Revised Draft Dated June 12, 2020

PRELIMINARY OFFICIAL STATEMENT DATED MAY __, 2020

NEW ISSUE NOT RATED

In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2020 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “LEGAL MATTERS – Tax Exemption.”

$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B

2020 SPECIAL TAX BONDS

Dated: Date of Delivery Due: September 1, as shown on inside cover.

Authority for Issuance. The bonds captioned above (the “2020 Bonds”) are being issued under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), the Resolution of Issuance (as defined herein), and a Fiscal Agent Agreement, dated as of [Closing Month] 1, 2020 (the “Fiscal Agent Agreement”), by and between Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”), and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). The Governing Board (the “Board”) of the Menifee Union School District (the “School District”), acting as the legislative body of the Community Facilities District, and the eligible landowner voters in Improvement Area B (“Improvement Area B”) of the Community Facilities District, have authorized the issuance of bonds with respect to Improvement Area B in an aggregate principal amount not to exceed $7,500,000. See “THE 2020 BONDS – Authority for Issuance.” The Community Facilities District may issue parity bonds payable from Special Taxes levied in Improvement Area B to finance facilities and to refund previously issued (“Parity Bonds,” and together with the 2020 Bonds, “Bonds”). See “THE 2020 BONDS – Parity Bonds.”

Security and Sources of Payment. The 2020 Bonds are payable from proceeds of Net Special Taxes (as defined herein) levied on taxable property rcumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of of a solicitation or to sell an offer constitute Statement Official Preliminary this shall rcumstances

ci within Improvement Area B of the Community Facilities District according to the rate and method of apportionment of special tax approved by the Board and the eligible landowner voters in the Community Facilities District with respect to Improvement Area B. The 2020 Bonds are secured by a first pledge of the revenues derived from the Net Special Taxes and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See “SECURITY FOR THE 2020 BONDS.”

Use of Proceeds. The 2020 Bonds are being issued (i) to acquire and construct certain school facilities to be owned and operated by the School District and certain facilities to be owned and operated by Eastern Municipal Water District (“EMWD”) (collectively, the “Project”); (ii) to make a deposit to the reserve fund for the 2020 Bonds; (iii) to pay a portion of capitalized interest through March 1, 2021; and (iv) to pay certain costs of issuing the 2020 Bonds. See “FINANCING PLAN.”

Bond Terms. Interest on the 2020 Bonds is payable semiannually on each March 1 and September 1, commencing September 1, 2020. The 2020 Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The 2020 Bonds, when delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). DTC will act as securities depository for the 2020 Bonds. See “THE 2020 BONDS – General Bond Terms” and APPENDIX E – “DTC AND THE BOOK-ENTRY ONLY SYSTEM.”

Redemption. The 2020 Bonds are subject to optional redemption, mandatory sinking fund redemption before maturity, and special mandatory redemption from prepaid Special Taxes. See “THE 2020 BONDS - Redemption.”

THE 2020 BONDS, THE INTEREST THEREON, AND ANY PREMIUMS PAYABLE ON THE REDEMPTION OF ANY OF THE 2020 BONDS, ARE NOT AN INDEBTEDNESS OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS, AND NEITHER THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE ON THE 2020 BONDS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE SCHOOL DISTRICT, THE COMMUNITY FACILITIES DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED IN THIS OFFICIAL STATEMENT) OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2020 BONDS. OTHER THAN THE NET SPECIAL TAXES, NO TAXES ARE PLEDGED TO THE PAYMENT OF THE 2020 BONDS. THE 2020 BONDS ARE NOT A GENERAL OBLIGATION OF THE COMMUNITY FACILITIES DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE COMMUNITY FACILITIES DISTRICT PAYABLE SOLELY FROM THE NET SPECIAL TAXES AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

MATURITY SCHEDULE

(see inside cover)

* Preliminary, subject to change. eliminary Official Statement and the information contained herein are subject to completion or amendment. Under no Under amendment. or completion to subject are herein contained information and the Statement Official eliminary Board Meeting Date: 06-23-2020 Page 1 of 150 an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. unlawful. be would orsale solicitation offer, such which in any jurisdiction in securities these of be any sale there nor shall buy to an offer This Pr This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the 2020 Bonds involves risks which may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of special risk factors that should be considered in evaluating the investment quality of the 2020 Bonds.

The 2020 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Community Facilities District by James F. Anderson Law Firm, A Professional Corporation, Laguna Hills, California, as disclosure counsel, and by Fagan, Friedman & Fulfrost LLP, Carlsbad, California, general counsel to the School District. Kutak Rock LLP, Irvine, California, is serving as counsel to the Underwriter. It is anticipated that the 2020 Bonds, in book-entry form, will be available for delivery on or about [______, 2020.

The date of this Official Statement is [______, 2020.

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$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B 2020 SPECIAL TAX BONDS

MATURITY SCHEDULE

$[______Serial Bonds (Base CUSIP†: 586810)

Maturity Principal Interest (September 1) Amount Rate Yield Price CUSIP† No. 2024 $ % % % 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 20__

$______% Term Bond due September 1, 20__, Yield: _____%, Price _____% CUSIP† No. 586810 [___ $______% Term Bond due September 1, 20__, Yield: _____%, Price _____% CUSIP† No. 586810 [___

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP® data is provided by CUSIP Global Services (“CGS”) which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. CUSIP® data is not intended to create a database and does not serve in any way as a substitute for the CGS database. The Community Facilities District, the School District and the Underwriter are not responsible for the selection, correctness or uses of the CUSIP® numbers, and no representation is made as to their correctness on the 2020 Bonds or as set forth herein. CUSIP® numbers have been assigned by an independent company not affiliated with the Community Facilities District, School District or the Underwriter and CUSIP® numbers are provided for convenience of reference only. The CUSIP number for a specific maturity is subject to being changed after the execution and delivery of the 2020 Bonds as a result of various subsequent actions, including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the 2020 Bonds.

* Preliminary, subject to change.

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GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2020 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2020 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the School District, the Community Facilities District, any other parties described in this Official Statement, or in the condition of property within Improvement Area B of the Community Facilities District since the date of this Official Statement.

Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2020 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2020 Bonds.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness.

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

Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stabilization of and Changes to Offering Prices. The Underwriter may over-allot or take other steps that stabilize or maintain the market price of the 2020 Bonds at a level above that which might otherwise prevail in the open market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may offer and sell the 2020 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter.

2020 Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2020 Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

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

Internet Site and Social Media Accounts. While the School District maintains an internet website and certain social media accounts for various purposes, none of the information on such website or social media accounts is intended to assist investors in making any investment decision or to provide any continuing information with respect to the 2020 Bonds or any other bonds or obligations of the School District.

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

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MENIFEE UNION SCHOOL DISTRICT

BOARD OF TRUSTEES/TRUSTEE AREA

Jackie Johansen, President, Trustee Area 4 J. Kyle Root, Vice President, Trustee Area 3 Kenyon Jenkins, Clerk, Trustee Area 5 Robert O’Donnell, Deputy Clerk, Trustee Area 2 Reg Bennett, Member, Trustee Area 1

DISTRICT ADMINISTRATION

Dr. Gary Rutherford, Interim Superintendent1 Chad McGough, Assistant Superintendent of Personnel Services James Sellers, Director of Facilities

______

PROFESSIONAL SERVICES

BOND COUNSEL

Jones Hall, A Professional Law Corporation San Francisco, California

DISCLOSURE COUNSEL

James F. Anderson Law Firm, A Professional Corporation Laguna Hills, California

MUNICIPAL ADVISOR, SPECIAL TAX CONSULTANT AND CFD ADMINISTRATOR

Cooperative Strategies, LLC Irvine, California

APPRAISER

Kitty Siino & Associates, Inc. Tustin, California

FISCAL AGENT

Zions Bancorporation, National Association Los Angeles, California

1 [In May 2020, Steve Kennedy announced his retirement as Superintendent. On May 26, 2020, the Governing Board appointed Chad McGough, Assistant Superintendent of Personnel Services as Acting Superintendent. On June __, 2020, the Board selected Dr. Gary Rutherford, as Interim Superintendent until a new Superintendent reports for duty.]

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[INSERT REGIONAL MAP]

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[INSERT AERIAL PHOTO]

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TABLE OF CONTENTS

Page Page INTRODUCTION ...... 1 BOND OWNERS’ RISKS ...... 55 FINANCING PLAN ...... 6 Risks of Real Estate Secured Investments Estimated Sources and Uses of Funds ...... 6 Generally ...... 55 THE 2020 BONDS ...... 8 Limited Obligation of the Community Authority for Issuance ...... 8 Facilities District to Pay Debt Service ...... 55 General Bond Terms...... 9 Future Property Development ...... 55 Redemption ...... 10 Extraordinary Redemption From Prepaid Parity Bonds ...... 13 Special Taxes ...... 56 Registration, Transfer and Exchange ...... 13 Concentration of Ownership ...... 56 Debt Service Schedule ...... 15 Levy and Collection of the Special Tax ...... 56 SECURITY FOR THE 2020 BONDS ...... 16 Risks Related to Declines in Home Values ...... 58 General ...... 16 Payment of Special Tax is not a Personal Limited Obligation ...... 16 Obligation of the Property Owners ...... 58 Special Taxes ...... 17 Appraised Values ...... 59 Rate and Method ...... 18 Property Values ...... 59 Covenant to Foreclose ...... 23 Other Possible Claims Upon the Value of Special Tax Fund ...... 24 Taxable Property ...... 61 Bond Fund ...... 25 Value-to-Debt Ratios ...... 62 Reserve Fund ...... 26 Exempt Properties ...... 62 Investment of Moneys in Funds ...... 27 Depletion of Reserve Fund ...... 63 Parity Bonds ...... 27 Bankruptcy Delays ...... 63 IMPROVEMENT AREA B OF THE Disclosure to Future Purchasers ...... 64 COMMUNITY FACILITIES DISTRICT ...... 28 Limitations on Remedies ...... 64 General ...... 28 No Acceleration Provisions ...... 64 Special Taxes and Projected Debt Service Tax Cuts and Jobs Act of 2017 ...... 64 Coverage ...... 30 Loss of Tax Exemption ...... 65 Appraised Property Value ...... 32 IRS Audit of Tax-Exempt Bond Issues ...... 65 Special Tax Levy ...... 34 Legislative Proposals, Clarifications of the Assigned Special Tax Rates and Projected Code and Court Decisions on Tax Revenue Assuming All Building Permits are Exemption ...... 65 Issued ...... 37 Backup Withholding ...... 65 Appraised Value-to-Debt Ratio ...... 39 Voter Initiatives and State Constitutional Direct and Overlapping Governmental Provisions ...... 65 Obligations ...... 41 Limited Secondary Market for 2020 Bonds ...... 67 Estimated Property Tax Rates and Tax Burden Cyber Security ...... 67 on Single-Family Home ...... 43 Emergency Preparedness; Coronavirus Special Tax Collection History and (COVID-19) ...... 68 Delinquencies...... 45 LEGAL MATTERS ...... 71 Historical Assessed Values ...... 46 Legal Opinion ...... 71 PROPERTY OWNERSHIP AND Tax Exemption ...... 72 DEVELOPMENT ...... 47 No Litigation ...... 73 Beazer Homes ...... 47 CONTINUING DISCLOSURE ...... 74 Development and Financing ...... 48 Community Facilities District ...... 74 History of Property Tax Payments; Loan Beazer Homes ...... 75 Defaults; Litigation and Bankruptcy ...... 52 NO RATINGS ...... 76 UNDERWRITING ...... 76 FINANCIAL INTERESTS ...... 76 EXECUTION ...... 77

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TABLE OF CONTENTS (Continued)

APPENDIX A – GENERAL INFORMATION ABOUT THE CITY OF MENIFEE, THE CITY OF MURRIETA, AND RIVERSIDE COUNTY ...... A-1 APPENDIX B – RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR IMPROVEMENT AREA B OF COMMUNITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT ...... B-1 APPENDIX C – APPRAISAL REPORT ...... C-1 APPENDIX D – SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT ...... D-1 APPENDIX E – DTC AND THE BOOK-ENTRY ONLY SYSTEM ...... E-1 APPENDIX F – FORM OF COMMUNITY FACILITIES DISTRICT CONTINUING DISCLOSURE CERTIFICATE ...... F-1 APPENDIX G – FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE ...... G-1 APPENDIX H – FORM OF OPINION OF BOND COUNSEL ...... H-1 APPENDIX I – COMMUNITY FACILITIES DISTRICT BOUNDARY MAP ...... I-1

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OFFICIAL STATEMENT

$[Principal Amount] * COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B 2020 SPECIAL TAX BONDS

INTRODUCTION

This Official Statement, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “2020 Bonds” and collectively with any Parity Bonds (as defined herein, and together with the 2020 Bonds, the “Bonds”) to be issued by Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”) for its Improvement Area B (“Improvement Area B”).

This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page, the inside cover and attached appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of the 2020 Bonds to potential investors is made only by means of the entire Official Statement.

Capitalized terms used but not defined in this Official Statement have the definitions given in the Fiscal Agent Agreement (as defined below).

The School District. The Menifee Union School District (the “School District”) is located in the southwestern portion of Riverside County (the “County”), and the School District primarily serves the City of Menifee (the “City”) but also serves portions of the Cities of Lake Elsinore, Murrieta, Perris and Wildomar and a portion of the unincorporated area of the County. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged into a single school district. The School District currently operates two preschools, ten elementary schools, one K-8 Harvest Hill STEAM Academy, and three middle schools, with an average daily attendance as of the Second Interim Report (as of January 30, 2020) of approximately [10,307 students in Fiscal Year 2019-20 and estimated to be approximately [10,641 students in Fiscal Year 2020-21. For economic and demographic information regarding the area in and around the School District, see “APPENDIX A.”

The administration headquarters of the School District are located at 29775 Haun Road, Menifee, California. For further information on the School District, see its Internet home page at www.menifeeusd.org. This internet address is included for reference only and the information on the Internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. The financial information in this Official Statement does not reflect any fiscal or economic impacts of the COVID-19 pandemic.

The Community Facilities District. The Community Facilities District was formed and established in June 2016, by the Governing Board of the School District (the “Board”), as the legislative body of the Community Facilities District, under the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), pursuant to a resolution adopted by the Board following a public hearing, and landowner elections held on the same date at which

* Preliminary, subject to change.

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the qualified electors of each of two improvement areas of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved the levy of special taxes with respect to the applicable improvement area. The Community Facilities District previously issued Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area A 2018 Special Tax Bonds in the amount of $5,750,000 on May 17, 2018 See “THE 2020 BONDS – Authority for Issuance.”

