each date upon which interest or principal is due on the Bonds. Where deposits are required to be made by the District with the Fiscal Agent to the Bond Fund for the Bonds more often than semi-annually, the Fiscal Agent shall be instructed to give notice to the 2019 Bonds Insurer of any failure of the District to make timely payment in full of such deposits within two Business Days of the date due.

OTHER COVENANTS OF THE CITY

Punctual Payment

The City will punctually pay or cause to be paid the principal of and interest and any premium on the Bonds when and as due in strict conformity with the terms of the Agreement and any Supplemental Agreement to the extent that the Special Tax Revenues are available therefor, and it will faithfully observe and perform all of the conditions, covenants and requirements of the Agreement and all Supplemental Agreements and of the Bonds.

B-19 Special Obligation

The Bonds are special obligations of the District and are payable solely from and secured solely by the Special Tax Revenues, the amounts in the Bond Fund, the Reserve Fund, the Special Tax Fund and Special Tax Prepayments.

Extension of Time for Payment

In order to prevent any accumulation of claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default under the Agreement, to the benefits of the Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded.

Against Encumbrances

The City shall not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds, including, but not limited to, moneys on deposit in the Special Tax Prepayments Account, superior to or on a parity with the pledge and lien created in the Agreement for the benefit of the Bonds, except as permitted by the Agreement.

Books and Accounts

The City shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund. Such books of record and accounts shall at all times during business hours, upon reasonable notice, be subject to the inspection of the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

Protection of Security and Rights of Owners

The City will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City.

Collection of Special Tax Revenues

The City shall comply with all requirements of the Act, including the enactment of necessary Ordinances, so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of the payment or collection of delinquent Special Taxes.

On or within five ( 5) Business Days of May I of each year, the Fiscal Agent shall provide the City with a notice stating the amount then on deposit in the Special Tax Fund, the Bond Fund and the Reserve Fund (including all accounts and sub-accounts therein), the monthly statements provided by the Fiscal Agent shall satisfy this notice requirement. The receipt of such notice by the City or the failure of the Fiscal Agent to give such notice shall in no way affect the obligations of the City under the following two paragraphs. The Fiscal Agent shall have no liability if it does not provide such notice to the City. Upon receipt of such notice, the City shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current Fiscal Year.

B-20 The City shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Act by August 10 of each year ( or such later date as may be authorized by the Act or any amendment thereof) that the Bonds are Outstanding, such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within Improvement Area No. 2 for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the City shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the tax roll. Notwithstanding provisions of the Agreement, the City Council may elect, as permitted by the Act, to collect the Special Taxes to be levied for any Fiscal Year directly from the owners of the parcels of taxable property upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll; provided that, in such event, the City shall otherwise comply with the provisions of the Agreement.

The City shall fix and levy the amount of Special Taxes within Improvement Area No. 2 required for the payment of the principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment or expenditure of the Reserve Fund, and the amount estimated to be sufficient to pay the Administrative Expenses during such calendar year. The Special Taxes so levied shall not exceed the authorized amounts for Improvement Area No. 2 as provided in the Rates and Method of Apportionment of Special Tax.

The Special Taxes shall be payable and be collected ( except in the event of judicial foreclosure proceedings pursuant to the Agreement) in the same manner and at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property.

The City will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53356.1 and 53356.8 of the California Government Code in any manner which would materially and adversely affect the interests of the Bondowners and, in particular, will not permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds and remaining Outstanding following such tender.

Levy of Special Taxes for Administrative Expenses

The City covenants that, to the extent that it is legally permitted to do so, (a) it will levy the Special Taxes for the payment of the Administrative Expenses which are expected to be incurred in each Fiscal Year, and (b) it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates (the "Maximum Rates") on then existing Developed Property in Improvement Area No. 2 below the amounts that are necessary to provide Special Tax Revenues in an amount equal to annual Administrative Expenses which shall not exceed the Maximum Administrative Expense Amount, plus an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds.

The City further covenants that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIII C of the California Constitution, which purports to reduce or otherwise alter the Maximum Rates, it will commence and pursue legal action seeking to preserve its ability to comply with its covenant contained in the Agreement.

Further Assurances

The City will adopt, make, execute and deliver any and all such further ordinances, resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the

B-21 performance of the Agreement, and for better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Agreement.

Tax Covenants

The City covenants that:

(A) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of the initial issuance and delivery of the Bonds, would have caused any of the Bonds to be "arbitrage bonds" within the meaning of Section 103(b) and Section 148 of the Code;

(B) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would result in loss of exclusion from gross income for purposes of federal income taxation under Section I 03(a) of the Code of interest paid with respect to the Bonds;

(C) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would have caused any of the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code;

(D) It will comply with the Rebate Certificate as a source of guidance for achieving compliance with the Code; and

(E) In order to maintain the exclusion from gross income for purposes of federal income taxation of interest paid with respect to the Bonds, it will comply with each applicable requirement of Section I 03 and Sections 141 through 150 of the Code.

The covenants of the City contained in the Agreement shall survive the payment, redemption or defeasance of Bonds pursuant to the Agreement.

Covenant to Foreclose

The City covenants with and for the benefit of the Owners of the Bonds (i) that it will order, and cause to be commenced, judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of $10,000 by the October I following the close of the Fiscal Year in which such Special Taxes were due, and (ii) that it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October I following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City shall not be required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists (or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency.

Prepayment of Special Taxes

The City shall cause all applications of owners of property in Improvement Area No. 2 to prepay and satisfy the Special Tax obligation for their property to be reviewed by the Special Tax Consultant and shall not accept any such prepayment unless such consultant certifies in writing that following the acceptance of the proposed prepayment by the City and the redemption of Bonds with such prepayment, (a) the ratio of (i) the maximum amount of the Special Taxes that may be levied on all Developed Property in Improvement Area No. 2 which following such prepayment will be subject to the levy of the Special Taxes to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption (e.g., 1.10 to 1. 0) plus Administrative Expenses, which shall not exceed the Maximum Administrative Expense Amount for the fiscal year in which such prepayment is made will not be less than such ratio as it existed prior to such prepayment, and B-22 (b) the maximum amount of the Special Taxes that may be levied on Developed Property at build-out of the property in Improvement Area No. 2, as then approved by the City, will be equal to at least one hundred ten percent (110%) of Maximum Annual Debt Service on such Outstanding Bonds plus Administrative Expenses, which shall not exceed the Maximum Administrative Expense Amount for the fiscal year in which such prepayment is made.

Calculation of Prepayments

The City will cause all Special Tax Prepayments to be calculated to include the amount of the premium on the Outstanding Bonds that will be redeemed with the Special Tax Prepayment and negative arbitrage on the investment of the Special Tax Prepayment from the date of receipt until the Interest Payment Date upon which the Special Tax Prepayment and the amount to be transferred from the Reserve Fund to the Principal Account pursuant to the Agreement will be used to redeem Outstanding Bonds pursuant to the Agreement. The City will not include in any calculation of the amount of any Special Tax Prepayment for any parcel of taxable property in Improvement Area No. 2 a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement.

Continuing Disclosure

The City covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate.

Accountability Measures

The City shall comply with the requirements of Section 53410 of the California Government Code with respect to the deposit and expenditure of the Proceeds of the sale of the Bonds and shall cause the appropriate officer of the City to file a report with the City Council no later than January 2, 2020, and annually thereafter, which shall contain the information required by Section 53411 of the California Government Code with respect to the expenditure of the Proceeds.

Provisions Related to the Insurer

Notwithstanding anything in the Fiscal Agent Agreement to the contrary, all provisions of this section are intended for the 2019 Bonds Insurer's benefit and shall be controlling.

(a) No grace period for a covenant default shall exceed thirty (30) days or be extended for more than sixty (60) days, without the prior written consent of the 2019 Bonds Insurer. No grace period shall be permitted for payment defaults.

(b) The District shall pay or reimburse the 2019 Bonds Insurer any and all charges, fees, costs and expenses that the 2019 Bonds Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the Fiscal Agent Agreement and any related document ( each a" Related Document"); (ii) the pursuit of any remedies under the any Related Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, any Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with any Related Document or the transactions contemplated thereby, other than costs resulting from the failure of the 2019 Bonds Insurer to honor its obligations under the Insurance Policy. The 2019 Bonds Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Related Documents.

(c) The notice address of the 2019 Bonds Insurer is: Assured Guaranty Municipal Corp., 1633 Broadway, New York, New York 10019, Attention: Managing Director-Surveillance, Telephone: (212) 974-0100; Telecopier: (212) 339-3556. In each case in which notice or other communication refers

B-23 to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED."

(d) The 2019 Bonds Insurer shall be provided with the following information by the District or Fiscal Agent, as the case may be:

(i) Annual audited financial statements within 270 days after the end of the District's fiscal year (together with a certification of the City that it is not aware of any default or Event of Default under the Fiscal Agent Agreement), together with such other information, data or reports as the 2019 Bonds Insurer shall reasonably request from time to time;

(ii) Notice of any draw upon the Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds;

(iii) Notice of any default known to the Fiscal Agent or District within five Business Days after knowledge thereof;

(iv) Prior notice of the advance refunding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof;

(v) Notice of the resignation or removal of the Fiscal Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto;

(vi) Notice of the commencement of any proceeding by or against the District commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding");

(vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Bonds;

(viii) A full original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to the Related Documents; and

(ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of the Related Documents except to the extent posted with Information Services.

In addition, to the extent that the District has entered into a continuing disclosure agreement, covenant or undertaking with respect to the Bonds, all information furnished pursuant to such agreements shall also be provided to the 2019 Bonds Insurer, simultaneously with the furnishing of such information.

( e) The 2019 Bonds Insurer shall have the right to receive such additional information as it may reasonably request.

(f) The City will permit the 2019 Bonds Insurer to discuss the affairs, finances and accounts of the District or any information the 2019 Bonds Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the City and will use commercially reasonable efforts to enable the 2019 Bonds Insurer to have access to the facilities, books and records of the City on any business day upon reasonable prior notice.

(g) The Fiscal Agent shall notify the 2019 Bonds Insurer of any known failure of the City to provide notices, certificates and other information under the Fiscal Agent Agreement. B-24 (h) In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Fiscal Agent Agreement would adversely affect the security for the Bonds or the rights of the Owners, the Fiscal Agent shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Insurance Policy.

(i) No contract shall be entered into or any action taken by which the rights of the 2019 Bonds Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the 2019 Bonds Insurer.

(i) The 2019 Bonds Insurer shall be deemed to be the sole Owner of the Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the Bonds are entitled to take pursuant to the Fiscal Agent Agreement pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Fiscal Agent. In furtherance thereof and as a term of the Fiscal Agent Agreement and each Bond, the Fiscal Agent and each Owner of the Bonds appoint the 2019 Bonds Insurer as their agent and attorney-in-fact with respect to the Bonds and agree that the 2019 Bonds Insurer may at any time during the continuation of any proceeding by or against the Successor Agency under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a "Claim"), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedes or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, the Fiscal Agent and each Owner of the Bonds delegate and assign to the 2019 Bonds Insurer, to the fullest extent permitted by law, the rights of the Fiscal Agent and each Owner of the Bonds with respect to the Bonds in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. Remedies granted to the Owners shall expressly include mandamus.

The rights granted to the 2019 Bonds Insurer under the Fiscal Agent Agreement or any other Related Document to request, consent to or direct any action are rights granted to the 2019 Bonds Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the 2019 Bonds Insurer of such rights is merely an exercise of the 2019 Bonds Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Owners of the Bonds and such action does not evidence any position of the 2019 Bonds Insurer, affirmative or negative, as to whether the consent of the Owners of the Bonds or any other person is required in addition to the consent of the 2019 Bonds Insurer.

(k) Upon the occurrence of an extraordinary optional, special or extraordinary mandatory redemption in part, the selection of the Bonds to be redeemed shall be subject to the approval of the 2019 Bonds Insurer. The exercise of any provision of the Fiscal Agent Agreement which permits the purchase oflnsured 2019 Bonds in lieu of redemption shall require the prior written approval of the 2019 Bonds Insurer if any Insured 2019 Bond so purchased is not cancelled upon purchase.

(1) Amounts paid by the 2019 Bonds Insurer under the 2019 Bonds Insurance Policy shall not be deemed paid for purposes of the Fiscal Agent Agreement and the Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the District in accordance with the Fiscal Agent Agreement. The Fiscal Agent Agreement shall not be discharged unless all amounts due or to become due to the 2019 Bonds Insurer have been paid in full or duly provided for.

(m) Claims Upon the 2019 Bonds Insurance Policy and Payments by and to the 2019 Bonds Insurer,

If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Fiscal Agent, after making all transfers

B-25 and deposits required under the Fiscal Agent Agreement, moneys sufficient to pay the principal of and interest on the Insured 2019 Bonds due on such Payment Date, the Fiscal Agent shall give notice to the 2019 Bonds Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Insured 2019 Bonds due on such Payment Date, the Fiscal Agent shall make a claim under the 2019 Bonds Insurance Policy and give notice to the 2019 Bonds Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Insured 2019 Bonds and the amount required to pay principal of the Insured 2019 Bonds, confirmed in writing to the 2019 Bonds Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the 2019 Bonds Insurance Policy.

The Fiscal Agent shall designate any portion of payment of principal on Insured 2019 Bonds paid by the 2019 Bonds Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Insured 2019 Bonds registered to the then-current Owner of the Insured 2019 Bonds, whether DTC or its nominee or otherwise, and shall issue a replacement Insured 2019 Bond to the 2019 Bonds Insurer, registered in the name of Assured Guaranty Municipal Corp., in a principal amount equal to the amount of principal so paid ( without regard to authorized denominations); provided that the Fiscal Agent's failure to so designate any payment or issue any replacement Insured 2019 Bond shall have no effect on the amount of principal or interest payable by the District on any Insured 2019 Bond or the subrogation rights of the 2019 Bonds Insurer.

The Fiscal Agent shall keep a complete and accurate record of all funds deposited by the 2019 Bonds Insurer into the Policy Payments Account ( defined below) and the allocation of such funds to payment of interest on and principal of any Insured 2019 Bond. The 2019 Bonds Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Fiscal Agent.