[Update] Improvement Area B of the Community Facilities District is part of the community known as “Heritage Ranch.” Heritage Ranch comprises an area of approximately 160 acres that lies west of Elliot Road, north of Cookie Road, east of Leon Road and south of Ruft Road. The Developer (defined herein) purchased the land for Heritage Ranch in 2007, and construction of homes ultimately commenced in early 2014. Heritage Ranch is planned for a total of 426 homes within four different product types, plus a park, open space-greenbelt and an [offsite] detention basin. Improvement Area B is planned for 131of the 426 homes. The park is a sports park which has been completed, and has been accepted by the Valley Wide Parks and Recreation Department which will maintain the park. The park site includes a main area at the southwest corner of Heritage Ranch and a narrow strip extending northeast to Whisper Heights Road. See “IMPROVEMENT AREA B OF THE COMMUNITY FACILIITES DISTRICT – General – Description.”

In connection with the formation of the Community Facilities District, the School District entered into:

(i) an agreement entitled “Amended and Restated School Facilities Mitigation Agreement” dated as of May 11, 2016 (the “Mitigation Agreement”), with Beazer Homes Holdings Corp., a Delaware corporation (“Beazer Homes Holdings Corp.”), and

(ii) an agreement entitled “Joint Community Facilities Agreement” dated as of October 25, 2016 (the “EMWD JCFA”), with Eastern Municipal Water District (“EMWD”), and Beazer Homes Holdings Corp.

Authority for Issuance of the 2020 Bonds. The 2020 Bonds are issued under the Act, certain resolutions adopted by the Board, including the Resolution of Issuance, adopted on June 23, 2020 (the “Resolution of Issuance”), and a Fiscal Agent Agreement, dated as of [Closing Month] 1, 2020 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). See “THE 2020 BONDS – Authority for Issuance.”

The Board and the eligible landowner voters in Improvement Area B of the Community Facilities District have authorized the Community Facilities District to incur bonded indebtedness with respect to Improvement Area B, in an amount not to exceed $7,500,000. After issuance of the 2020 Bonds, the Community Facilities District will have $5,075,000* of remaining authorization with respect to Improvement Area B. See “THE 2020 BONDS – Authority for Issuance.” The Community Facilities District anticipates issuing Parity Bonds in connection with the development of 55 lots within Improvement Area B. See “THE 2020 BONDS – Parity Bonds” for the conditions which must be satisfied in connection with the issuance of Parity Bonds.

Purpose of the 2020 Bonds. Proceeds of the 2020 Bonds will be used primarily (i) to acquire and construct eligible facilities of the School District (the “School District Facilities”); and (ii) to acquire and construct certain facilities to be owned and operated by EMWD (collectively with the School District Facilities, the “Project”).

* Preliminary, subject to change.

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Proceeds of the 2020 Bonds will also fund a reserve fund for the 2020 Bonds, capitalized interest through March 1, 2021, and certain costs of issuing the 2020 Bonds. See “FINANCING PLAN – Estimated Sources and Uses of Funds.”

Redemption of 2020 Bonds Before Maturity. The 2020 Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid Special Taxes. See “THE 2020 BONDS – Redemption.”

Security and Sources of Payment for the 2020 Bonds. The Board annually levies special taxes on real property in Improvement Area B of the Community Facilities District (the “Special Taxes”) in accordance with the Rate and Method of Apportionment of Special Taxes of Improvement Area B of Community Facilities District No. 2016-1 of Menifee Union School District (the “Rate and Method”). The 2020 Bonds are secured by and payable from a first pledge of the net proceeds of the Special Taxes (as more particularly defined in the Fiscal Agent Agreement, the “Net Special Taxes”) levied on the property in Improvement Area B of the Community Facilities District. The 2020 Bonds will be additionally secured by certain funds and accounts established and held under the Fiscal Agent Agreement. See “SECURITY FOR THE 2020 BONDS.”

The Community Facilities District will covenant in the Fiscal Agent Agreement to cause foreclosure proceedings to be commenced and prosecuted against parcels in Improvement Area B with delinquent installments of the Special Taxes if certain conditions are met. For a more detailed description of the foreclosure covenant see “SECURITY FOR THE 2020 BONDS – Covenant to Foreclose.”

Property Ownership and Proposed Development. [UPDATE] The property within Improvement Area B of the Community Facilities District is expected to be developed by Beazer Homes Holdings, LLC, a Delaware limited liability company (“Beazer Homes” or the “Developer”), successor by conversion of Beazer Homes Holdings Corp., with a total of 131 single-family detached homes, including 76 proposed homes comprising a portion of a larger 174 unit project known as Provence at Heritage Ranch and 55 proposed homes anticipated to be developed in a future project known as Sutton Place. The portion of Provence at Heritage Ranch within Improvement Area B consists of 54 completed homes owned by individuals, along with five models and 17 vacant lots owned by the Develop as of May 15, 2020, the date of value of the Appraisal Report. While building permits for the 17 vacant lots were issued after May 1, 2020 [CONFIRM], the 17 lots will be the last phase of the total Provence 174-lot development and the Developer has indicated it does not anticipate commencement of construction until the ___ quarter of [20___. 59 homes within the portion of Provence at Heritage Ranch within Improvement Area B will be categorized as Developed Property in Fiscal Year 2020-21 and all 76 lots within the portion of Provence at Heritage Ranch within Improvement Area B will be categorized as Developed Property in Fiscal Year 2021-22, whether or not construction has commenced on the 17 vacant lots. It is estimated that approximately $48,788.38 of the estimated $171,083.96 of Special Taxes in Fiscal Year 2021-22 will be levied on the 22 lots owned by the Developer. As of June [__, 2020, the Developer expects to close escrow and convey to individual homeowners all 76 homes in the portion of Provenance at Heritage Ranch within Improvement Area B by [the ___ quarter of 20__] and anticipates commencement of construction of the first of the 55 homes within Sutton Place portion of Improvement Area B in the ___ half of 20__. [The Developer] anticipates that it will be responsible for a portion of each annual Special Tax levy until homes are constructed and sales to individual homeowners occur. See “PROPERTY OWNERSHIP AND DEVELOPMENT.”

As indicated above, in addition to the 76 homes proposed for development within Improvement Area B in Provence at Heritage Ranch, the balance of the 131 lots within Improvement Area B are 55 larger-sized lots anticipated to be developed as a neighborhood known as Sutton Place, which is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots. See “SECURITY FOR THE 2020 BONDS – Parity Bonds” for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds.

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For estimated levies of special taxes on Approved Property and other information relating to debt service coverage from Special Taxes, see Table 3 in “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Special Taxes and Projected Debt Service Coverage.”

Appraisal Report. [UPDATE] An appraisal of the portion of the Provence at Heritage Ranch project within Improvement Area B of the Community Facilities District comprising 76 taxable lots, dated [May 28], 2020 (the “Appraisal Report”), was prepared by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”) in connection with issuance of the 2020 Bonds.

The purpose of the Appraisal Report was to estimate the value of the fee simple interest of the as is condition of the 76 lots within the portion of the Provence at Heritage Ranch project within Improvement Area B, reflecting the status of the completed-sold homes (54 closed builder sales), completed-unsold homes (5 model homes), and vacant lots (17 vacant lots), subject to the Special Tax lien of the 2020 Bonds, as of the Date of Value of the Appraisal Report. The subject property consists of 76 single-family detached lots encompassed within Subdivision Tract Numbers 32185-5 (the 76 lots are a part of Provence at Heritage Ranch), which encompasses a neighborhood being developed by the Developer. See the section entitled, “PROPERTY OWNERSHIP AND DEVELOPMENT” for detailed information regarding development for the Developer’s project.

[Update] The Appraisal Report is based on certain assumptions and limiting conditions therein. Subject to these assumptions and limiting conditions, as of May 15, 2020, the Appraiser estimated that the aggregate market value of the subject property within Improvement Area B was $[28,988,486]. The aggregate market value as of May 15, 2020, included 54 homes closed and sold to individuals, 5 model homes, and 17 vacant lots ($26,988,486). While building permits with respect to the 17 vacant lots within the portion of Provence at Heritage Ranch were issued after May 1, 2020, the Developer has indicated it does not anticipate commencing construction of the homes on such 17 lots until the last phases of the Provence at Heritage Ranch neighborhood development. [No building permits have been issued with respect to the 55 vacant lots within the Sutton Place project and the Developer has indicated it does not anticipate commencing construction of the homes on such 55 lots until the _____ half of 20__. The analysis of the vacant lots is based on the Sales Comparison Approach, considering recent sales of residential land or bulk single-family lots from the general area. The analysis is initially of the lots as if in finished condition, then a deduction is made for the estimated costs and fees to get the lots from as is blue-topped condition to finished condition.]

See Table 6A and the footnotes thereto under the caption “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to-Debt Ratio.” See also under the captions “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value,” “ – Direct and Overlapping Governmental Obligations” and “BOND OWNERS’ RISKS – Value-to-Debt Ratios” herein and APPENDIX C – “APPRAISAL REPORT” appended hereto for further information on the Appraisal Report, including valuation by ownership and assumptions and limiting conditions relating to the Appraisal Report.

Value-to-Debt Ratio. As of May 15, 2020, the date of value of the Appraisal Report, the estimate of value contained in the Appraisal Report results in an overall appraised value-to-debt ratio of approximately [______:1] [Update to include Appraised Value of 55 lots in Sutton Place: [______to 1 * ([13.59 to 1 with respect to the 76 lots within the portion of Provence within Improvement Area B) based on the estimated amount of direct and overlapping debt allocated to parcels within Improvement Area B of the Community Facilities District, including the 2020 Bonds, all overlapping debt secured by a tax or assessment on the property within Improvement Area B of the Community Facilities District, but excluding all overlapping general obligation debt. See “IMPROVEMENT

* Preliminary, subject to change.

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AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value” and APPENDIX C – “APPRAISAL REPORT” for further information on the Appraisal Report.

Risk Factors Associated with Purchasing the 2020 Bonds. Investment in the 2020 Bonds involves risks that may not be appropriate for some investors. See “BOND OWNERS’ RISKS” for a discussion of certain risk factors which should be considered, in addition to the other matters set forth in this Official Statement, in considering the investment quality of the 2020 Bonds.

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FINANCING PLAN

The 2020 Bonds are being issued for the primary purpose of providing funds (i) to finance the acquisition and construction, either directly or indirectly, of the Project, (ii) to fund a Reserve Fund for the 2020 Bonds, (iii) [to fund interest on the 2020 Bonds through [March 1, 2021], and (iv) to pay certain costs of issuing the 2020 Bonds.

* School District Facilities. $1,071,364 (51%) of the proceeds from the sale of the 2020 Bonds will be used to finance the planning and construction of eligible school facilities of the School District (the “School District Facilities”). The Fiscal Agent will deposit such proceeds of the 2020 Bonds in the Improvement Fund established under the Fiscal Agent Agreement (the “Improvement Fund”). EMWD Facilities. $1,029,350* (49%) of the proceeds from the sale of the 2020 Bonds will be used to finance the planning and construction of EMWD Facilities (the “EMWD Facilities”). The Fiscal Agent will deposit such proceeds of the 2020 Bonds in the EMWD Facilities Account within the Improvement Fund established under the Fiscal Agent Agreement.

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* Preliminary, subject to change.

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Estimated Sources and Uses of Funds

The estimated proceeds from the sale of the 2020 Bonds will be deposited into the following funds established under the Fiscal Agent Agreement:

SOURCES Principal Amount of 2020 Bonds $ [Plus/Less: Net Original Issue Premium/Discount] Underwriter’s Discount Total Sources $

USES Deposit into Improvement Fund (1) School Facilities Account $ EMWD Facilities Account Deposit into Reserve Fund (2) Deposit into Costs of Issuance Fund (3) Deposit into Capitalized Interest Account of the Bond Fund (4) Underwriter’s Discount Total Uses $

(1) Will be used to acquire and construct the School District Facilities and the EMWD Facilities. (2) Equal to the Reserve Requirement with respect to the 2020 Bonds as of their date of delivery. See “SECURITY FOR THE 2020 BONDS – Reserve Fund.” (3) An amount to pay costs of issuance, which includes, among other things, the fees and expenses of Bond Counsel, and Disclosure Counsel, the cost of printing the Preliminary and final Official Statements, the cost of the Appraisal Report, fees and expenses of the Fiscal Agent, and the fees of the Municipal Advisor and the Special Tax Consultant [and repayment of Developer deposits]. (4) An amount to pay the interest payable through March 1, 2021.

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THE 2020 BONDS

This section generally describes the security for the 2020 Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX D. Capitalized terms used but not defined in this section are defined in APPENDIX D.

Authority for Issuance

Community Facilities District Proceedings. The 2020 Bonds are issued under the Act, the Resolution of Issuance and the Fiscal Agent Agreement. In addition, as required by the Act, the Board has taken the following actions with respect to establishing the Community Facilities District, improvement areas within the Community Facilities District and authorizing issuance of the 2020 Bonds:

Resolutions of Intention: On May 11, 2016, the Board adopted Resolution No. 2016-17/63, which set forth the Board’s intention to establish the Community Facilities District and two improvement areas thereof, including Improvement Area B, and to authorize the levy of special taxes for each of the improvement areas to fund authorized public facilities. On May 11, 2016, the Board also adopted Resolution No. 2016-17/64, which set forth the Board’s intention to incur bonded indebtedness with respect to Improvement Area A in the amount of $8,000,000 and with respect to Improvement Area B in the amount of $7,500,000.

Resolution Approving Joint Community Facilities Agreement: The Resolution of Intention adopted on May 11, 2016, also approved the EMWD JCFA.

Resolution of Formation and Resolution to Incur Bonded Indebtedness: Immediately following a noticed public hearing on June 14, 2016, the Board adopted Resolution No. 2016-66, which established the Community Facilities District, Improvement Area A and Improvement Area B, and authorized the levy of special taxes for each of the improvement areas to fund authorized public facilities on June 14, 2016, the Board also adopted Resolution No. 2016-67, declaring the necessity to incur bonded indebtedness with respect to each improvement area to finance authorized public facilities ($8,000,000 with respect to Improvement Area A and $7,500,000 with respect to Improvement Area B). On June 14, 2016, the Board adopted Resolution No. 2016-68 calling an election for each improvement area.

Landowner Election for Improvement Area B and Declaration of Results: On June 14, 2016, the election was conducted and the measure presented to the qualified voters of Improvement Area B was approved by more than two-thirds of the votes cast in the election. The Board then adopted Resolution No. 2016-69 declaring the results of the election and directing recordation of a notice of special tax lien. A notice of special tax lien was recorded with respect to Improvement Area B on June 22, 2016.

Special Tax Lien and Levy: A Notice of Special Tax Lien for Improvement Area B was recorded in the real property records of the County on June 22, 2016.

Ordinance Levying Special Taxes: On June 14, 2016, the Board adopted Ordinance No. 2016-1 levying the Special Taxes within Improvement Area B of the Community Facilities District.