Upon payment of a claim under the 2019 Bonds Insurance Policy, the Fiscal Agent shall establish a separate special purpose trust account for the benefit of Owners of the Insured 2019 Bonds referred to in the Fiscal Agent Agreement as the "Policy Payments Account" and over which the Fiscal Agent shall have exclusive control and sole right of withdrawal. The Fiscal Agent shall receive any amount paid under the 2019 Bonds Insurance Policy in trust on behalf of Owners of the Insured 2019 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Fiscal Agent to Owners of the Insured 2019 Bonds in the same manner as principal and interest payments are to be made with respect to the Insured 2019 Bonds under the sections of the Fiscal Agent Agreement regarding payment of 2019 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, the District agrees to pay to the 2019 Bonds Insurer, solely from the Special Tax Revenues, (i) a sum equal to the total of all amounts paid by the 2019 Bonds Insurer under the 2019 Bonds Insurance Policy (the "Insurer Advances"); and (ii) interest on such Insurer Advances from the date paid by the 2019 Bonds Insurer until payment thereof in full, payable to the 2019 Bonds Insurer at the Late Payment Rate per annum ( collectively, the "Insurer Reimbursement Amounts"). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Insured 2019 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The District covenants and agrees that the Insurer B-26 Reimbursement Amounts are secured by a lien on and pledge of the Special Tax Revenues and payable from such Special Tax Revenues on a parity with debt service due on the 2019 Bonds.

Funds held in the Policy Payments Account shall not be invested by the Fiscal Agent and may not be applied to satisfy any costs, expenses or liabilities of the Fiscal Agent. Any funds remaining in the Policy

Payments Account following a Payment Date shall promptly be remitted to the 2019 Bonds Insurer.

(n) The 2019 Bonds Insurer shall, to the extent it makes any payment of principal of or interest on the Insured 2019 Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2019 Bonds Insurance Policy (which subrogation rights shall also include the rights of any such recipients in connection with any Insolvency Proceeding). Each obligation of the District to the 2019 Bonds Insurer under the Related Documents shall survive discharge or termination of such Related Documents.

( o) After payment of reasonable expenses of the Fiscal Agent, the application of funds realized upon default shall be applied to the payment of expenses of the District or rebate only after the payment of past due and current debt service on the Bonds and amounts required to restore the Reserve Fund to the Reserve Requirement.

(p) The 2019 Bonds Insurer shall be entitled to pay principal or interest on the Insured 2019 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the District ( as such terms are defined in the 2019 Bonds Insurance Policy), whether or not the 2019 Bonds Insurer has received a Notice of Nonpayment (as such terms are defined in the 2019 Bonds Insurance Policy) or a claim upon the 2019 Bonds Insurance Policy.

(q) So long as any Insured Bonds remain outstanding or any amounts are owed to the 2019 Bonds Insurer by the District, the City shall not enter into any interest rate exchange agreement, cap, collar, floor, ceiling or other agreement or instrument involving reciprocal payment obligations between the District and a counterparty based on interest rates applied to a notional amount of principal, without the prior written consent of the 2019 Bonds Insurer.

INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY

Deposit and Investment of Moneys in Funds

Subject in all respects to the provisions of the Agreement, moneys in any fund or account created or established by the Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer's Certificate, the Fiscal Agent shall hold funds uninvested. The Fiscal Agent shall not have any responsibility for determining the legality of any Permitted Investments. The Fiscal Agent shall have no obligation to pay additional interest or maximize investment income on any funds held by it. Neither the City nor the Owners of the Bonds shall have any claim of any kind against the Fiscal Agent in connection with investments properly made pursuant to the Agreement. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account, subject, however, to the requirements of the Agreement for transfer of Investment Earnings in funds and accounts.

The Fiscal Agent shall not incur any liability for losses arising from any investments made pursuant to the Agreement. For purposes of determining the amount on deposit in any fund or account held under the

B-27 Agreement, all Permitted Investments or investments credited to such fund or account shall be valued at the cost thereof ( excluding accrued interest and brokerage commissions, if any).

Subject in all respects to the provisions of the Agreement, investments in any and all funds and accounts may be commingled in a single fund for purposes of making, holding and disposing of investments, notwithstanding provisions in the Agreement for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent under the Agreement, provided that the Fiscal Agent shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in the Agreement.

The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City or the District the right to receive brokerage confirmations of securities transactions as they occur, the City for itself and the District specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent shall furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent under the Agreement.

Rebate Fund; Rebate to the United States

There is created by the Agreement, to be held by the Fiscal Agent, as a separate account distinct from all other funds and accounts held by the Fiscal Agent under the Agreement, the Rebate Fund. The Fiscal Agent shall, in accordance with written directions ( which direction may be provided by email) received from an Authorized Officer, deposit into the Rebate Fund moneys transferred by the City to the Fiscal Agent pursuant to the Rebate Certificate or moneys transferred by the Fiscal Agent from the Reserve Fund. The Rebate Fund shall be held either uninvested or invested only in Federal Securities at the written direction of the City. Moneys on deposit in the Rebate Fund shall be applied only to payments made to the United States, to the extent such payments are required by the Rebate Certificate. The Fiscal Agent shall, upon written request and direction of the City, make such payments to the United States.

The Fiscal Agent may rely conclusively upon the City's determinations, calculations and certifications required by the Agreement. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City's calculations under the Agreement. The Fiscal Agent's sole responsibilities under the Agreement are to follow the written instructions of the City pertaining thereto. The City shall be responsible for any fees and expenses incurred by the Fiscal Agent pursuant to the Agreement.

The Fiscal Agent shall, upon written request and direction from the City, transfer to or upon the order of the City any moneys on deposit in the Rebate Fund in excess of the amount, if any, required to be maintained or held therein in accordance with the Rebate Certificate.

Liability of City

The City shall not incur any responsibility in respect of the Bonds or the Agreement other than in connection with the duties or obligations explicitly in the Agreement or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of its duties under the Agreement, except for its own negligence or willful default. The City shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Fiscal Agent in the Agreement or of any of the documents executed by the Fiscal Agent in connection with the Bonds.

In the absence of bad faith, the City may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the City and conforming to the requirements of the Agreement. The City shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts.

B-28 No provision of the Agreement shall require the City to expend or risk its own general funds or otherwise incur any financial liability ( other than with respect to the Special Tax Revenues) in the performance of any of its obligations under the Agreement, or in the exercise of and of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

The City may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under the Agreement in good faith and in accordance therewith.

Whenever in the administration of its duties under the Agreement the City shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Agreement, such matter (unless other evidence in respect thereof be specifically prescribed in the Agreement) may, in the absence of willful misconduct on the part of the City, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, and such certificate shall be full warranty to the City for any action taken or suffered under the provisions of the Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the City may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

Employment of Agents by City

In order to perform its duties and obligations under the Agreement, the City may employ such persons or entities as it deems necessary or advisable. The City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith under the Agreement, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.

THE FISCAL AGENT

Appointment of Fiscal Agent

Wilmington Trust, National Association is appointed Fiscal Agent, registrar and paying agent for the Bonds under the Agreement. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in the Agreement, and no implied covenants or obligations shall be read into the Agreement against the Fiscal Agent.

Any company into which the Fiscal 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 Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the Agreement, shall be the successor to the Fiscal Agent without the execution or filing of any paper or any further act, anything to the contrary in the Agreement notwithstanding.