Resolution of Issuance: On [ROI Date], 2020, the Board adopted a resolution approving issuance of the 2020 Bonds for Improvement Area B in a principal amount not to exceed $7,000,000.

School District’s Goals and Policies. The School District adopted “Local Agency Goals and Policies for Community Facilities Districts” on October 12, 1999, as amended by a resolution adopted on August 13, 2002 (as amended, the “Goals and Policies”).

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The Goals and Policies establish an order of priority for financing by community facilities districts and certain credit quality requirements for bonds issued by community facilities districts, namely a 3:1 property value to public debt ratio (public debt is defined as community facilities district bonds and other bonds secured by special taxes or special assessments). Property value may be based on an appraisal or on assessed values. Although the Goals and Policies do not require the value-to-debt ratio to be 3:1 on a parcel by parcel basis, consideration must be given to the ratio when apportioning special taxes to different parcels, to assure that the property owner will accept its special tax responsibilities.

The Goals and Policies also require a debt service reserve fund and declare that bonds may not be issued if delinquencies for the collection of taxes and assessments are greater than 10% on the date of issuance of the bonds.

Exceptions to these policies may be considered by the School District for bonds that do not represent an unusual credit risk, either due to credit enhancement or other reasons specified by the School District. In addition, the School District, by a four-fifths vote of its Board, may determine that a bond issue should proceed for specified public policy reasons without complying with the stated policies.

The 2002 amendment to the Goals and Policies added the requirement that debt service on community facilities district bonds be generally level and not escalate over the term of the bonds; however, the Board waived this requirement with respect to the Community Facilities District in the Resolution of Intention.

Taking into account this waiver, the School District and the Community Facilities District have determined that issuance of the 2020 Bonds conforms with the School District’s Goals and Policies, as amended.

General Bond Terms

Dated Date, Maturity and Authorized Denominations. The 2020 Bonds will be dated their date of delivery (the “Delivery Date”) and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The 2020 Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple of $5,000.

Interest. The 2020 Bonds will bear interest at the annual rates set forth on the inside cover page of this Official Statement, payable semiannually on each March 1 and September 1, commencing September 1, 2020 (each an “Interest Payment Date”) until the principal sum of the 2020 Bonds has been paid.

Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each 2020 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless

(i) it is authenticated on an Interest Payment Date, in which event it will bear interest from such date of authentication, or

(ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date (as hereinafter defined) preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or

(iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from the Closing Date; provided, however, that if at the time of authentication of a 2020 Bond, interest is in default thereon, such 2020 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

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Record Date. “Record Date” means the 15th day of the calendar month (whether or not such day is a business day) next preceding the month of the applicable Interest Payment Date.

DTC and Book-Entry Only System. DTC will act as securities depository for the 2020 Bonds. The 2020 Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC’s partnership nominee). See APPENDIX E – “DTC AND THE BOOK-ENTRY ONLY SYSTEM.”

Payments of Interest and Principal. For so long as DTC is used as depository for the 2020 Bonds, principal of, premium, if any, and interest payments on the 2020 Bonds will be made solely to DTC or its nominee, Cede & Co., as registered owner of the 2020 Bonds, for distribution to the beneficial owners of the 2020 Bonds in accordance with the procedures adopted by DTC.

Interest on the 2020 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered Owner thereof at the 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, or by wire transfer (i) to the Depository (so long as the 2020 Bonds are in book-entry form), or (ii) to an account within the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2020 Bonds, which instructions will continue in effect until revoked in writing, or until such 2020 Bonds are transferred to a new Owner.

The principal of the 2020 Bonds and any premium on the 2020 Bonds are payable by check in lawful money of the United States of America upon surrender of the 2020 Bonds at the Principal Office of the Fiscal Agent.

Redemption

Optional Redemption. The 2020 Bonds maturing on or before September 1, 2027, are not subject to optional call and redemption prior to maturity. The 2020 Bonds maturing on or after September 1, 2028, are subject to optional call and redemption prior to maturity, as a whole or in part among such maturities as are selected by the Community Facilities District and by lot within a maturity, on any Interest Payment Date on or after September 1, 20[__, from funds derived by the Community Facilities District from any source, at a redemption price (expressed as a percentage of the principal amount of the 2020 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:

Redemption Date Redemption Price September 1, 2027, and March 1, 2028 103% September 1, 2028, and March 1, 2029 102 September 1, 2029, and March 1, 2030 101 September 1, 2030, and any Interest Payment Date thereafter 100

Mandatory Redemption from Special Tax Prepayments. The 2020 Bonds are subject to mandatory call and redemption prior to maturity, as a whole or in part among such maturities as are selected by the Community Facilities District and by lot within a maturity, on any Interest Payment Date on or after March 1, 2021, from amounts in the Special Tax Prepayments Account available to redeem 2020 Bonds under the Fiscal Agent Agreement, at a redemption price (expressed as a percentage of the principal amount of the 2020 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:

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Redemption Date Redemption Price Any Interest Payment Date through March 1, 2028 103% September 1, 2028, and March 1, 2029 102 September 1, 2029, and March 1, 2030 101 September 1, 2030, and any Interest Payment Date thereafter 100

Such Prepayments could be made by any of the owners of any of the property within Improvement Area B including Beazer Homes, or any individual owner; and they could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. The resulting redemption of 2020 Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such 2020 Bonds. See “BOND OWNERS’ RISKS – Extraordinary Redemption from Prepaid Special Taxes.” Mandatory Sinking Payment Redemption. The 2020 Bonds maturing on September 1, 20[__ (the “20[__ Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20[__, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

20[__ Term Bonds

Sinking Fund Redemption Date (September 1) Sinking Payments 20__ $ 20__ 20__ 20__ 20__ (final maturity)

The 2020 Bonds maturing on September 1, 20[__ (the “20[__ Term Bonds”) are subject to mandatory sinking payment redemption in part on September 1, 20[__, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:

20[__ Term Bonds

Sinking Fund Redemption Date (September 1) Sinking Payments 20__ $ 20__ 20__ 20__ 20__ (final maturity)

The amounts in the foregoing tables will be reduced as a result of any prior partial optional redemption of the 2020 Bonds or prior partial mandatory redemption of the 2020 Bonds from Special Tax Prepayments as described above, as specified in writing by an Authorized Officer to the Fiscal Agent.

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Purchase in Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2020 Bonds, upon the filing with the Fiscal Agent of a written direction of an Authorized Officer requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such written direction may provide, but in no event may 2020 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2020 Bonds were to be redeemed in accordance with the Fiscal Agent Agreement.

Notice of Redemption. The Fiscal Agent will 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 Underwriter, to the Securities Depositories, to the Information Service, and to the respective registered Owners of any 2020 Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; 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 therein, will not affect the validity of the proceedings for the redemption of such 2020 Bonds.

However, while the 2020 Bonds are subject to DTC’s book-entry system, the Fiscal Agent will be required to give notice of redemption only to DTC as provided in the letter of representations executed by the Community Facilities District and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the beneficial owners of the 2020 Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure of Participants to notify the Beneficial Owner of any 2020 Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity of the notice of redemption, or alter the effect of redemption, set forth in the Fiscal Agent Agreement.

Selection of 2020 Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2020 Bonds of a single maturity, the Fiscal Agent will select the 2020 Bonds of that maturity to be redeemed by lot in any manner which the Fiscal Agent in its sole discretion deems appropriate. For purposes of such selection, the Fiscal Agent will treat each 2020 Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate 2020 Bond.

Conditional Redemption Notice and Rescission of Redemption. Any notice of optional redemption may specify that redemption of the 2020 Bonds designated for redemption on the specified date will be subject to the receipt by the Community Facilities District or the Fiscal Agent, as applicable, of moneys sufficient to cause such redemption (and will specify the proposed source of such moneys), and neither the Community Facilities District nor the Fiscal Agent will have any liability to the Owners of any 2020 Bonds, or any other party, as a result of the Community Facilities District’s failure to redeem the 2020 Bonds designated for redemption as a result of insufficient moneys therefor.

Additionally, the Community Facilities District may rescind any optional redemption of the 2020 Bonds, and notice thereof, for any reason on any date prior to the date fixed for such redemption by causing written notice of the rescission to be given to the Owners of the 2020 Bonds so called for redemption. Notice of rescission of redemption will be given in the same manner in which notice of redemption was originally given. The actual receipt by the Owner of any 2020 Bond of notice of such rescission will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the validity of the rescission. Neither the Community Facilities District nor the Fiscal Agent will have any liability to the Owners of any 2020 Bonds, or any other party, as a result of the Community Facilities District’s decision to rescind a redemption of any 2020 Bonds under the Fiscal Agent Agreement.

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Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2020 Bonds so called for redemption have been deposited in the Bond Fund, such 2020 Bonds so called 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 no interest will accrue thereon on or after the redemption date specified in such notice.

Parity Bonds

The Community Facilities District, with respect to Improvement Area B, may from time to time issue Parity Bonds in addition to the 2020 Bonds authorized under the Fiscal Agent Agreement to finance authorized facilities or to refund previously issued 2020 Bonds without the consent of any Owners in accordance with the Act. Any such Parity Bonds will constitute Bonds under the Fiscal Agent Agreement and will be secured by a lien on the Net Special Taxes and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other Outstanding Bonds under the Fiscal Agent Agreement.

Registration, Transfer and Exchange

The following provisions regarding the exchange and transfer of the 2020 Bonds apply only during any period in which the 2020 Bonds are not subject to DTC’s book-entry system. While the 2020 Bonds are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See APPENDIX E – “DTC AND THE BOOK-ENTRY ONLY SYSTEM.”

Registration. The Fiscal Agent will keep or cause to be kept, at its Principal Office, sufficient books for the registration and transfer of the 2020 Bonds, which books will show the series number, date, amount, rate of interest and last known Owner of each 2020 Bond, and will at all times be open to inspection by the Community Facilities District during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the 2020 Bonds as provided in the Fiscal Agent Agreement.

The Community Facilities District and the Fiscal Agent will treat the owner of any 2020 Bond whose name appears on the Bond Register as the absolute Owner of such 2020 Bond for any and all purposes, and the Community Facilities District and the Fiscal Agent will not be affected by any notice to the contrary. The Community Facilities District and the Fiscal Agent may rely on the address of the Owner as it appears in the Bond Register for any and all purposes.

Transfer of 2020 Bonds. Any 2020 Bond may, in accordance with its terms, be transferred, upon the books required to be kept by the Fiscal Agent by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2020 Bond for cancellation, accompanied by delivery of a duly 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 Community Facilities District. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer.

Whenever any 2020 Bond or 2020 Bonds are surrendered for transfer, the Community Facilities District will execute and the Fiscal Agent will authenticate and deliver a new 2020 Bond or 2020 Bonds, for like aggregate principal amount of authorized denominations.

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No transfers of 2020 Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of 2020 Bonds for redemption, (ii) with respect to a 2020 Bond after such 2020 Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date.

Exchange of 2020 Bonds. 2020 Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of 2020 Bonds of authorized denominations and of the same series and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange will be paid by the Community Facilities District. The Fiscal Agent will collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange.

No exchanges of 2020 Bonds will be required to be made (i) 15 days prior to the date established by the Fiscal Agent for selection of 2020 Bonds for redemption, (ii) with respect to a 2020 Bond after such 2020 Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date.

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Debt Service Schedule

The following table presents the annual debt service on the 2020 Bonds (including sinking fund redemptions), assuming there are no optional or special mandatory redemptions.

Table 1 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds Debt Service Schedule

Year Ending Total September 1 Principal Interest Debt Service 2020 -- $ $ 2021 $ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 Total: $ $ $

Source: Underwriter.

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SECURITY FOR THE 2020 BONDS

This section generally describes the security for the 2020 Bonds set forth in the Fiscal Agent Agreement, which is summarized in more detail in APPENDIX D. Capitalized terms used but not defined in the section are defined in APPENDIX D.

General

The payment of the principal of, and interest and any premium on, the Bonds are secured by a first pledge of the following:

• all of the Net Special Taxes; and

• all moneys deposited in the Bond Fund, in the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund.

The Net Special Taxes and all moneys deposited into these funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities (as defined in the Fiscal Agent Agreement) have been set aside irrevocably for that purpose in accordance with the Fiscal Agent Agreement.

Amounts in the Administrative Expense Fund, the Costs of Issuance Fund, the Improvement Fund and the Special Tax Remainder Account are not pledged to the repayment of the Bonds. The facilities constructed or acquired with the proceeds of the Bonds are not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation or destruction of any facilities financed with the proceeds of the Bonds are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed under the Fiscal Agent Agreement.

“Net Special Taxes” is defined in the Fiscal Agent Agreement as, after the Administrative Expense Requirement is funded to the Administrative Expense Fund pursuant to the Fiscal Agent Agreement (an amount equal to $30,000 and for each Fiscal Year thereafter) the proceeds of the Special Taxes received by the Community Facilities District, including any scheduled payments, interest thereon, collections of any delinquent Special Taxes and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon.

Net Special Taxes does not include any penalties or costs of collecting delinquent Special Taxes collected in connection with delinquent Special Taxes.

Limited Obligation

The 2020 Bonds and interest thereon are not payable from the general fund of the Community Facilities District or the School District. Except with respect to the Net Special Taxes, neither the credit nor the taxing power of the Community Facilities District or the School District is pledged for the payment of the 2020 Bonds or interest thereon, and no Owner of the 2020 Bonds may compel the exercise of the taxing power by the Community Facilities District or the School District or the forfeiture of any of their property.

The principal of and interest on the 2020 Bonds and premiums upon the redemption of any thereof are not a debt of the Community Facilities District (except to the limited extent described in this Official Statement) or the School District, the State of California (the “State”) nor any of its political subdivisions,

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within the meaning of any constitutional or statutory limitation or restriction. The 2020 Bonds are not a legal or equitable pledge, charge, lien or encumbrance, upon any property or income, receipts or revenues of the Community Facilities District or the School District, except the Net Special Taxes that are, under the terms of the Fiscal Agent Agreement, set aside for the payment of the 2020 Bonds and interest thereon. Neither the members of the Board nor any persons executing the 2020 Bonds are liable personally on the 2020 Bonds by reason of their issuance.

Special Taxes

Covenant to Levy Special Taxes to Meet Special Tax Requirement. The Community Facilities District will covenant in the Fiscal Agent Agreement to comply with all requirements of the Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of delinquent Special Taxes.

On or within 5 Business Days of each June 1, the Fiscal Agent will provide an Authorized Officer with a notice stating the amount then on deposit in the Bond Fund, the Special Tax Fund, and the Reserve Fund, and informing the Community Facilities District of the amount needed to provide for Annual Debt Service, Administrative Expenses known to the Fiscal Agent and replenishment (if necessary) of the Reserve Fund so that the balance therein equals the Reserve Requirement.

Upon receipt of such notice, the Authorized Officer will communicate with the County Auditor (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 year.

An Authorized Officer will effect the levy of the Special Taxes each Fiscal Year in accordance with the Ordinance by each August 10 that the Bonds are outstanding, or otherwise 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 B of the Community Facilities District for inclusion on the next real property tax roll. Upon the completion of the computation of the amounts of the levy, an Authorized Officer will prepare or cause to be prepared, and will transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll.

An Authorized Officer will fix and levy the amount of Special Taxes within Improvement Area B of the Community Facilities District required for the payment of principal of and interest on any Outstanding Bonds of the Community Facilities District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any obligation under the Fiscal Agent Agreement for rebating excess earnings to the federal government) during such year.

The Special Taxes so levied may not exceed the authorized amounts as provided in the Community Facilities District proceedings or the Rate and Method.

Manner of Collection. The Fiscal Agent Agreement provides that the Special Taxes will be payable and be collected 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 time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

Notwithstanding the foregoing, an Authorized Officer may, in his discretion, cause the collection of any Special Taxes by direct, first-class mail billing to the then owner of each parcel so owned in lieu of billing for such Special Taxes in the same manner as general taxes as described above. Such direct mail billing will be made not later than November 1 of the Fiscal Year and will direct the owner of the property affected to pay the Special Taxes

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directly to the Community Facilities District in two equal installments, the first of which will be due and delinquent if not paid on December 10 and the second of which may be paid with the first and which, in any event, will be due and delinquent if not paid on April 10 of the Fiscal Year. Any such Special Taxes so billed will have the same priority and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.

Other Covenants Regarding Special Tax Levy. The Community Facilities District will covenant not to conduct or consent to proceedings with respect to a reduction in the Maximum Special Taxes that may be levied in Improvement Area B of the Community Facilities District on Developed Property or Approved Property (as defined below) below an amount, for any Fiscal Year, equal to the Administrative Expense Requirement plus 110% of Annual Debt Service in such Fiscal Year. The ability of the Community Facilities District to increase the Special Tax levy on residential property in Improvement Area B is subject to limitations under the Act. See “BOND OWNERS’ RISKS.”

Because the Special Tax levy is subject to limitations under the Act and is limited to the Maximum Special Tax rates set forth in the Rate and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the 2020 Bonds.

Rate and Method

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

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

Special Tax Requirement.

The Rate and Method defines the “Special Tax Requirement” as the amount required in any Fiscal Year to pay the following:

(i) the debt service or the periodic costs on all outstanding Bonds,

(ii) Administrative Expenses of Improvement Area B,

(iii) the costs associated with the release of funds from any escrow account established in association with the Bonds,

(iv) any amount required to establish or replenish any reserve funds (or accounts thereof) established in association with the Bonds,

(v) the collection or accumulation of funds for the acquisition or construction of school facilities and certain costs associated with the maintenance and operations of school facilities authorized by the Community Facilities District provided that the inclusion of such amount does not

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cause an increase in the levy of the Special Tax on Approved Property, Undeveloped Property or Provisional Undeveloped Property, and

(vi) less any amounts available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, trust agreement, or equivalent agreement or document.

In arriving at the Special Tax Requirement, the Administrator (as defined in the Rate and Method) will take into account the reasonably anticipated delinquent Special Taxes, provided that the amount included cannot cause the Annual Special Tax of an Assessor Parcel of Developed Property to increase by greater than 10% of what would have otherwise been levied.

Classification of Assessor’s Parcels. For each Fiscal Year, the property in Improvement Area B will be classified as follows:

(i) each Assessor’s Parcel has been and will be classified as Taxable Property or Exempt Property, and

(ii) each Assessor’s Parcel of Taxable Property has been and will be classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property, all as defined below.

In addition, each Assessor’s Parcel of Developed Property will be further assigned to a Land Use Class based on the Building Square Footage of the Unit.

The classification of Exempt Property will take into consideration the Minimum Taxable Acreage as determined pursuant to Section K of the Rate and Method.

“Taxable Property” means all Assessor’s Parcels that are not Exempt Property.

“Exempt Property” is defined as follows:

(i) Assessor’s Parcels owned by the State of California, federal or other local governments,

(ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization,

(iii) Assessor’s Parcels owned by a homeowner’s association,

(iv) Assessor’s Parcels burdened with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, or

(v) any other Assessor’s Parcels at the reasonable discretion of the Board, provided that no such classification would reduce the Net Taxable Acreage to less than 38.2127 Acres of Acreage (“Minimum Taxable Acreage”) within Improvement Area B.

Notwithstanding the above, the Administrator or Board may not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than the Minimum Taxable Acres of Acreage within Improvement Area B. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the

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Minimum Taxable Acreage within Improvement Area B will be classified as Provisional Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

“Developed Property” means all Assessor’s Parcels of Taxable Property for which building permits were issued on or before May 1 of the prior Fiscal Year, provided that each such Assessor’s Parcel was created on or before January 1 of the prior Fiscal Year, as determined reasonably by the Administrator.

“Undeveloped Property” means all Assessor’s Parcels of Taxable Property that are not Developed Property [,] [or] Approved Property [or Provisional Undeveloped Property].

“Approved Property” means all Assessor’s Parcels of Taxable Property that (i) are associated with a Lot in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) have not been issued a building permit prior to the May 1st preceding the Fiscal Year in which the Special Tax is being levied.

“Provisional Undeveloped Property” means all Assessor Parcels of Taxable Property that would otherwise be classified as Exempt Property but cannot be classified as Exempt Property because to do so would reduce the Net Taxable Acreage below the required minimum Acreage.

Maximum Special Taxes, Assigned Annual Special Tax and Backup Annual Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows:

Developed Property. The Maximum Special Tax for each Assessor’s Parcel classified as Developed Property for any Fiscal Year is the greater of the amount derived by the application of the (i) Assigned Annual Special Tax or (ii) Backup Annual Special Tax within a Final Map.

Assigned Annual Special Tax. The Assigned Annual Special Tax for Improvement Area B is set forth in Table 2 of the Rate and Method. The Assigned Annual Special Tax for Improvement Area B varies from $[1,956.84 to $[2,658.20 in Fiscal Year 2020-21, based on Building Square Footage, and shall be increased by two percent (2.00%).

Backup Annual Special Tax. The Backup Annual Special Tax in any Fiscal Year for Developed Property within a Final Map is the rate per Lot calculated according to the following formula

 the Assigned Annual Special Tax per acre of Undeveloped Property, multiplied by

 the Acreage of Residential Property expected to exist in such Final Map at the time of calculation, as determined by the Administrator, divided by

 the number of Lots in the Final Map at the time of calculation.

The Backup Annual Special Tax is subject to adjustment if all or any portion of a Final Map is changed or modified, as set forth in Section E of the Rate and Method.

Approved Property, Undeveloped Property and Provisional Undeveloped Property. The Assigned Annual Special Tax in Fiscal Year 2020-21 for each Assessor’s Parcel of Approved Property, Undeveloped Property, or Provisional Undeveloped Property shall be $[______per acre of Acreage, subject to increases as described below.

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Increases in the Assigned Annual Special Tax.

· Developed Property. On each July 1, the Assigned Annual Special Tax rate applicable to Developed Property in the Fiscal Year in which such Assessor’s Parcel is first classified as Developed Property shall be increased by 2.00% of the amount in effect the prior Fiscal Year.

· Approved Property, Undeveloped Property and Provisional Undeveloped Property. On each July 1, the Assigned Annual Special Tax rate for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall increase by 2.00% of the amount in effect the prior Fiscal Year.

· Increase in the Backup Annual Special Tax. On each July 1, commencing the July 1 following the initial calculation of the Backup Annual Special Tax rate for Developed Property within a Final Map, the Backup Annual Special Tax for each Lot within such Final Map shall be increased by 2.00% of the amount in effect the prior Fiscal Year.

Method of Apportionment. Under the Rate and Method, the Board will levy Annual Special Taxes each Fiscal Year as follows:

Step One: The Annual Special Tax will be levied on each Assessor’s Parcel of Developed Property in an amount equal to the Assigned Annual Special Tax applicable to each such Assessor’s Parcel.

Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Approved Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the second step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the third step has been completed, the Annual Special Tax on each Assessor’s Parcel of Developed Property whose Maximum Special Tax is the Backup Annual Special Tax, will be increased Proportionately from the Assigned Annual Special Tax up to 100% of the Backup Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the fourth step has been completed, the Annual Special Tax will be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

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

 There are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid;  No prepayment will be allowed unless the amount of Assigned Annual Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such

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prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination will include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

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

Partial Prepayment of Annual Special Taxes. The Annual Special Tax obligation of an Assessor’s Parcel may be partially prepaid in increments of ten (10) Lots, provided that the terms set forth under the Rate and Method are satisfied, including (among others) the following conditions:

 There are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel at the time the Annual Special Tax obligation would be partially prepaid.

 No partial prepayment will be allowed unless the amount of Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such partial prepayment, net of Administrative Expenses, will be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such partial prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination will include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

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

Appeals. Any property owner claiming that the amount or application of the Special Tax levied in a Fiscal Year is not correct may file a written claim with the Administrator of the Community Facilities District, subject to the conditions set forth in the Rate and Method.

Duration of Special Tax Levy. Annual Special Taxes will be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds, provided that the Annual Special Taxes may not be levied later than Fiscal Year 2065-66.

Manner of Collection. The Annual Special Tax will be collected in the same manner and at the same time as ordinary ad valorem property taxes and will be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Community Facilities District may directly bill all or a portion of the Special Tax, and may collect Annual Special Taxes at a different time or in a different manner if necessary to meet its financial obligations.

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Covenant to Foreclose

Sale of Property for Nonpayment of Taxes. The Fiscal Agent Agreement provides that the Special Taxes are to be payable and collected in the same manner 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 time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property. Under the procedures, if taxes are unpaid for a period of five years or more, the property is subject to sale by the County. The Community Facilities District may also cause the collection of any Special Taxes by direct, first-class mail billing to the then owner of each parcel so owned in lieu of billing for such Special Taxes as described above. Finally, the Fiscal Agent Agreement contains a special covenant for foreclosure described below.

Foreclosure Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in the payment of the Special Tax, the Community Facilities District may order the institution of a Superior Court action to foreclose the lien therefor within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at judicial foreclosure sale.

Such judicial foreclosure action is not mandatory. However, the Community Facilities District will agree in the Fiscal Agent Agreement that, on or about February 15 and June 15 of each Fiscal Year, an Authorized Officer will compare the amount of Special Taxes to be collected on the December 10 and April 10 installments of the secured property tax bills to the amount of Special Taxes actually received by the Community Facilities District in those installments, and proceed as set forth below:

Individual Delinquencies. If the Authorized Officer determines that any single parcel subject to the Special Tax in Improvement Area B of the Community Facilities District is delinquent in the payment of 5 or more installments of the Special Taxes, or a single owner of multiple parcels is delinquent in the payment of Special Taxes in the amount of $15,000 or more, then the Authorized Officer will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the Community Facilities District within 90 days of a February 15th or June 15th determination against each such parcel; provided, however, that the Community Facilities District may elect not to go forward on foreclosure proceedings if the Reserve Fund established by the Fiscal Agent Agreement is fully funded at the Reserve Requirement and such delinquencies are not expected to result in a draw on the Reserve Fund in both the then current and immediately following Fiscal Years.

Aggregate Delinquencies. If the Authorized Officer determines that the total amount of delinquent Special Taxes for the prior Fiscal Year (after both the first and second installments) for Improvement Area B of the Community Facilities District (including the total of individual delinquencies determined as set forth above), exceeds 5% of the total Special Taxes due and payable for the prior Fiscal Year, the Community Facilities District will notify or cause to be notified all property owners who are then delinquent in the payment of Special Taxes and demand immediate payment of the delinquency within 45 days of a June 15th determination, and will commence foreclosure proceedings within 90 days of a June 15th determination against each parcel in Improvement Area B of the Community Facilities District with a Special Tax delinquency; provided, however, that the Community Facilities District may elect not to go forward with foreclosure proceedings for aggregate delinquencies if the Reserve Fund established by the Fiscal Agent Agreement is fully funded at the Reserve Requirement and such delinquencies are not expected to result in a draw on the Reserve Fund in both the then-current and immediately following Fiscal Years.

Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act does not require the Community Facilities

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District to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale.

Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post-judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.5 of the Act, the Community Facilities District, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the Community Facilities District could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Taxes. If the Community Facilities District becomes the purchaser under a credit bid, the Community Facilities District must pay the amount of its credit bid into the redemption fund established for the Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale.

Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior Court calendar. In addition, the ability of the Community Facilities District to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the property owner if the property is owned by or in receivership of the Federal Deposit Insurance Corporation (the “FDIC”). See “BOND OWNERS’ RISKS – Bankruptcy Delays.”

No Teeter Plan. Because the Community Facilities District does not participate in the “Teeter Plan” (which is the County’s Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code), collections of Special Taxes will reflect actual delinquencies.

See “BOND OWNERS’ RISKS – Emergency Preparedness; Coronavirus (COVID-19)” for the potential of a grant of waivers on penalties, based on application and approval, benefiting taxpayers that do not make timely payment of property taxes, including the Special Taxes, due to the COVID-19 virus.

Special Tax Fund

Deposits. Under the Fiscal Agent Agreement, the Community Facilities District will authorize direct deposit of all Special Taxes received by the Community Facilities District in the Special Tax Fund; provided that any proceeds of Special Tax Prepayments will be transferred by an Authorized Officer to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account.

Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the Community Facilities District and the Owners, will be disbursed as described below and, pending disbursement, will be subject to a lien in favor of the Owners and the Community Facilities District.

Disbursements. From time to time as needed to pay the obligations of the Community Facilities District, but no later than the Business Day before each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority:

(i) to the Administrative Expense Fund an amount, up to the Administrative Expense Requirement (an amount equal to $[26,010.00] for Fiscal Year 2020-21 and for each Fiscal Year thereafter, an amount equal to the Administrative Expense Requirement for the prior Fiscal Year increased by 2.00%), that an Authorized Officer directs the Fiscal Agent in writing to deposit in the Administrative Expense Fund for payment of Administrative Expenses;

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(ii) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund, and the capitalized interest account therein, including any expected transfers from the Improvement Fund and the Special Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on the next Interest Payment Date;

(iii) the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement; and

(iv) to the Administrative Expense Fund the amount of Administrative Expenses in excess of the amount previously transferred thereto under (i) above, as directed in writing by an Authorized Officer; provided that the amounts the Authorized Officer directs the Fiscal Agent to transfer from time to time to the Administrative Expense Fund may not exceed, in any Fiscal Year, the amount included in the Special Tax levy for such Fiscal Year for Administrative Expenses.