The City may, upon a 30-day notice of removal, remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, national banking association, corporation or trust company having a combined capital ( exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. If such bank, national banking association, corporation or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of the Agreement, combined capital and surplus of such bank, national banking association or

B-29 trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

The Fiscal Agent may at any time resign by giving written notice to the City and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent.

If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of the Agreement within forty-five ( 45) days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent, at the expense of the City, or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent.

Liability of Fiscal Agent

The recitals of facts, covenants and agreements in the Agreement and in the Bonds contained shall be taken as statements, covenants and agreements of the City and the District, and the Fiscal Agent assumes no responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of the Agreement or of the Bonds, nor shall the Fiscal Agent incur any responsibility in respect thereof, other than in connection with the duties or obligations in the Agreement or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties under the Agreement, except for its own negligence or willful misconduct. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds.

In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of the Agreement. Except as provided in the Agreement, the Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of the Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of the Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument.

The Fiscal Agent shall not be liable for any error of judgment made in good faith by the Fiscal Agent unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts.

No provision of the Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Agreement, or in the exercise of any of its rights or powers.

The Fiscal Agent shall not be responsible for accounting for, or paying to, any party to the Agreement, including, but not limited to the City and the Owners, any returns on or benefit from funds held for payment of unredeemed Bonds or outstanding checks and no calculation of the same shall affect, or result in any offset against, fees due to the Fiscal Agent under the Agreement.

The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by the Agreement at the request or direction of any of the Owners pursuant to the Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

B-30 The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent.

All indemnification and releases from liability granted in the Agreement to the Fiscal Agent shall extend to the directors, officers and employees of the Fiscal Agent.

The Fiscal Agent shall have the right to accept and act upon instructions, including funds transfer instructions ("Instructions") given pursuant to the Agreement and delivered using Electronic Means ("Electronic Means" shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Fiscal Agent, or another method or system specified by the Fiscal Agent as available for use in connection with its services under the Agreement); provided, however, that the City shall provide to the Fiscal Agent an incumbency certificate listing officers with the authority to provide such Instructions ("Authorized Officers") and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent Instructions using Electronic Means and the Fiscal Agent in its discretion elects to act upon such Instructions, the Fiscal Agent's understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Fiscal Agent cannot determine the identity of the actual sender of such Instructions and that the Fiscal Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Fiscal Agent have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Fiscal Agent and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent's reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Fiscal Agent, including without limitation the risk of the Fiscal Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Fiscal Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Fiscal Agent immediately upon learning of any compromise or unauthorized use of the security procedures.

Information

The Fiscal Agent shall provide to the City such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent under the Agreement as the City shall reasonably request, including, but not limited to, quarterly statements reporting funds held and transactions by the Fiscal Agent.

Notice to Fiscal Agent

The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent may consult with counsel, who may be counsel to the City, with regard to legal questions, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Fiscal Agent under the Agreement in good faith and in accordance therewith.

Whenever in the administration of its duties under the Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Agreement, such matter (unless other evidence in respect thereof be specifically prescribed in the Agreement) may, in the

B-31 absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warranty to the Fiscal Agent for any action taken or suffered under the provisions of the Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

Compensation, Indemnification

The City shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under the Agreement, and also all reasonable expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under the Agreement, and the Fiscal Agent shall have a first priority lien therefor on any funds at any time held by it in the Administrative Expense Fund, and the Fiscal Agent shall pay and reimburse all expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in connection therewith from the funds held by it in the Administrative Expense Fund. The City further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents, harmless against any liabilities, costs, claims, expenses or charges of any kind whatsoever (including fees and expenses of its attorneys) which it may incur in the exercise and performance of its powers and duties under the Agreement which are not due to its negligence or willful misconduct. The obligation of the City under the Agreement shall survive resignation or removal of the Fiscal Agent under the Agreement and payment of the Bonds and discharge of the Agreement.

Books and Accounts

The Fiscal Agent shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions made by it to the expenditure of amounts disbursed from the Bond Fund, the Special Tax Fund, the Administrative Expense Fund, the Reserve Fund and the Costs of Issuance Fund. Such books of record and accounts shall, upon reasonable notice, at all times during business hours be subject to the inspection of the City and the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.

MODIFICATION OR AMENDMENT OF THE AGREEMENT

Amendments Permitted

(A) The Agreement and the rights and obligations of the District and the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of the Owners, or with the written consent, without a meeting, of the Owners of at least sixty percent ( 60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Agreement. No such modification or amendment shall (i) extend the maturity of any Bond or the time for paying interest thereon, or otherwise alter or impair the obligation of the City on behalf of the District to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation of any pledge of or lien upon the Special Tax Revenues, or the moneys on deposit in the Special Tax Fund, the Bond Fund or the Reserve Fund, superior to or on a parity with the pledge and lien created for the benefit of the Bonds ( except as otherwise permitted by the Act, the laws of the State of California or the Agreement), (iii) reduce the percentage of Bonds required for the amendment, or (iv) reduce the principal amount of or redemption premium on any Bond or reduce the interest rate thereon. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. The Fiscal Agent shall be furnished an opinion of counsel that any such Supplemental Agreement entered into by the City and the Fiscal Agent complies with the provisions of the Agreement and the Fiscal Agent may conclusively rely on such op1mon.

B-32 (B) The Agreement and the rights and obligations of the District and the City and the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes:

(1) to add to the covenants and agreements of the District and the City in the Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power reserved to or conferred upon the City in the Agreement;

(2) to make modifications not adversely affecting any Outstanding series of Bonds of the District in any material respect;

(3) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provisions of the Agreement, or in regard to questions arising under the Agreement, as the City and the Fiscal Agent may deem necessary or desirable and not inconsistent with the Agreement, and which shall not adversely affect the rights of the Owners;

(4) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Code relating to required rebate of moneys to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the Bonds or to conform with the Regulations; or

(5) to provide for the issuance of Parity Bonds pursuant to the Agreement, or to pay and discharge the indebtedness of a portion of the Outstanding Bonds ( a "Partial Discharge") pursuant to the Agreement; provided that following the issuance of such Parity Bonds Maximum Annual Debt Service on the Bonds that will remain Outstanding following such Partial Discharge and such Parity Bonds will not be more in any subsequent Bond Year than Maximum Annual Debt Service on the Outstanding Bonds before the issuance of such Parity Bonds.

Owners' Meetings

The City may at any time call a meeting of the Owners. In such event, the City is authorized to fix the time and place of any such meeting and to provide for the giving of notice thereof and to fix and adopt rules and regulations for the conduct of the meeting.

Procedure for Amendment with Written Consent of Owners

The City and the Fiscal Agent may at any time enter into a Supplemental Agreement amending the provisions of the Bonds or of the Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by the Agreement, to take effect when and as provided in the Agreement. A copy of the Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, postage prepaid, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of the Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as provided in the Agreement.

Such a Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the 2019 Bonds Insurer and Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in the Agreement) and a notice shall have been mailed as provided in the Agreement. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by the Agreement. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice provided for in the Agreement has been mailed.

B-33 After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner provided in the Agreement for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in the Agreement (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the documents required by the Agreement to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding ( except as otherwise specifically provided in the Agreement) upon the City, the District and the Owners of all Bonds then Outstanding at the expiration of sixty ( 60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60)-day period.