At any time following the deposit of Special Taxes in an amount sufficient to make payment of all of the foregoing deposits for the current Bond Year, any amounts in excess of such amounts remaining in the Special Tax Fund will, upon the written direction of an authorized officer, be transferred by the Fiscal Agent to the Special Tax Remainder Account, to be used for any lawful purpose under the Act. In the absence of such written direction, all amounts remaining in the Special Tax Fund on the first day of the succeeding Bond Year shall be retained in the Special Tax Fund and applied to the succeeding Bond Year’s Annual Debt Service; provided however, that in no event shall such amounts be invested at a yield in excess of the yield on the Bonds.

Bond Fund

General. Moneys in the Bond Fund and the accounts therein will be held by the Fiscal Agent for the benefit of the Owners, will be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided in the Fiscal Agent Agreement, and, pending such disbursement, will be subject to a lien in favor of the Owners.

Principal and Interest. On each Interest Payment Date, the Fiscal Agent will withdraw from the Bond Fund and pay to the Owners the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments required by the Fiscal Agent Agreement or a mandatory redemption of the Bonds from Special Tax prepayments, such payments to be made in the priority listed below.

Notwithstanding the foregoing, amounts in the Bond Fund as a result of a transfer from excess amounts in the Improvement Fund or excess amounts in the Reserve Fund will be used to pay the principal of and interest on the Bonds prior to the use of any other amounts in the Bond Fund for such purpose. If amounts in the Bond Fund are insufficient for the purposes described in the preceding paragraph, the Fiscal Agent will withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund will be deposited in the Bond Fund. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make all of the payments of principal, and interest and any premium, then due and payable on the Bonds, the Fiscal Agent will apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled will be added to the sinking payment to be made on the next sinking payment date.

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Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account will be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption can timely be given for mandatory redemption of Bonds, and notice to the Fiscal Agent can timely be given under the Fiscal Agent Agreement, and will be used (together with any amounts transferred from the Reserve Fund) to redeem Bonds on the redemption date selected in accordance with the Fiscal Agent Agreement.

Capitalized Interest Account. The Fiscal Agent will withdraw from the Capitalized Interest Account and transfer to the Bond Fund [$______on September 1, 2020, and [$______for March 1, 2021, for the purpose of paying interest then due on the 2020 Bonds.

On March 2, 2021, the Fiscal Agent shall transfer all remaining amounts in the Capitalized Interest Account to the Bond Fund, and the Fiscal Agent shall close the Capitalized Interest Account.

Reserve Fund

General. Moneys in the Reserve Fund will be held by the Fiscal Agent for the benefit of the Owners as a reserve for the payment of principal of, and interest and any premium on, the Bonds and will be subject to a lien in favor of the Owners.

Disbursements. Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the Fiscal Agent Agreement, for the purpose of redeeming Bonds. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” for a complete description of the timing, purpose and manner of disbursements from the Reserve Fund.

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

(i) the then Maximum Annual Debt Service on the 2020 Bonds and Parity Bonds,

(ii) 125% of the then average Annual Debt Service on the 2020 Bonds and Parity Bonds, or

(iii) 10% of the initial principal amount of the 2020 Bonds and Parity Bonds.

As of the Closing Date, the Reserve Requirement is $216,638.* See “FINANCING PLAN – Estimated Sources and Uses of Funds.”

Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment, a proportionate amount in the Reserve Fund (determined on the basis of the principal of Bonds to be redeemed and the original aggregate principal amount of the Bonds, and calculated with reference to the calculation of the Special Tax prepayment amount in the Rate and Method) shall be applied to the redemption of the Bonds, provided, however, that such amount shall be transferred only if and to the extent that the amount remaining on deposit in the Reserve Fund will be at least equal to the Reserve Requirement (excluding from the calculation thereof said Bonds to be redeemed) following such transfer.

* Preliminary, subject to change.

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Investment of Moneys in Funds

Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by the Fiscal Agent will be invested by the Fiscal Agent in Authorized Investments, as directed in writing by the Community Facilities District, subject to certain restrictions in the Fiscal Agent Agreement. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT” for a definition of “Authorized Investments” and other restrictions on the investment of moneys in the funds and accounts held under the Fiscal Agent Agreement.

Parity Bonds

The Community Facilities District may from time to time issue additional bonds on a parity with the 2020 Bonds (a series of “Parity Bonds”) for authorized purposes, including but not limited to, financing of projects and project costs, payable from the Net Special Taxes on a parity with the 2020 Bonds, in such principal amount as may be determined by the Community Facilities District, under a separate agreement entered into by the Community Facilities District and the Fiscal Agent. Any such Parity Bonds will be secured by a lien on the Net Special taxes on a parity with the outstanding 2020 Bonds. The Community Facilities District currently anticipates issuing Parity Bonds in the future.

Conditions to the Issuance of Parity Bonds. The Community Facilities District may issue such Parity Bonds upon compliance with conditions precedent as set forth in the Fiscal Agent Agreement, among which are the following: (i) Separate Funds; Debt Service Reserve Fund. The agreement providing for the issuance of such Parity Bonds shall provide for the establishment of separate funds and accounts.

The agreement providing for issuance of the Parity Bonds shall provide for one of the following: (a) a deposit to a reserve account for the Parity Bonds in an amount defined in such agreement, and such agreement shall expressly declare that the Owners of such Parity Bonds shall have no interest in or claim to the Reserve Fund and that the Owners of the Bonds covered by the Reserve Fund shall have no interest in or claim to such other reserve account; or (b) no deposit to another reserve account, as long as such agreement expressly declares that the owners of such Parity Bonds shall have no interest in or claim to the Reserve Fund.

(ii) Value. The value of the property subject to the Special Tax (to be determined by reference to either or some combination of an appraisal prepared by an MAI appraiser selected by the Community Facilities District, with a date of value no earlier than 90 days before the date the proposed Parity Bonds would be issued, or the assessed values shown on the last equalized County assessor’s property tax rolls) shall be at least _____ times the sum of:

(1) the aggregate principal amount of all Bonds then outstanding, plus

(2) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus

(3) the aggregate principal amount of any overlapping special tax or fixed assessment liens on the parcels in the Community Facilities District subject to the levy of Special Taxes.

(iii) Coverage. The amount of the maximum Special Taxes that may be levied in each Fiscal Year under the Ordinance shall at least equal 110% of the total Annual Debt Service on the then-outstanding

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Bonds, the proposed Parity Bonds and the Administrative Expense Requirement in the then-current fiscal year.

Refunding Bonds. Notwithstanding the foregoing, the Community Facilities District may issue Refunding Bonds as Parity Bonds without the need to satisfy the conditions set forth above.

IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT

General

Background. The Community Facilities District was formed in June 2016. The Community Facilities District is authorized to levy its own special taxes and to issue its own series of special tax bonds secured by those special taxes within each of the improvement areas established within the Community Facilities District. See “THE 2020 BONDS – Authority for Issuance.” The 2020 Bonds are secured only by Net Special Taxes, which in general consist of the Special Taxes levied within Improvement Area B of the Community Facilities District, less the Administrative Expense Requirement, and the moneys on deposit in certain funds held by the Fiscal Agent under the Fiscal Agent Agreement. See “SECURITY FOR THE 2020 BONDS.”

Location. The property within Improvement Area B of the Community Facilities District is located at the southeast corner of Leon Road and Whispering Heights Parkway, extending south along Leon Road, in the Winchester/French Valley area of unincorporated Riverside County and with a Winchester mailing address. This location is within the sphere of influence of the City of Murrieta and to the south of the City of Menifee. The location is within one-half mile to the northwest of Highway 79/Winchester Road and about three miles to the east of the 215 Freeway. See APPENDIX A – “GENERAL INFORMATION ABOUT THE CITY OF MENIFEE, CITY OF MURRIETA, AND RIVERSIDE COUNTY” for demographic and other information regarding the City of Menifee, City of Murrieta, and the County. The boundary map showing the boundaries of the Community Facilities District, and each of the two improvement areas, is attached as APPENDIX I.

Description. Improvement Area B of the Community Facilities District is part of the community known as “Heritage Ranch.” Heritage Ranch comprises an area of approximately 160 acres that lies west of Elliot Road, north of Cookie Road, east of Leon Road and south of Ruft Road. The Developer purchased the land for Heritage Ranch in 2007, and construction of homes ultimately commenced in early 2014. Heritage Ranch is planned for a total of 426 homes within four different product types, plus a park, open space-greenbelt and a detention basin. [Confirm/update] Improvement Area A included 191 of the 426 homes. Improvement Area B is planned for 131 of the remaining 235 homes. The park comprises a 10.9-acre site, including a main area at the southwest corner of Heritage Ranch and a narrow strip extending northeast to Whisper Heights Road. The park is improved as a sports park for public use and has been accepted and will be maintained by Valley Wide Recreation and Park District. The open space consists of a ±90-foot wide area along the east side of Leon Road and along the west side of the park, containing a total of approximately 4.7 acres. [It currently consists of unimproved land and is encumbered by an easement for the underground San Diego Aqueduct.] Adjacent to the south of Heritage Ranch, this area has been improved as a wide landscaped greenbelt with a paved meandering sidewalk and a wide meandering multi-purpose trail. The detention basin comprises a .67-acre rectangular-shaped parcel located at the south end of the community at the northeast corner of Kooden Road and Cookie Road.

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Only Special Taxes levied on the property in Improvement Area B serves as security for the 2020 Bonds. The following table describes the proposed development within Improvement Area B:

Table 2 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds Proposed Development Description

Developer / Neighborhood Lots Homes/Product Beazer Homes Provence at Heritage Ranch (portion) 76 Detached single-family, 1,691 SF to 3,053 SF Sutton Place at Heritage Ranch 55 Detached single-family, _____ SF to _____ SF Total 131 Source: Appraisal Report.

See “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Property Value” and APPENDIX C – “APPRAISAL REPORT.”

Surrounding Community. [Update: The Community Facilities District is located within the Menifee Union School District (K – 8th) and the Perris Union High School District (9th – 12th). The community is served by the District’s Harvest Hills Steam Academy (currently an Elementary School TK1-6th) (located approximately one- quarter mile northeast of Improvement Area B), Bell Mountain Middle School (approximately a 6-mile drive north) until a middle school building under construction on the Harvest Hill STEAM Academy site is opened, and Paloma Valley High School (approximately a 7-mile drive west). Mount San Jacinto College’s Menifee Valley campus is located approximately a 7-mile drive northwest of the Community Facilities District.

Improvement Areas. The Community Facilities District contains two improvement areas, each of which is authorized to levy its own special taxes and to issue its own series of special tax bonds secured by those special taxes ($8,000,000 with respect to Improvement Area A and $7,500,000 with respect to Improvement Area B). The Community Facilities District previously issued Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area A 2018 Special Tax Bonds in the amount of $5,750,000 on May 17, 2018. See “THE 2020 BONDS – Authority for Issuance.” There is no cross-collateralization among improvement areas, and the 2020 Bonds are secured only by the Special Taxes levied within Improvement Area B of the Community Facilities District. See “SECURITY FOR THE 2020 BONDS.” [UPDATE]As of May 15, 2020, the Taxable Property in Improvement Area B of the Community Facilities District was planned to be developed with a total of 131 single-family homes, 54 of which had closed sales to individual homeowners. 5 completed model homes are within Improvement Area B. See “PROPERTY OWNERSHIP AND DEVELOPMENT” herein.

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Special Taxes and Projected Debt Service Coverage

The debt service on the 2020 Bonds will be structured such that the projected Net Special Taxes from the Assigned Annual Special Tax on Developed Property in [Fiscal Years 2020-21 through [2023-24], when applied to the projected debt service on the 2020 Bonds (net of capitalized interest through [September 1, 2020]), is anticipated to result in a debt service coverage ratio of at least 110% for the 2020 Bonds. The Community Facilities District anticipates issuing Parity Bonds and will covenant in the Fiscal Agent Agreement that debt service on the 2020 Bonds and Parity Bonds will be structured such that the projected Net Special Taxes from the Assigned Annual Special Tax on Developed Property together with the Net Special Taxes from the Assigned Annual Special Tax on Approved Property,1 when applied to the projected debt service on the 2020 Bonds and such Parity Bonds (net of capitalized interest), will result in a debt service coverage ratio of at least 110%. The following table provides an estimate of the number of permitted units, gross Special Tax revenues from Developed Property and Approved Property, Administrative Expenses and Net Special Tax Revenues for Fiscal Year 2020-21, and for Fiscal Years 2020-21 and thereafter also includes the net debt service and debt service coverage.

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1 “Approved Property” means all Assessor’s Parcels of Taxable Property that (i) are associated with a Lot in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) have not been issued a building permit on or before the May 1st preceding the Fiscal Year in which the Special Tax is being levied.

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Table 3 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds Debt Coverage Number of Number of Less: Net Special Tax Units Projected Total Projected Permitted Levy at Projected Levy at Aggregate Levy at Administrative Revenue Net Proposed Debt Service Fiscal Year Permitted (1) Units (1) Units for Levy Assigned Rates Assigned Rates Assigned Rates Expenses Constraint Debt Service (3) Coverage 2019-20 $ $ $ $ ($ ) $ $ % 2020-21 2021-22(2) 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 2038-39 2039-40 2040-41 2041-42 2042-43 2043-44 2044-45 2045-46 2046-47 2047-48 2048-49 2049-50 2050-51 2051-52(3) - ( ) Total NA NA $ $ $ $ ($ ) $ $ NA ______(1) Projected buildout based on the product mix provided by the Developer. (2) [Confirm: A total of 17 building permits were issued after May 1, 2020, and will commence levy in Fiscal Year 2021-22. (3) Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots. See "SECURITY FOR THE 2020 BONDS - Parity Bonds" for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds. (4) The Annual Special Tax shall be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds provided that the Annual Special Tax shall not be levied later than Fiscal Year 2065-66.

Source: Cooperative Strategies, LLC.

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The Community Facilities District will covenant not to conduct or consent to proceedings with respect to a reduction in the maximum Special Taxes that may be levied in Improvement Area B of the Community Facilities District on Developed Property [or Approved Property] below an amount, for any Fiscal Year, equal to the Administrative Expense Requirement plus 110% of the aggregate annual debt service due on the Bonds in such Fiscal Year. The ability of the Community Facilities District to increase the Special tax levy on residential property is subject to limitations under the Act and the maximum Special Tax under the Rate and Method. See “BOND OWNERS’ RISKS.”

Appraised Property Value

[UPDATE]The purpose of the Appraisal Report was to estimate the value of the fee simple interest of the subject property, subject to the Special Tax lien of the 2020 Bonds, as of the date of value of the Appraisal Report (May 15, 2020). The subject property consists of 131 single-family detached lots consisting of 76 single-family detached lots encompassed by Subdivision Tract Number 32185-5 being developed by the Developer within a development known as “Provence at Heritage Ranch” and 55 single-family detached lots encompassed by Tentative Tract Map Number ______within a proposed development known as “Sutton Place at Heritage Ranch.” See the section for the Developer in the Section entitled, “PROPERTY OWNERSHIP AND DEVELOPMENT” for detailed information regarding development for the Developer’s project.

The Appraisal Report was intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice for an Appraisal Report, and with the appraisal standard proposed by the California Debt and Investment Advisory Commission. The property rights appraised were of a fee simple interest subject to easements of record and the lien of the Special Taxes. The Appraisal Report is based on certain assumptions and limiting conditions therein. Subject to these assumptions and limiting conditions, as of May 15, 2020, the Appraiser estimated that the aggregate market value of the Taxable Property within Improvement Area B was $[______. The aggregate market value as of May 15, 2020, included 54 homes closed and sold to individuals, 5 model homes, and 17 vacant lots ($26,988,486) in the portion of Provence within Improvement Area B and 55 vacant lots in in proposed Sutton Place ($[2,000,000). While building permits with respect to the 17 vacant lots within the portion of Provence at Heritage Ranch were issued after May 1, 2020, the Developer has indicated it does not anticipate commencing construction of the homes on such 17 lots until the last phases of the Provence at Heritage Ranch neighborhood development. No building permits have been issued with respect to the 55 vacant lots within the Sutton Place project and the Developer has indicated it does not anticipate commencing construction of the homes on such 55 lots until the _____ half of 20__. The analysis of the vacant lots is based on the Sales Comparison Approach, considering recent sales of residential land or bulk single-family lots from the general area. The analysis is initially of the lots as if in finished condition, then a deduction is made for the estimated costs and fees to get the lots from as is blue-topped condition to finished condition.

See Table 6A and the footnotes thereto under the caption “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to-Debt Ratio.” See also under the caption “BOND OWNERS’ RISKS – Value-to-Debt Ratios” herein and APPENDIX C – “APPRAISAL REPORT” appended hereto for further information on the Appraisal Report, including valuation by ownership and assumptions and limiting conditions relating to the Appraisal Report.

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Subject to the assumptions contained in the Appraisal Report, the Appraiser estimated that the property within Improvement Area B of the Community Facilities District, subject to the lien of the Special Taxes and overlapping liens, had an estimated value not less than as follows:

No. of Appraised Value[/ Ownership Lots/Units Assessed Value] Beazer Homes – Provence at Heritage Ranch (vacant lots) 17 $2,558,794 Beazer Homes – Provence at Heritage Ranch (model homes) 5 1,852,606 Beazer Homes – Subtotal Provence at Heritage Ranch 22 $4,411,400

Beazer Homes – Sutton Place 55 $2,000,000 Subtotal: Beazer Homes 77 $6,411,400

Individually Owned Homes 54 $22,577,086 Total 131 $28,988,486

Valuation Methods. The Appraiser estimated the value of the completed-sold homes in Improvement Area B by a mass appraisal basis by means of the Sales Comparison Approach as described within the Appraisal Report. In the Sales Comparison Approach, primary consideration is given to the recent builder sales and the resale activity of the subject homes, and secondary consideration is given to resent sales of the Traditions homes in Heritage Ranch as well as from other neighborhoods in the nearby area. For the completed-unsold home, the analysis is similar though considering the much larger size than the average of the completed-sold homes. For the homes under construction, a simplified Cost Approach is used in which the value is based on an estimate of direct construction costs expended plus the estimated value of the vacant lot as if in finished condition. he analysis of the vacant lots is based on the Sales Comparison Approach, considering recent sales of residential land or bulk single- family lots from the general area. The analysis is initially of the lots as if in finished condition, then a deduction is made for the estimated costs and fees to get the lots from as is blue-topped condition to finished condition.

The School District, the Community Facilities District and the Underwriter make no representation as to the accuracy or completeness of the Appraisal Report. See APPENDIX C for the Appraisal Report. See “IMPROVEMENT AREA B OF COMMUNITY FACILITIES DISTRICT NO. 2016-1 – Appraised Value-to-Debt Ratio,” “IMPROVEMENT AREA B OF COMMUNITY FACILITIES DISTRICT NO. 2016-1 – Direct and Overlapping Governmental Obligations” and “BOND OWNERS’ RISKS – Value-to-Debt Ratios” and APPENDIX C – “APPRAISAL REPORT” appended hereto for further information on the Appraisal Report for assumptions and limiting conditions relating to the Appraisal Report.

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Special Tax Levy

Fiscal Year 2020-21 Projected Special Tax Levy. An aggregate amount of $130,982.56 of Special Taxes are projected to be levied on 59 parcels constituting Developed Property for Fiscal Year 2020-21 in Improvement Area B. Table 4A Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Assigned Annual Special Tax Rates Fiscal Year 2020-21 Special Tax Levy

Projected Projected Fiscal Year Fiscal Year 2020-21 2020-21 Special Building No. of Assigned Annual Annual Percentage Tax Class Square Feet Parcels (1) Special Tax Rate Special Taxes (2) Levy of Total

1 ≤ 1,751 10 $1,956.84 per Unit $19,568.40 14.94% 2 1,751 - 1,950 0 2,054.48 per Unit 0.00 0.00 3 1,951 - 2,150 13 2,143.32 per Unit 27,863.16 21.27 4 2,151 - 2,350 14 2,209.88 per Unit 30,938.32 23.62 5 2,351 - 2,550 0 2,276.48 per Unit 0.00 0.00 6 2,551 - 2,750 10 2,343.06 per Unit 23,430.60 17.89 7 2,751 - 2,950 0 2,409.64 per Unit 0.00 0.00 8 2,951 - 3,150 12 2,431.84 per Unit 29,182.08 22.28 9 3,151 - 3,350 0 2,454.08 per Unit 0.00 0.00 10 3,351 - 3,550 0 2,516.06 per Unit 0.00 0.00 11 3,551 - 3,750 0 2,564.90 per Unit 0.00 0.00 12 3,751 - 3,950 0 2,613.74 per Unit 0.00 0.00 13 > 3,950 0 2,658.20 per Unit 0.00 0.00

TOTAL (3) 59 NA $130,982.56 100.00%

(1) Projected buildout based on the product mix by the Developer. (2) Amounts shown reflect the projected Fiscal Year 2020-21 Special Taxes that would be levied on all properties categorized as Developed Property within Improvement Area B planned for residential construction, if developed at the building square footage provided by the Developer at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots within Sutton Place. (3) Columns may not sum to totals due to rounding. Source: Cooperative Strategies, LLC.

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Fiscal Year 2021-22 Projected Special Tax Levy. An aggregate amount of $171,083.96 of Special Taxes are projected to be levied on 76 parcels Within Provence at Heritage Ranch constituting Developed Property for Fiscal Year 2021-22 in Improvement Area B.

Table 4B Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Assigned Annual Special Tax Rates Fiscal Year 2021-22 Special Tax Levy

Projected Projected Fiscal Year Fiscal Year Lots Projected at 2021-22 2021-22 Special Building Development Assigned Annual Assigned Annual Percentage Tax Class Square Feet Completion (1) Special Tax Rate Special Taxes (2) Levy of Total

1 ≤ 1,751 15 $1,995.98 per Unit $29,939.70 17.50% 2 1,751 - 1,950 0 2,095.56 per Unit 0.00 0.00 3 1,951 - 2,150 17 2,186.18 per Unit 37,165.06 21.72 4 2,151 - 2,350 18 2,254.08 per Unit 40,573.44 23.72 5 2,351 - 2,550 0 2,322.00 per Unit 0.00 0.00 6 2,551 - 2,750 12 2,389.92 per Unit 28,679.04 16.76 7 2,751 - 2,950 0 2,457.82 per Unit 0.00 0.00 8 2,951 - 3,150 14 2,480.48 per Unit 34,726.72 20.30 9 3,151 - 3,350 0 2,503.16 per Unit 0.00 0.00 10 3,351 - 3,550 0 2,566.38 per Unit 0.00 0.00 11 3,551 - 3,750 0 2,616.18 per Unit 0.00 0.00 12 3,751 - 3,950 0 2,666.00 per Unit 0.00 0.00 13 > 3,950 0 2,711.36 per Unit 0.00 0.00

TOTAL (3) 76 NA $171,083.96 100.00%

(1) Projected buildout of the Provence at Heritage Ranch portion of Improvement Area B based on the product mix by the Developer. (2) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Provence at Heritage Ranch portion of Improvement Area B if categorized as Developed Property, if developed at the building square footage provided by the Developer at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built in the Provence at Heritage Ranch portion of Improvement Area B and are not intended to represent the actual Special Tax levy. Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots in Sutton Place. See “SECURITY FOR THE 2020 BONDS – Parity Bonds” for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds. (3) Columns may not sum to totals due to rounding. Source: Cooperative Strategies, LLC.

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Fiscal Year 2021-22 Projected Special Tax Levy by Property Ownership. Table 4C below illustrates the Fiscal Year 2021-22 projected Special Tax levy allocated by ownership information as of May 15, 2020, made in accordance with the Rate and Method. See the respective description of home sales and projected absorption for the Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

Table 4C Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Assigned Annual Special Tax Rates and Revenues Fiscal Year 2021-22 Projected Special Tax Levy by Ownership

Projected Fiscal Year Permitted Currently 2021-22 Annual Property Ownership (1) Status (2) Owned Lots Special Taxes (3) Percent of Total Provence at Heritage Ranch Individual Homeowners Permitted 54 $122,295.58 71.48%

Beazer Homes Permitted 5 $11,306.64 6.61% Unpermitted 17 37,481.74 21.91 Subtotal, Beazer Homes NA 22 $48,788.38 28.52%

Subtotal, Permitted 59 $133,602.22 78.09% Subtotal, Unpermitted 17 $37,481.74 21.91% Subtotal, Provence at Heritage Ranch (4) 76 $171,083.96 100.00%

Sutton Place Beazer Homes Unpermitted 55 $0.00 0.00% Total 131 TOTAL (5) NA 186 $171,083.96 100.00%

(1) Ownership information is based on the Appraisal as of May 15, 2020. [See “PROPERTY OWNERSHIP AND DEVELOPMENT – Development and Financing” for further information regarding development status as of June ___, 2020.] (2) Permitted status is based on information provided by the Developer]. 17 additional units have been permitted since May 1, 2020, and will be classified and levied as Developed Property in Fiscal Year 2021-22. (3) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the Provence at Heritage Ranch portion of Improvement Area B if categorized as Developed Property, if developed at the building square footage provided by the Developer at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. (4) The 2020 Bonds are sized to 76 lots in the Provence at Heritage Ranch portion of Improvement Area B. (5) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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Assigned Special Tax Rates and Projected Revenue Assuming All Building Permits are Issued

Special Tax Levy Assuming All Building Permits Are Issued. [Discuss; Table 5 below shows a hypothetical Special Tax levy taking into account that [confirm: all 76 building permits within the portion of Provence at Heritage Ranch which is within Improvement Area B have been issued and that building permits for ___ of the 55 lots within Sutton Place are issued prior to May 1, 20__, allocated by current property ownership as of May 15, 2020. As indicated previously, the Special Taxes in Fiscal Year 2020-21 are projected to be levied on 59 parcels within Improvement Area B. The 59 lots are projected to be classified as Developed Property in Fiscal Year 2020-21. See the respective description of home sales and projected absorption for the Developer in “PROPERTY OWNERSHIP AND DEVELOPMENT.” No assurance can be given as to when or whether final home construction and conveyance to individual home buyers will be carried out.

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Table 5 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Assigned Annual Special Taxes by Major Property Owners Assuming All 131 Building Permits within Improvement Area B are Issued Prior to May 1, [2024] [Discuss presentation regarding phasing of remaining lots ]

Lots Projected Lots Projected Lots Projected Lots Projected Total Projected Currently to be Permitted to be Permitted to be Permitted to be Permitted Expected Fiscal Year Property Permitted Prior to Prior to Prior to Prior to Units at [2024-25] Percent Ownership (1) Lots (1) May 1, 2021 (1) May 1, 2022 (1) May 1, 2023 (1) May 1, 2024 (1) Build-Out Special Tax (2) of Total Provence at Heritage Ranch Individual Homeowners 54 – – – – 54 $ %

Beazer Homes 22 – – – – 22 $ %

Subtotal Cumulative Permits Issued Total (3) 76 – – – – 76 $ % Sutton Place Beazer Homes 0 [TBD] [TBD] [TBD] [TBD] [TBD] [TBD] % [Cumulative Permits Issued Total] 76 [TBD] [TBD] [TBD] [TBD] [TBD] [TBD] %

(1) Ownership and permitted status is as of May 15, 2020, and information and parcel classification is based on closing information provided by Beazer Homes. [See “PROPERTY OWNERSHIP AND DEVELOPMENT – Development and Financing” for development status as of [June __, 2020.] (2) Amounts shown reflect the Fiscal Year 2024-25 Special Taxes levied on such properties within the Community Facilities District planned for residential construction, if developed at the building square footage sizes provided by Beazer Homes at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. (3) Totals may not sum due to rounding. (4) Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots. See “SECURITY FOR THE 2020 BONDS – Parity Bonds” for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds. Source: Cooperative Strategies, LLC.

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Appraised Value-to-Debt Ratio

The table below shows the approximate value-to-debt ratio for the Taxable Property in Improvement Area B of the Community Facilities District based on the principal amount of the 2020 Bonds, which has been allocated based on the Appraised Values and Value-to-Debt Ratios by Property Ownership. Table 6A Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Appraised Values and Value-to-Debt Ratios by Property Ownership Projected Percent of Assigned Assigned Value-to- Annual Special Annual Special Debt Ratio (5) Tax Levy at Tax Levy at Property Ownership and Appraisal Number of Appraised Other Land as of May 15, Development Development Report Development Classification (1) Parcels (1) Value (2) 2020 Bonds (3) Secured Debt (4) Total Debt 2020 Completion (6) Completion (6) Provence at Heritage Ranch (portion) Individual Homeowners 54 $22,577,086 $1,309,340.18 $35,959.67 $1,426,299.85 15.83:1 $122,295.58 71.48%

Beazer Homes Completed/Model Homes 5 $1,852,606 $128,541.65 $0.00 $128,541.65 14.41:1 $11,306.64 6.61 Finished Lots 17 2,5560,794 426,118.17 4,230.55 430,348.72 5.95:1 7,481.74 21.91 Subtotal, Beazer Homes 22 $4,411,400 $554,659.82 $4,230.55 $558,890.22 7.89:1 $48,788.38 28.52% Subtotal Provence at Heritage Ranch 76 $26,988,486 $2,425,000.00 $40,190.22 $1,985,190.32 13.59:1 $171,083.96 100.00% (portion) (7)

Sutton Place Beazer Homes 55 $2,000,000 0.00 [TBD] [TBD] TOTAL (8) 131 $28,988,586 $______$______$______.__:1 $______N/A ______(1) Ownership information and parcel classification is based on the Appraisal Report as of May 15, 2020. (2) Market value estimated by the Appraiser as of May 15, 2020. (3) 2020 Bond amounts are allocated based on each parcel’s proportionate share of the Special Taxes projected to be levied on parcels [at completion of development of the 76 homes within Provence at Heritage Ranch.]. (4) Represents the lien of Perris Union High School District CFD No. 92-1. Lien amounts are allocated based on the Fiscal Year 2019-20 Perris Union High School District CFD No. 92-1 levy. Of the 54 parcels owned by individual homeowners, 19 parcels were subject to this assessment in Fiscal Year 2019-20. See “ – Direct and Overlapping Governmental Obligations” below. Excludes general obligation bonded indebtedness. (5) 2020 Bond amounts are allocated based on each parcel’s proportionate share of the Special Taxes projected to be levied on parcels [at completion of development of the 76 homes within Provence at Heritage Ranch, and assumes no development of units within Sutton Place]. [Parity Bonds are expected to be issue after commencement of homes sales in Sutton Place and prior to development completion of all homes within Improvement Area B.] Average value-to-debt; actual value-to-debt ratio per Lot may vary. (6) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the portion of homes within Provence at Heritage Ranch within Improvement Area planned for residential construction, if developed at the building square footage sizes provided by Beazer Homes at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built of the 76 units within the portion of homes within Provence at Heritage Ranch within Improvement Area B and are not intended to represent the actual Special Tax levy. (7) The 2020 Bonds are sized to 76 lots in the Provence at Heritage Ranch portion of Improvement Area B. (8) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC.