Disqualified Bonds

Bonds owned or held for the account of the City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in the Agreement, and shall not be entitled to vote upon, consent to, or participate in any action provided for in the Agreement. Upon request of the Fiscal Agent, the City shall specify to the Fiscal Agent those Bonds disqualified pursuant to the Agreement and the Fiscal Agent may conclusively rely on such certificate.

Effect of Supplemental Agreement

From and after the time any Supplemental Agreement becomes effective pursuant to the Agreement, the Agreement shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Agreement of the City and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced under the Agreement subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of the Agreement for any and all purposes.

Endorsement or Replacement of Bonds Issued After Amendments

The City may determine that Bonds issued and delivered after the effective date of any action taken as provided in the Agreement shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and upon presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that new Bonds, so modified as in the opinion of the City is necessary to conform to such action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for like Bonds then Outstanding, upon surrender of such Bonds.

Amendatory Endorsement of Bonds

The provisions of the Agreement shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.

MISCELLANEOUS

Benefits of Agreement Limited to Parties

Nothing in the Agreement, expressed or implied, is intended to give to any person other than the City, the Fiscal Agent, the 2019 Bonds Insurer and the Owners, any right, remedy or claim under or by reason of the B-34 Agreement. Any covenants, stipulations, promises or agreements in the Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent.

Discharge of Agreement

If the City shall pay and discharge the indebtedness on all or a portion (a "Partial Discharge") of the Outstanding Bonds in any one or more of the following ways:

(A) by well and truly paying or causing to be paid the principal of and interest and any premium on such Bonds, as and when the same become due and payable;

(B) by depositing with the Fiscal Agent, in trust, at or before maturity, an amount of money which, together with the amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums, if any; or

(C) by irrevocably depositing with the Fiscal Agent, in trust, cash or non-callable Defeasance Securities in such amount as the City shall determine, as confirmed by an Independent Financial Consultant (which shall be a firm of certified public accountants that specializes in making such determinations), will, together with the interest to accrue thereon and amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City and confirmed by such Independent Financial Consultant, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in the Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any such Bonds shall not have been surrendered for payment, the pledge of the Special Tax Revenues and other funds and accounts provided for in the Agreement and all other obligations of the City and the District under the Agreement with respect to such Bonds shall cease and terminate, except the obligation of the City to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon, the obligation of the City to pay all amounts owing to the Fiscal Agent pursuant to the Agreement, and the obligations of the City pursuant to the covenants contained in the Agreement; and thereafter Special Tax Revenues shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent. The satisfaction and discharge of the Agreement as to all of the Outstanding Bonds shall be without prejudice to the rights of the Fiscal Agent to charge and be reimbursed by the City for the expenses which it shall thereafter incur in connection with the Agreement.

Any funds held by the Fiscal Agent to pay and discharge the indebtedness on such Bonds, upon payment of all fees and expenses of the Fiscal Agent, which are not required for such purpose, shall be paid over to the City.

B-35 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXC

FORM OF CONTINUING DISCLOSURE CERTIFICATE OF THE CITY

Upon issuance ofthe Bonds, the City proposes to enter into a Continuing Disclosure Certificate in substantially the following form:

This Continuing Disclosure Certificate, dated as of December 1, 2019 (the "Disclosure Certificate"), is executed and delivered by the City of Azusa (the "Issuer"), for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the "District"), in connection with the issuance and delivery by the Issuer of its $20,525,000 City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds"). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of December 1, 2019 (the "Fiscal Agent Agreement"), by and between the Issuer and Wilmington Trust, National Association, as fiscal agent (the "Fiscal Agent"). The Issuer covenants as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.

SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

"Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

"Annual Report Date" shall mean the date that is nine (9) months after the end of the Issuer's fiscal year ( currently March 31 based on the Issuer's fiscal year end of June 30).

"Beneficial Owner" shall mean any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income purposes.

"Disclosure Representative" shall mean the City Manager or the Director of Finance of the Issuer, or their designee, or such other officer or employee as the Issuer shall designate in writing from time to time.

"Dissemination Agent" shall mean, initially, the Issuer, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the then current Dissemination Agent a written acceptance of such designation.

"Financial Obligation" shall mean (a) a debt obligation; (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or ( c) guarantee of (a) or (b). The term "Financial Obligation" does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.

"Fiscal Year" shall mean the period from July 1 to June 30, or any other period selected by the Issuer as its fiscal year.

"Improvement Area No. 2" shall mean Improvement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 (Rosedale).

"Listed Events" shall mean any of the events listed in Section 5(a) and (b) of this Disclosure Certificate.

"MSRB" shall mean the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other

C-1 repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future

"Official Statement" shall mean the Official Statement dated December 3, 2019 relating to the Bonds.

"Participating Underwriter" shall mean the original Underwriter' of the Bonds that are required to comply with the Rule in connection with offering of the Bonds.

"Rule" shall mean 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" shall mean the State of California.

SECTION 3. Provision of Annual Reports.

(a) The Issuer shall, not later than the Annual Report Date, commencing with the report due on March 31, 2020, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report; and provided further that the first Annual Report shall consist solely of the Official Statement.

An Annual Report shall be provided at least annually notwithstanding any Fiscal Year longer than 12 calendar months. The Issuer's Fiscal Year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The Issuer will promptly notify the MSRB and the Fiscal Agent of a change in its Fiscal Year.

(b) Not later than fifteen (15) business days prior to each Annual Report Date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner in the manner prescribed by the MSRB.

( c) The Dissemination Agent shall: (i) determine each year prior to March 1 the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (b) if the Dissemination Agent is other than the Issuer, certify to the Issuer that the Annual Report has been filed with the MSRB pursuant to this Disclosure Certificate, and stating, to the extent that it can confirm such filing of the Annual Report, the date that it was filed.

SECTION 4. Content of Annual Report. The Issuer's Annual Report shall contain or include by reference:

(a) The audited financial statements of the Issuer for the most recent Fiscal Year of the Issuer then ended. If the Issuer prepares audited financial statements and if the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Fiscal Agent Agreement. Audited financial statements, if prepared by the Issuer, shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide the information referenced in Section 8( d) below.

C-2 (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information:

(i) the principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report;

(ii) the balance in each fund under the Fiscal Agent Agreement as of the September 2 preceding the filing of the Annual Report;

(iii) any changes to the Rate and Method of Apportionment of the Special Taxes approved or submitted to the qualified electors for approval prior to the filing of the Annual Report and a summary of the facts related to the collection of any Backup Special Tax and a description of any parcels for which the Special Taxes have been prepaid, including the amount prepaid, since the date of the last Annual Report;

(iv) in the event assessed valuations have decreased since the Official Statement, an update substantially in the form of the direct and overlapping debt table in the Official Statement;

(v) in the event assessed valuations have decreased since the Official Statement, the total assessed value of all parcels within Improvement Area No. 2 on which the Special taxes are levied, as shown on the assessment roll of the Los Angeles County Assessor last equalized prior to the September 2 preceding the filing of the Annual Report, and a statement of assessed value-to-lien ratios therefor, either by individual parcel or by categories;

(vi) any event known to the Issuer which reduces the taxable parcels within the District;

(vii) a table, substantially in the form of Table 8 in the Official Statement, setting forth for the five most recent Fiscal Years in which Special Taxes were levied, the amount of Special Taxes levied in each Fiscal Year and the percentage delinquent as of June 30 of such Fiscal Year and as of the date of the Annual Report, and a description of the status of any foreclosure actions being pursued by the Issuer with respect to delinquent Special Taxes; and

(viii) any information not already included under (i) through (vi) above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended.