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The table below shows the approximate value-to-debt ratio for the Taxable Property in Improvement Area B of the Community Facilities District based on the appraised values and the principal amount of the 2020 Bonds, which has been allocated based on the projected Assigned Annual Special Tax levy at buildout, which is expected for Fiscal Year 2021-22.

Table 6B Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds Appraised Value-to-Debt Ratios by Categories Projected Assigned Annual Number Value-to- Special Tax Levy Percentage Value-to-Debt of Appraised Other Land Debt at Development Share of Category Parcels Value (1) 2020 Bonds (2) Secured Debt (3) Total Lien Ratio (4) Completion (5) Special Tax (5) Provence at Heritage Ranch (Portion) 15:1 and Above 44 $18,232,467.52 $1,118,792.04 $12,691.65 $1,131,483.69 16.11:1 $98,409.96 57.52% 10:1 to 15:1 15 6,197,224.48 400,089.79 23,268.02 423,357.81 14.64:1 35,192.26 20.57 8:1 to 10:1 0 0.00 0.00 0.00 0.00 NA 0.00 0.00 5:1 to 8:1(6) 16 2,408,276.71 397,918.37 2,115.27 400,033.65 6.02:1 35,001.26 20.46 5:1 and below (6) 1 150,517.29 28,199.80 2,115.27 30,315.08 4.97:1 2,480.48 1.45 Subtotal (7) 76 $26,988,486.00 $2,425,000.00 $40,190.22 $1,985,190.22 13.59:1 $171,083.96 100.00% Sutton Place (8) 55 $2,000,000.00 0.00 __,__:1 0 Total (9) 131 $28,988,486.00 $[______.__:1 N/A N/A ______(1) Market value estimated by the Appraiser as of May 15, 2020. (2) 2020 Bond amounts are allocated based on each parcel’s proportionate share of the Special Taxes projected to be levied at development completion of the portion of homes within Provence at Heritage Ranch within Improvement Area B. (3) Represents the lien of Perris Union High School District CFD No. 92-1. Lien amounts are allocated based on the Fiscal Year 2019-20 Perris Union High School District CFD No. 92-1 special tax levy. Of the 54 parcels owned by individual homeowners, 19 parcels were subject to this special tax in Fiscal Year 2019-20. See “ – Direct and Overlapping Governmental Obligations” below. Excludes general obligation bond indebtedness. [As building permits are issued and as the assessed values reflect completion of home construction, a parcel’s share of overlapping debt may increase.] (4) Average value-to-debt; actual value-to-debt ratio per Lot may vary. (5) Amounts shown reflect the projected Fiscal Year 2021-22 Special Taxes that would be levied on all properties within the portion of units within Provence at Heritage Ranch within Improvement Area B planned for residential construction, if developed at the building square footage sizes provided by Beazer Homes at the time of issuance of the 2020 Bonds. These amounts are provided to illustrate the expected classification of the units remaining to be built and are not intended to represent the actual Special Tax levy. (6) All 17 lots are valued as Finished Lots per the Appraisal Report as of May 15, 2020 (the date of value of the Appraisal Report), resulting in a Value-to-Debt Ratio of 8:1 and below. (7) The 2020 Bonds are sized to 76 lots in the Provence at Heritage Ranch portion of Improvement Area B. (8) Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots. See “SECURITY FOR THE 2020 BONDS – Parity Bonds” for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds. (9) Totals may not sum due to rounding. Source: Cooperative Strategies, LLC. 40

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Direct and Overlapping Governmental Obligations

Certain local agencies provide public services and assess property taxes, assessments, special taxes and other charges on the property in Improvement Area B of the Community Facilities District. Many of these local agencies have outstanding debt. The direct and overlapping obligations affecting the property in Improvement Area B of the Community Facilities District as of May 13, 2020, are shown in the following table. The table is sourced from California Tax Data, Inc. and is included for general information purposes only. The Community Facilities District has not reviewed this report for completeness or accuracy and makes no representation in connection therewith. The Community Facilities District believes the information is current as of its date, but makes no representation as to its completeness or accuracy. Other public agencies, such as the County, may issue additional indebtedness at any time, without the consent or approval of the Community Facilities District.

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Table 7 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Direct and Overlapping Governmental Obligations (As of May 13, 2020) [Update to include 55 lots in Sutton Place]

I. Assessed Value (1) 2019-20 Secured Roll Assessed Value $10,919,013

II. Secured Property Taxes Total Description on Tax Bill Type Parcels Total Levy % Applicable Parcels Levy Basic 1% Levy PROP13 923,511 $2,836,919,066.53 0.00385% 78 $109,190.01 County of Riverside CSA No. 103 (Street Lights) CSA 11,548 664,532.22 0.86141 76 5,724.32 County of Riverside CSA No. 152 (Street Sweeping) CSA 67,616 2,115,283.36 0.24726 76 5,230.32 County of Riverside LLMD No. 89-1C, Zone 109 LLMD 376 3,527.98 18.09534 76 638.40 Menifee Union School District CFD No. 2016-1, Impv Area B CFD 46 100,210.78 100.00000 46 100,210.78 Menifee Union School District Debt Service GOB 41,850 6,871,207.07 0.09975 78 6,853.83 Metropolitan Water District of Southern California Debt Service GOB 252,556 2,832,586.90 0.01349 75 382.06 Mt. San Jacinto Community College District Debt Service GOB 328,787 12,284,230.20 0.01173 78 1,441.23 Perris Union High School District CFD No. 92-1 CFD 21,724 4,809,144.18 0.12033 19 5,786.64 Perris Union High School District Debt Service GOB 72,102 14,426,608.76 0.06240 78 9,001.81 Riverside County Flood Control NPDES (Santa Margarita) FLOOD 90,061 581,686.40 0.01651 24 96.04 Valley Wide Park and Recreation District LMD (French Valley) LMD 9,119 4,717,244.14 0.89656 54 42,292.80 Valley Wide Park and Recreation District LMD No. 88-1 (Regional Facility) LMD 74,398 1,244,391.26 0.02404 54 299.16 2019-20 TOTAL PROPERTY TAX LIABILITY $287,147.40 TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2019-20 ASSESSED VALUATION 2.63%

III. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Menifee Union School District CFD No. 2016-1, Impv Area B CFD $0 $0 100.00000 46 $0 Perris Union High School District CFD No. 92-1 CFD 40,000,000 33,400,000 0.12033 19 40,190 TOTAL LAND SECURED BOND INDEBTEDNESS (1) $40,190 TOTAL OUTSTANDING LAND SECURED BOND INDEBTEDNESS (1) $40,190

IV. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Menifee Union School District GOB 2002 GOB $14,498,923 $11,129,720 0.09489% 78 $10,561 Menifee Union School District GOB 2008 GOB 31,460,000 28,175,000 0.09489 78 26,735 Menifee Union School District GOB 2016 GOB 60,300,000 54,585,000 0.09489 78 51,794 Metropolitan Water District of Southern California GOB 1966 GOB 850,000,000 50,105,000 0.00557 78 2,789 Perris Union High School District GOB 2004 GOB 45,997,378 27,322,378 0.05981 78 16,342 Perris Union High School District GOB 2012 GOB 75,413,024 67,328,024 0.05981 78 40,270 Perris Union High School District GOB 2018 GOB 148,000,000 148,000,000 0.05981 78 88,522 Mt. San Jacinto Community College District GOB 2014 GOB 190,000,000 164,385,000 0.01135 78 18,653 TOTAL GENERAL OBLIGATION BOND INDEBTEDNESS (1) $255,664 TOTAL OUTSTANDING GENERAL OBLIGATION BOND INDEBTEDNESS (1) $255,664

(1) As of January 1, 2019. (2) Parity Bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced fiscal year. Source: California Tax Data, Inc.

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Estimated Property Tax Rates and Tax Burden on Single-Family Home

The following table sets forth the estimated total property tax rates and tax burden on a single-family detached unit of 2,027 building square feet (representing a parcel with the median effective tax rate for a single- family detached home within Improvement Area B of the Community Facilities District), based on actual tax rates for Fiscal Year 2019-20.

Table 8 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Sample Property Tax Bill for Fiscal Year 2019-20

Assessed Valuations and Property Taxes Total Assessed Value $438,990 Homeowner’s Exemption (7,000) Assessed Value (1) $431,990

Percent of

Ad Valorem Property Taxes Total AV Amount General Purposes 1.00000% $4,319.90 Ad Valorem Tax Overrides Perris Union High School District Debt Service 0.08244% $356.13 Menifee Union School District Debt Service 0.06277 171.16 Mt. San Jacinto Community College District Debt Service 0.01320 57.02 Metropolitan Water District of Southern California Debt Service 0.00350 15.12 Total Ad Valorem Property Taxes 1.16191% $5,019.33

Assessments, Special Taxes and Parcel Charges County of Riverside LLMD No. 89-1C, Zone 109 $8.40 Riverside County Flood Control NPDES (Santa Margarita) 4.00 County of Riverside CSA No. 103 (Street Lights) 75.32 County of Riverside CSA No. 152 (Street Sweeping) 68.82 Valley Wide Park and Recreation District LMD No. 88-1 (Regional Facility) 5.54 Valley Wide Park and Recreation District LMD (French Valley) 783.20 Menifee Union School District CFD No. 2016-1, Impv. Area B 2,101.30 Total Assessments, Special Taxes and Parcel Charges $3,046.58

Total Property Taxes $8,065.91 Total Effective Tax Rate 1.84% ______(1) Fiscal Year 2019-20 assessed valuation for a single-family detached unit containing 2,027 building square feet, selected to represent the median effective tax rate for a single-family detached unit within Improvement Area B of the Community Facilities District. Source: Cooperative Strategies, LLC.

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The following is a description of certain of the direct assessments mentioned in the preceding table, using the most recent information available.

Menifee Union School District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2002, 2008 and 2016 that were used to fund school facilities of the School District. This ad valorem tax is levied based on the property value.

Metropolitan Water District of Southern California General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2010, 2014 and 2019 that were used to fund the acquisition and construction of improvements and works of the Metropolitan Water District of Southern California for supplying its inhabitants with water, including facilities relating thereto.

Mt. San Jacinto Community College District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2014 that were used to fund the acquisition, construction, modernization and renovation of Mt. Jacinto Community College District sites and facilities.

Perris Union High School District Community Facilities District No. 92-1: This special tax is used to pay debt service due on bonds issued in 2011 and 2015 that were used to fund school facilities of the Perris Union High School District. The special tax is levied based on the property classification of a parcel, such as attached, detached or multifamily. The community facilities district may impose a maximum special tax of $304.55 (for properties with building permits issued after 1993) per single family resident unit for Fiscal Year 2019-20. This special tax increases at two percent (2%) each fiscal year.

Perris Union High School District General Obligation Bonds. This ad valorem tax is used to pay debt service due on bonds issued in 2004, 2012 and 2018 that were used to fund school facilities of the Perris Union High School District. This ad valorem tax is levied based on the property value.

Valley Wide Park and Recreation District French Valley Landscape Maintenance District (French Valley). This landscape maintenance district provides funding for maintenance and servicing of park, parkways, landscaping and appurtenant facilities within and/or adjacent to the landscape maintenance district. The district may impose a maximum assessment of $815.00 per single-family residential unit for Fiscal Year 2019-20. The assessment increases at two percent (2.00%) each fiscal year.

Valley Wide Park and Recreation District LMD No. 88-1 (Regional Facility). This landscape maintenance district provides funding for public park facilities benefiting property within its boundaries. This district may impose a maximum assessment of $8.41 per single-family residential unit for Fiscal Year 2019-20. The special assessment may be increased annually by the maximum of 2.00%.

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Special Tax Collection History and Delinquencies

The Special Taxes were first levied in Improvement Area B of the Community Facilities District in Fiscal Year 2019-20. The following table illustrates one year history of delinquencies for Special Taxes levied in Improvement Area B of the Community Facilities District for Fiscal Year 2019-20.

Table 9

Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Special Tax Delinquency History

Subject Fiscal Year Ending June 30 Number Number of Remaining Remaining Fiscal of Parcels Amount Amount Parcels Percent Amount Percent Year Amount Levied Levied Collected Delinquent Delinquent Delinquent Delinquent (1) Delinquent (1) 2019/2020 $101,210.78 46 $101,210.78 $0.00 0 0.00% $0.00 0.00%

(1) As of May 6, 2020. Source: Cooperative Strategies, LLC.

See “BOND OWNERS’ RISK – Emergency Preparedness; Coronavirus (COVID-19)” for the potential of a grant of waivers on penalties, based on application and approval, benefiting taxpayers that do not make timely payment of property taxes, including the Special Taxes, due to the COVID-19 virus.

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Historical Assessed Values

The property within Improvement Area B of the Community Facilities District has a total assessed valuation for Fiscal Year 2019-20 of $[______. The following table represents a [one-year history of the assessed valuation for Improvement Area B of the Community Facilities District.

Table 10

Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds [TO BE UPDATED] Historical Assessed Value Summaries

Fiscal Year Number of Number of Annual Ending Developed Undeveloped Assessed Value Assessed Value Total Assessed Percentage June 30 Parcels Parcels Land (1) Improvement (1) Value (1) Increase 2018 __ ___ $______$______$______N/A

(1) Source: County of Riverside Assessor’s Roll. ______Source: Cooperative Strategies, LLC.