( c) Any or all of the items listed in subsections (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, in a timely manner not more than ten (10) Business Days after the event:

(i) Principal and interest payment delinquencies.

(ii) Unscheduled draws on debt service reserves reflecting financial difficulties.

(iii) Unscheduled draws on credit enhancements reflecting financial difficulties.

(iv) Substitution of credit or liquidity providers, or their failure to perform

(v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB).

C-3 (vi) Tender offers.

(vii) Defeasances.

(viii) Rating changes.

(ix) Bankruptcy, insolvency, receivership or similar proceedings.

(x) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties.

Note: For the purposes of the event identified in subparagraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) business days after occurrence:

(i) Unless described in Section 5(a)(v), other notices or determinations by the Internal Revenue Service with respect to the tax status of the securities or other events affecting the tax status of the securities.

(ii) Modifications to the rights of security holders.

(iii) Bond calls.

(iv) Release, substitution or sale of property securing repayment of the securities.

(v) Non-payment related defaults.

(vi) The consummation of a merger, consolidation or acquisition involving the obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms.

(vii) Appointment of a successor or additional trustee or paying agent or the change of the name of a trustee or paying agent.

(viii) Incurrence of a Financial Obligation of the District or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders.

( c) Ifthe Issuer determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the Issuer, the Issuer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) business days after the event. Notwithstanding the foregoing, notice of Listed Event described in subsection (b)(iii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Fiscal Agent Agreement.

C-4 ( d) If the Issuer determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the Issuer, the Issuer shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence.

(e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the Issuer and, if the Dissemination Agent is other than the Issuer, the Dissemination Agent shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule.

SECTION 6. Termination of Reporting Obligation. The obligation of the Issuer under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a).

SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Issuer pursuant to this Disclosure Certificate. The Dissemination Agent may resign by providing 30 days' written notice to the Issuer and the Fiscal Agent. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Issuer and shall have no duty to review any information provided to it by the Issuer. The Dissemination Agent shall have no duty to prepare any information report, nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Issuer in a timely manner and in a form suitable for filing.

SECTION 8. Amendment.

(a) This Disclosure Certificate may be amended, without the consent of the Owners, if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby; (ii) this Disclosure Certificate as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the Issuer shall have obtained an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the same effect as set forth in clause (ii) above and to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners.

(b) This Disclosure Certificate may be amended upon obtaining consent of Owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of the Owners of the Bonds, provided that the conditions set forth in Section 8(a)(i), (ii) and (iii) have been satisfied.

(c) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change.

( d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report 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. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information.

SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is

C-5 specifically required by this Disclosure Certificate, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice if occurrence of a Listed Event.

The Issuer acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and the Rule, may apply to the Issuer, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under such laws.

SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any Owner 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 Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or the Fiscal Agent to comply with this Disclosure Certificate shall be an action to compel performance.

No Owner or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Issuer satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Issuer shall have refused to comply therewith within a reasonable time.

SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Fiscal Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney's fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Issuer 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 Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Owners, or any other party. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing.

Disclosure Representative: Director of Administrative Services City of Azusa 213 E. Foothill Blvd. Azusa, California 91702

Fiscal Agent: Wilmington Trust, National Association 650 Town Center Drive, Suite 600 Costa Mesa, California 92626

C-6 Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, 35th Floor San Francisco, California 94104

CITY OF AZUSA, for and on behalf of CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE), COUNTY OF LOS ANGELES, STATE OF CALIFORNIA

Director of Administrative Services

C-7 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIXD

FORM OF OPINION OF BOND COUNSEL

December 18, 2019

City of Azusa 213 East Foothill Boulevard Azusa, California 91702

Re: $20,525,000 City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2)

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the City of Azusa (the "City") for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale), County of Los Angeles, State of California (the "District") of $20,525,000 aggregate principal amount of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the "Bonds"). The Bonds are issued pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2. 5 ( commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the "Act"), a resolution adopted by the City Council of the City of Azusa (the "City") on November 18, 2019 (the "Resolution"), and a Fiscal Agent Agreement, dated as of December 1, 2019 (the "Agreement"), by and between the City and Wilmington Trust, National Association, as fiscal agent (the "Fiscal Agent").

We have examined the Act, the Resolution, the Agreement and certified copies of the proceedings taken for the issuance and sale of the Bonds. As to questions of fact which are material to our opinions, we have relied upon the representations of the City contained in the Agreement, and in certificates of its authorized officers which have been delivered to us for the purpose of supplying such facts, without having undertaken to verify the accuracy of any such representations by independent investigation.

Based upon such examination, we are of the opinion, as of the date hereof, that the proceedings referred to above have been taken in accordance with the laws and the Constitution of the State of California, and that the Bonds, having been issued in duly authorized form and executed by the proper officials and delivered to and paid for by the purchaser thereof, and the Agreement, having been duly authorized and executed by the proper officials, constitute the legally valid and binding obligations of the City and District enforceable in accordance with their terms subject to the qualifications specified below. Except where funds are otherwise available, as may be permitted by law, the Bonds are payable, as to both principal and interest, solely from certain special taxes to be levied and collected within Improvement Area No. 2 of the District and other funds available therefor held under the Agreement.

The Internal Revenue Code of 1986, as amended (the "Code"), sets forth certain investment, rebate and related requirements which must be met subsequent to the issuance and delivery of the Bonds for the interest on the Bonds to be and remain exempt from federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroactive to the date of issuance of the Bonds. Pursuant to the Agreement, the City has covenanted to comply with the requirements of the Code and applicable regulations promulgated thereunder.

We are of the opinion that, under existing statutes, regulations, rulings and court decisions, and assuming compliance by the City with the aforementioned covenants, the interest on the Bonds is excluded from gross

D-1 income for purposes of federal income taxation and is exempt from personal income taxation imposed by the State of California.

We are further of the opinion that interest on the Bonds is not an item of tax preference for purposes of calculating the federal alternative minimum tax. Although interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these tax consequences will depend on the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.

The opinions expressed herein may be affected by actions which may be taken (or not taken) or events which may occur ( or not occur) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur or are not taken or do not occur.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Agreement may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted, and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted,

D-2 APPENDIXE

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix concerning DTC and DTC 's book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment ofprincipal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.

The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for 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 each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U. S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

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 tum 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 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 ofDTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 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.

E-1 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 the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond 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 notices be provided directly to them

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 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 offunds and corresponding detail information from the District or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the District, 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 othernominee as may be requested by an authorized representative ofDTC) is the responsibility of the District or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Fiscal Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Fiscal Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Fiscal Agent's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The District 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 FISCAL AGENT, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAIL URE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

E-2 APPENDIXF

GENERAL INFORMATION CONCERNING THE CITY OF AZUSA AND THE REGION

The following information is presented as general background data. The Bonds are payable solely from the Special Taxes as described in the Offzcial Statement. The taxing power of the City ofAzusa, the County of Los Angeles, the State of California or any political subdivision thereof is not pledged to the payment of the Bonds.

General

The City of Azusa (the "City") was incorporated as a general law city in 1898, and is administered by a Council-Manager form of government. The four City Council members are elected at-large for four-year terms. Elections are staggered at two-year intervals. The office of mayor is elected at-large for a two-year term. The election coincides with those of the Council members. The City Council appoints the City Manager to manage the City's staff and implement the policies established by the Council. The City is full-service except for its Fire Department which is contracted with Los Angeles County Fire Department. The City owns and operates an electric public utility for its citizens providing electric services to customers within the City limits. The City also owns and operates a water system whose service territory includes the City and adjoining portions of neighboring cities and unincorporated areas of the County of Los Angeles.

The City is strategically located off the 210 Freeway within a 30 minute drive to Pasadena, Orange County, Inland Empire, and the Ontario International Airport. In addition to its convenient freeway access, Azusa offers several major traffic corridors, including the renowned U.S. Route 66 (Foothill Boulevard) which runs east to west through the community. The California State Route 39 runs north to the newly designated San Gabriel Mountains National Monument and south to the beach.

The City covers approximately 10 square miles and boasts a diverse population of nearly 50,000. The estimated median household income is over $57,000. The City is proud of its mix of small businesses, support services, manufacturers, and large institutional employers such as Azusa Pacific University. The City is home to two Metro Gold Line Light Rail Stations as part of the Foothill Gold Line from Pasadena to Azusa. The stations are located in the heart of downtown, Azusa Downtown Station, and adjacent to Azusa Pacific University and Citrus College, APU/Citrus College Station.

Population

The following table offers population figures for the City, the County and the State of California (the "State") as of January 1, 2015 through January 1, 2019.

CITY OF AZUSA, COUNTY OF LOS ANGELES-LONG BEACH-GLENDALE METROPOLITAN AREA AND STATE OF CALIFORNIA POPULATION 2015-2019

1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 City of Azusa 49,398 49,691 49,992 50,237 51,313 County of Los Angeles 10,155,753 10,185,851 10,226,920 10,254,658 10,253,716 State of California 38,952,462 39,214,803 39,504,609 39,740,508 39,927,315

Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011-2019, with 2010 Benchmark.

F-1 Construction Activity

The following table shows building permit valuations and new housing units in the City for calendar years 2014 through 2018.

CITY OF AZUSA NEW HOUSING UNITS AND BUILDING PERMIT VALUATIONS 2014 THROUGH 2018

2014 2015 2016 2017 2018 Valuation $101,964,571 $50,241,607 $48,114,099 $53,977,842 $44,422,626 Total New Housing Units 298 112 110 158 189

Source: City of Azusa.

Employment

The following table lists the largest employers located in the County.

COUNTY OF LOS ANGELES PRINCIPAL EMPLOYERS 2018 (except as noted)

Los Angeles 107,400 (l) Los Angeles Unified School District 104,300 <2) 2 University of California, Los Angeles 65,600 < ) City of Los Angeles (including DWP) 61,900 <2) Federal Government (non-Defense Dept.)* 43,600 (l) Kaiser Permanente 37,400 (3) State of California (non-education) 29,800 (3) University of Southern California 21,000 (3) Northrop Grumman Corp. 16,600 (3) Providence Health & Services 15,900 (3)

* Includes U.S. Postal Service OJ California Employment Development Department, 2018 (see "Note" below). 2 < J Government Compensation in California, 2017 (see "Note" below). 3 C J Los Angeles Business Journal Employer Survey/Estimates, 2018. Note: Employment numbers from "Government Compensation in California" (source #2) may differ from employment numbers directly reported by the employer. Numbers from this source reflect every individual receiving a paycheck for any amount during any part of the year. Source: "Largest Employers in Los Angeles County" from Los Angeles Almanac.

F-2 The following table lists the ten largest employers located in the City.

CITY OF AZUSA LARGEST TEN EMPLOYERS AS OF JUNE 30, 2018

2017-2018 Percentage of Number of Total City Em~loyer Emnlo:yees Rank Emnlo:yment Azusa Pacific University 2,632 1 10.40% Azusa Unified School District* 1,752 2 6.92 Northrop Grumman 901 3 3.56 City of Azusa 357 4 1.41 Costco Wholesale Corporation 312 5 1.23 S&S Foods LLC 300 6 1.19 Hanson Distribution Company 220 7 0.87 Buena Vista Food Products 178 8 0.70 OJ Insulation 165 9 0.65 Target Store 155 10 0.61

Total Number of Employees of Largest Ten Employers 6,972 27.54% Total Number of Employees in City 25,300< 1)

Cl J Total City labor force provided by Employment Development Department Labor Force Data. Source: Comprehensive Annual Financial Report of the City of Azusa, California for the Fiscal Year ended June 30, 2018.

F-3 Employment and Industry

Employment data by industry is not separately reported on an annual basis for the City, but is compiled for the County. The following table represents the Annual Average Labor Force and Industry Employment for the County of Los Angeles Metropolitan Statistical Area for calendar years 2015 through 2018 and preliminary information through August 2019.

COUNTY OF LOS ANGELES-LONG BEACH-GLENDALE METROPOLITAN AREA INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE 2014-2019

2015 2016 2017 2018 2019* Civilian Labor Force 4,989,800 5,041,400 5,096,500 5,136,300 5,101,800 Civilian Employment 4,659,700 4,776,700 4,853,800 4,896,500 4,861,400 Civilian Unemployment 330,100 264,800 242,700 239,800 240,400 Civilian Unemployment Rate 6.6% 5.3% 4.8% 4.7% 4.7%

Total Farm 5,000 5,300 5,700 4,800 5,400 Total Nonfarm 4,285,800 4,394,600 4,448,300 4,510,100 4,544,000 Total Private 3,717,300 3,817,900 3,862,200 3,920,500 3,982,000 Goods Producing 497,300 497,100 490,300 491,600 504,600 Mining, Logging and Construction 129,000 136,300 140,400 147,900 160,000 Mining and Logging 2,900 2,400 2,000 1,900 2,000 Construction 126,100 133,900 138,400 146,000 158,000 Manufacturing 368,200 360,800 349,900 343,700 344,600 Service Providing 3,788,500 3,897,400 3,958,000 4,018,500 4,039,400 Trade, Transportation & Utilities 822,200 835,600 845,700 850,900 847,600 Wholesale Trade 222,400 222,100 221,500 222,800 221,700 Retail Trade 422,200 424,600 426,100 425,300 416,900 Transportation, Warehousing & Utilities 177,600 188,900 198,200 202,800 209,000 Utilities 12,100 11,900 11,500 11,600 11,700 Information 207,600 229,400 214,900 217,400 214,400 Financial Activities 215,600 219,800 221,600 223,000 223,900 Professional & Business Services 591,000 600,100 608,800 620,000 637,700 Educational & Health Services 745,900 772,700 800,600 823,600 840,500 Leisure & Hospitality 486,600 510,000 524,600 534,300 549,800 Other Services 151,000 153,300 155,700 159,700 163,500 Government 568 500 576 700 586 100 589 600 562,000 Total, All Industries 4 290 700 4 399 900 4 454 000 4 514 900 4 549 400

Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The "Total, All Industries" data is not directly comparable to the employment data found in this Appendix F. * Preliminary through August 2019 Source: State of California Employment Development Department.

F-4 The following table summarizes the labor force, employment and unemployment figures over the past five years and preliminary figures through August 2019 for the City, the County, the State and the United States as a whole.

CITY OF AZUSA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND UNITED STATES AVERAGE ANNUAL CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT

Unemployment 2 Year and Area Labor Force Em~loymentClJ Unem~loymentC J Rate(%) 2014 City of Azusa 23,600 22,200 1,500 6.2% Los Angeles County 4,992,600 4,580,300 412,300 8.3 California 18,714,700 17,310,900 1,403,800 7.5 United States 155,922,000 146,305,000 9,617,000 6.2

2015 City of Azusa 24,000 22,800 1,200 5.0% Los Angeles County 4,989,800 4,659,700 330,100 6.6 California 18,851,100 17,681,800 1,169,200 6.2 United States 157,130,000 148,834,000 8,296,000 5.3

2016 City of Azusa 24,700 23,500 1,300 3.9%(3) Los Angeles County 5,041,400 4,776,700 264,800 5.3 California 19,044,500 18,002,800 1,041,700 5.5 United States 159,187,000 151,436,000 7,751,000 4.9

2017 City of Azusa 25,100 23,900 1,200 4.3%(3) Los Angeles County 5,096,500 4,853,800 242,700 4.8 California 19,205,300 18,285,500 919,800 4.8 United States 160,320,000 153,337,000 6,982,000 4.4

2018 City of Azusa 25,200 24,100 1,100 4.5%(3) Los Angeles County 5,136,300 4,896,500 239,800 4.7 California 19,398,200 18,582,800 815,400 4.2 United States 162,075,000 155,761,000 6,314,000 3.9

2019 (4) City of Azusa 25,300 24,300 1,100 4.2% Los Angeles County 5,161,500 4,928,500 233,000 4.5 California 19,587,500 18,869,200 718,300 3.7 United States 164,364,000 158,510,000 5,855,000 3.6

OJ Data may not add due to rounding. The unemployment rate is calculated using unrounded data. 2 C J Labor force data for all geographic areas for 1990 to 2018 now reflect the March 2018 annual revision (or benchmark) and Census 2014 population controls at the state level. 3 C J Data from Table 21 in City's Comprehensive Annual Financial Report for Fiscal Year ending June 30, 2018. 4 C J October 2019 (Preliminary). Source: California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics, November 20, 2019, March 2018 Benchmark; Comprehensive Annual Financial Report of the City of Azusa, California for the Fiscal Year ended June 30, 2018.

F-5 Retail Sales

The table below presents the City's retail permits and transactions for calendar years 2011 through 2017.

CITY OF AZUSA TAXABLE TRANSACTIONS (IN THOUSANDS) 2011-2017

Retail Stores Retail Taxable Total Taxable Year Permits Transactions Total Permits Transactions 2011 567 $331,797 941 $416,943 2012 580 358,371 950 444,314 2013 553 369,992 911 462,152 2014 567 376,369 916 477,260 2015 602 338,455 1,011 447,264 2016 NIA 340,457 NIA 437,554 2017(1) NIA 360,220 NIA 453,643

OJ Last year data is available. Source: "Taxable Sales in California (Sales & Use Tax)," California State Board of Equalization.

F-6 APPENDIXG

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

G-1 [THIS PAGE INTENTIONALLY LEFT BLANK] . ~lJREI) GUARA.t~TY'' MUNICIPAL BOND Mt;Ni(JP,i.1.. INSURANCE POLICY

ISSUER: -N

BONDS: $ in aggregate principal amount of

ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the tr "Paying Agent") (as set forth in the documentation providing f the Bonds, for the benefit of the Owners or, at the election of the terms of this Policy (which includes each endorrernent interest on !he Bonds that shall become Due for Payment but the Issuer.

On the later of the day on which such ue for Payrnent or ttle Business Day next following the Business Da Notice of Nonpayment, AGM wm disburse to or for the benefit of eat f principal of and interest on the Bond that is then Due for Pa:i f Nonpayment by the Issuer, but only upon receipt by AGM, in a fom1 (a evidenc.e of the Owner's right to receive payment of the principal t and (b) evidence, including any appropriate instruments of a its with respect to payment of such principal or interest that is Du AGM. A Notice of Nonpayment \viii be deemed received on a given r to 1:00 p.m. (New Yol1< !irne) on such Business Da~,; othe · the next Business Day. If any Notice of Nonpayment receive deemed not to have been re-..-:eived by AGM for purposes of the p ornptly so advise the Trustee, Paying Agent or Owner, as app Notice of Nonpayment. Upon disbursement in respect of a Bon er of the Bond, any appurtenant coupon to llle Bond or right to receipt of on the Bond and shall be fully subrogated to the rights of the Own payments under the Bond, to the extent of any payment by AGM Trustee or Paying Agent for !he benefit of the Owners shall, to thee n of AGM under this Policy.

lent expr modified by an endorsement hereto, the following terms shall have or all purposes of this Policy, "Business Day" means any day nther than (a} a y on which banking institutions in the State of New York or the Insurer's r required by law or executive order to remain closed. "Due ror Payment" to the principal of a Bend, payable on the stated maturity date thereof or the date ave been duly G"alied for mandatory sinl~'it on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, 1n respect of a Bond, the faiture of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. ''Nonpayment'' shall also include, in respE1et of a Bond, any payment of principal or intemsl: that is Due for Payment made lo an Owner by or on bPllalf of the Issuer whieh has been n:.:,covemd from such Owner pursuant to the

G-2 Page2 of2 Policy No. -N

United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, rmnappeaiable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making lhe claim, (b) the Policy Number, {c} the claimed amcnJnt and (d) the date such claimed amount be,..ame Due for Payrnent. "O\,vner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under lhe tern1s of such Bond to payment thereof, except that "Owner" shall not include the lssu any person or entity whose direct or indirect obligation constitutes the undertying security for the Bonds.

AGM may appoint a fiscal agent {the "Insurer's Fiscal Agent") for purp giving written notice to the Trustee and the Paying Agent specifying !he name d insurer's Fiscal Agent. From and after the date of receipt of suct1 notice b Agent, (a} copies of all notices required lo be delivered to AGM p simultaneously delivered to the Insurer's Fiscal Agent and lo AGM and received by both and (b) all pa~ments required to be made by AGM by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Ins only and the Insurer's Fiscal Agent shall in no event be liable Agent or any failure of AGM to deposit or cause to be dep under this Policy.

To the fullest Hxtent pHnnitted by applicable law, AG hereby waives, only for the benefit of each Owner, all rights (whether by cm.mt ) and defenses (including, without limitation, the defense of ther tion, assignment or otherwise, to the extent that such rights and to avoid payment of its obligations under this Policy in accordance · y.

This Policy sets forth in full an not be modified, altered c,r affected by any other agreertient or i or amendment !hereto. Except to the extent expressty rnc,cHfiect by a m paid in respect of this Policy is nonrefundable for any reason wll ovision being made for payment, of the Bonds prior to maturity and (b) ect or revoked. THIS POI.ICY IS NOT COVERED BY THE PROP /C CURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK IN E

MUNICIPAL CORP. has caused this Policy to be

ASSURED GUARANTY MUNICIPAL CORP.

A subsidiary of Assured Guaranty Munleipal Holdings Inc. 1633 Broadway, New York, N.Y. 10019 (212) 974-0100

Forrn 500NY (5/90}

G-3

CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2)

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