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PROPERTY OWNERSHIP AND DEVELOPMENT

Representatives of the Developer have provided the information in this section regarding the Developer and its development in Improvement Area B of the Community Facilities District. Neither the Underwriter, the School District nor the Community Facilities District has independently confirmed or verified the information in this section of the Official Statement nor does any such party make any representation as to accuracy or adequacy of this information. Further, there may be material adverse changes in this information after the date of this Official Statement. The information in this section of the Official Statement regarding ownership of certain taxable property in Improvement Area B of the Community Facilities District has been included because it is considered relevant to an informed evaluation of the 2020 Bonds. The inclusion in this Official Statement of information related to the Developer should not be construed to suggest that the 2020 Bonds, or the Special Taxes that will be used to pay the 2020 Bonds, are recourse obligations of the Developer or any other property owner in Improvement Area B of the Community Facilities District. A property owner may sell or otherwise dispose of land within Improvement Area B of the Community Facilities District or a development or any interest therein at any time. The 2020 Bonds and the Special Taxes are not personal obligations of the Developer or any other current or subsequent property owners and, in the event that the Developer or any other current or subsequent property owner defaults in the payment of the Special Taxes, the Community Facilities District may proceed with judicial foreclosure but has no direct recourse to the assets of the Developer or any other current or subsequent property owner. As a result, other than as provided in the Official Statement, no financial statements or information is, or will be, provided about the Developer or any other current or subsequent property owner. The 2020 Bonds are secured solely by the Net Special Taxes and other amounts pledged under the Fiscal Agent Agreement. See “SECURITY FOR THE 2020 BONDS” and “BOND OWNERS’ RISKS.”

Beazer Homes

As previously defined in this Official Statement, “Beazer Homes” refers to Beazer Homes Holdings, LLC, a Delaware limited liability company. Beazer Homes is a wholly owned subsidiary of Beazer Homes USA, Inc., a Delaware corporation (“Beazer USA”), a publicly traded company listed on the New York Stock Exchange under the symbol “BZH.” Founded in 1985, Beazer USA is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States: the West, the East, and the Southeast.

Beazer USA is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of Beazer USA and its subsidiaries (e.g., see Beazer USA’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, as filed with the SEC on November 13, 2019, and Quarterly Report on Form 10- Q for the quarter ended March 31, 2020, as filed with the SEC on April ___, 2020), as of the dates described therein. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Beazer USA. The address of such internet website is www.sec.gov. All documents subsequently filed by Beazer USA pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Beazer USA’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Beazer USA’s website at www.beazer.com. These Internet websites are included for reference only, and the information on this Internet site is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these Internet websites. Neither Beazer nor Beazer USA is obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes, and investors should not rely on the information and financial statements contained on such internet websites in evaluating whether to buy, hold or sell the 2020 Bonds.

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A sample of other single-family development projects currently under development or recently completed by Beazer Homes in southern California include the following: [Update: Est. Description/ Number of Approx. Approx. Base Approx. Square Homes at Time Period of (1) Site Name Location Selling Price Feet Completion Development

(1) As of May 1, 2020.

______

Source: Beazer Homes.

Nationwide, Beazer USA had ______home sale closings in its fiscal year 2019 ended September 30, 2019, and had ______home sale closings through its second quarter of fiscal year 2020 ended March 31, 2020.

Development and Financing

General. Beazer acquired its property in Improvement Area B in [2006]. The property is intended for development of a total of 131 single-family homes.

Infrastructure and Entitlements. [UPDATE]

Provence at Heritage Ranch. The portion of Provence at Heritage Ranch neighborhood within Improvement Area B is a portion of Final Tract Map No. 32185-5. 59 of the 76 homes within Improvement Area B within the Provence at Heritage Ranch project are completed and 17 lots are in a graded blue-topped condition, with all infrastructure improvements serving them [confirm: completed. The Provence at Heritage Ranch homes include a total of five floor plans of homes sizes planning ranging from 1,691 square feet to 3,053 square feet. All discretionary entitlements are in place, and Beazer Homes is not aware of any additional discretionary entitlements required to continue with development of its Provence at Heritage Ranch project in Improvement Area B. [Building permits for the 17 lots were issued after May 1, 2020 (the final phase of Provence at Heritage Ranch). No infrastructure improvements are required in connection with the remaining homes to be constructed by Beazer Homes in the portion of the Provence at Heritage Ranch neighborhood within Improvement Area B.

Sutton Place at Heritage Ranch. The balance of the 131 lots within Improvement Area B are 55 larger sized lots anticipated to be developed as a neighborhood known as Sutton Place at Heritage Ranch, which will be the final neighborhood to be built in Heritage Ranch. Construction of homes within Sutton Place are not expected to commence until the [___ quarter of 20__]. Sutton Place at Heritage Ranch is encompassed by

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Tentative Tract Map No. ______. The 55 lots are in a [rough graded] condition, with infrastructure improvements needed to be extended to serving such lots]. [Home designs for the Sutton Place at Heritage Ranch homes include a total of _____ floor plans of homes sizes planning ranging from _____ square feet to ____ square feet, on _____ square foot lots. [Update; Discretionary entitlements remaining to be obtained include ______and ______. Beazer Homes is not aware of any additional discretionary entitlements required to continue with development of its property in Improvement Area B that cannot be obtained through normal development process.].

Environmental Conditions. Beazer Homes represents that none of the property in Improvement Area B is within a 100-year flood plain, seismic fault setback zone, or very high fire hazard severity zone. Beazer Homes represents that it is not aware of any federally or State classified hazardous materials or any species currently listed as endangered located on any of its property in the Community Facilities District that requires mitigation. See the caption “BOND OWNERS’ RISKS – Property Values – Hazardous Substances.”

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Home Sales and Projected Absorption.

As of the May 15, 2020, the date of value in the Appraisal Report, Beazer Homes owned the 5 model homes and 17 lots within Improvement Area B planned to be developed as a portion of the 174-lot neighborhood of Provence at Heritage Ranch. The 17 lots for which building permits were recently issued within Improvement Area B comprise Phase 13 and the build out phase of Provence at Heritage Ranch. As of [May/June] __, 2020, building permits for the 17 vacant lots had been issued but Beazer Homes does not expect to commence construction of homes on any of such lots, until construction and sale of the 98 homes within Improvement Area A, estimated to be during the ___ quarter of 20__. As of June __, 2020, Beazer Homes expects to close all of the homes in Improvement Area B by the [___ or ___ quarter of 20__].

Table 11 Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds [TO BE UPDATED] Beazer Homes Development Status (As of May 15, 2020)

Estimated Total Completed Units With Base Approx. Estimated Units Closed Escrows Unit Sales Square Number (Not Units Under Finished to Individual Available Neighborhood Prices (1) Feet of Units Closed) (2) Construction Lots (3) Homeowners for Sale (3) Provence at $406,990- 1,691 – 76 5 0 17 54 0 Heritage Ranch $480,990 3,053 Total: Sutton Place TBD TBD 55 N/A N/A 55 N/A N/A Total: 131 5 0 72 54 0

(1) Base sales prices for the homes are subject to change at any time by Beazer Homes. Base sales prices are exclusive of any premiums, options, upgrades, incentives, and any selling concessions or price reductions currently being offered. (2) Includes 5 model homes. (3) Includes finished lots. As of [May/June __, 2020, building permits for the 17 lots have been issued, but Beazer Homes does not expect to commence construction of homes on any of the 17 lots, until construction and sale of the 98 homes within Improvement Area B. As of June [__, 2020, there are no homes within Improvement Area B available for sale. (4) Sutton Place is currently planned to be the final neighborhood to be built in Heritage Ranch. It is anticipated that Parity Bonds will be issued in connection with the development of the 55 lots. See “SECURITY FOR THE 2020 BONDS – Parity Bonds” for information regarding the conditions which must be satisfied in connection with the issuance of Parity Bonds. Source: Beazer Homes.

No assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth in Table 11 will not change after the date of this Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. See “BOND OWNERS’ RISKS – Future Property Development” and “Property Values.”

COVID-19 Pandemic. The spread of the novel strain of coronavirus called COVID-19 (“COVID- 19”) is having a growing negative impact throughout the world, including in the County of Riverside, and could have a material adverse effect on Beazer Homes’ ability to complete its Provence at Heritage Ranch neighborhood within Improvement Area B in the time frame and budget, and at the sales prices, described in this Official Statement. Beazer Homes has taken recent steps to limit the spread of COVID-19. For example, effective March __, 2020, Beazer Homes’ on-site sales office for its Provence at Heritage Ranch 50

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neighborhood within Improvement Area B remains open, but by in person and virtual appointment only. The impacts caused by the outbreak are evolving and Beazer Homes cannot predict the ultimate effects of the COVID-19 outbreak on its the ability to develop the project as planned. See “BOND OWNERS’ RISKS – Emergency Preparedness; Coronavirus (COVID-19).”

Financing Plan.

Provence at Heritage Ranch. All infrastructure facilities serving Provence at Heritage Ranch in Improvement Area B have been completed. As of June 1, 2020, with respect to the portion of Provence at Heritage Ranch within Improvement Area B, Beazer Homes expected to spend approximately $______in additional site development costs (inclusive of the payment of impact and permit fees totaling approximately $______and site improvement costs totaling approximately $______) and approximately $__.__ million in additional direct home construction costs until full buildout of the homes proposed to be constructed therein and marketing and sales costs (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs).

As of June 1, 2020, to date, Beazer Homes has financed its land acquisition costs ($______) and various site development costs and home construction costs related to its property in Improvement Area B through internally generated funds, which may include cash from operations, proceeds from notes and other bank borrowings, including borrowings under the credit facility described below, as well as issuance of equity securities. Beazer Homes expects to use these sources of funds to complete its development of its property within Improvement Area B. Beazer Homes believes that it will have sufficient funds available to complete the proposed development of its property as described in this Official Statement commensurate with the development timing described in this Official Statement.

Sutton Place. Describe status: [Update: A tentative map encompassing Sutton Place has been approved and a final map may be prepared and recorded during the [___ quarter of 20__. Infrastructure facilities serving Sutton Place remain to be extended into Sutton Place. As of June 1, 2020, with respect to the Sutton Place at Heritage Ranch, Beazer Homes expected to spend approximately $______in additional site development costs (inclusive of the payment of impact and permit fees totaling approximately $______and site improvement costs totaling approximately $______) and approximately $__.__ million in additional direct home construction costs until full buildout of the homes proposed to be constructed therein and marketing and sales costs (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs).

As of June 1, 2020, to date, Beazer Homes has financed its land acquisition costs ($______) and various site maintenance and development costs related to its property for Sutton Place through internally generated funds, which may include cash from operations, proceeds from notes and other bank borrowings, including borrowings under the credit facility described below, as well as issuance of equity securities. Beazer Homes expects to use these sources of funds to fund its development of Sutton Place. Beazer Homes believes that it will have sufficient funds available to complete the proposed development of its property as described in this Official Statement commensurate with the development timing described in this Official Statement.

Revolving Credit Facility. As of March 30, 2020, Beazer USA was a party to a $250.0 million secured revolving credit facility that provides for working capital and letter of credit capacity (the “Credit Facility”). The Credit Facility is with four lenders and terminates in [February 2022]. Subject to Beazer USA’s option to cash collateralize its obligations under the Credit Facility upon certain conditions, Beazer USA’s obligations under the Credit Facility are secured by liens on substantially all of its personal property and a significant portion of its owned real properties. Although the Credit Facility is not currently secured by the 51

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property owned by Beazer Homes within Improvement Area B [CONFIRM], such property may be pledged as security under the Credit Facility in the near future. As a precautionary measure to increase Beazer USA’s cash position and preserve flexibility in light of the COVID-19 pandemic, on March 13, 2020, the company elected to draw down all of the $250.0 million of available amounts under the Credit Facility. Accordingly, as of March 31, 2020, $250.0 million of borrowings and no letters of credit were outstanding under the Facility, resulting in no remaining capacity. The Credit Facility contains certain covenants, including negative covenants and financial covenants, with which Beazer USA is required to comply and which may limit the amount Beazer USA may borrow or have outstanding at any time. As of March 31, 2020, Beazer USA was in compliance with all such covenants. Beazer USA’s ability to renew the Credit Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and Beazer USA’s financial condition and strength.

Notwithstanding the current belief of Beazer Homes that it will have sufficient funds to complete its planned development in Improvement Area B, no assurance can be given that sources of financing available to Beazer Homes will be sufficient to complete the property development and home construction as currently anticipated. While Beazer Homes has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Beazer Homes, Beazer USA, nor any of their affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Beazer Homes to provide internal financing in the past, Beazer Homes has not represented in any way that it will do so in the future.

If and to the extent that internal financing or sales revenues are inadequate to pay the costs to complete Beazer Homes’ planned development within Improvement Area B and other financing by Beazer Homes or its affiliates is not put into place, there could be a shortfall in the funds required to complete the remaining development by Beazer Homes or to pay ad valorem property taxes or Special Taxes related to Beazer Homes’ property in Improvement Area B and portions of the project may not be developed. Many factors beyond Beazer Homes’ control, or a decision by Beazer Homes to alter its current plans, may cause the actual sources and uses to differ from the projections. See “BOND OWNERS’ RISKS” herein for a discussion of risk factors.

Beazer Homes is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area B.

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

In connection with the issuance of the 2020 Bonds, an officer or authorized representative of Beazer Homes will execute a certificate on behalf of such entity, containing the following representations (among others).

For purposes of these representations, the following terms have the following meanings:

 “Property” means the Taxable Property currently owned by Beazer Homes within Improvement Area B.

 “Actual Knowledge of Beazer Homes” means the knowledge of the authorized officer of Beazer Homes signing the certificate containing the following representations (the “Beazer Homes Letter of Representations”) as of the date of the Beazer Homes Letter of Representations obtained from interviews with such current officers and responsible employees of Beazer Homes and its Relevant Entities (defined below) as the authorized officer signing the Beazer Homes Letter of Representations has determined are likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Beazer Homes Letter of Representations. The 52

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authorized officer of Beazer Homes signing the Beazer Homes Letter of Representations has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Beazer Homes’ current business and operations. Beazer Homes has not contacted individuals who are no longer with Beazer Homes or its Relevant Entities.

 “Relevant Entity” means, with respect to Beazer Homes, any other Person: (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Beazer Homes, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of Improvement Area B and the 2020 Bonds (i.e., such Person’s assets or funds would materially affect the ability of Beazer Homes to develop the Property as proposed in this Official Statement or to pay its Special Taxes, or such Person’s compliance with continuing disclosure undertakings under SEC Rule 15c2- 12 would materially affect the ability of Beazer Homes to comply with its obligations under the Developer Continuing Disclosure Certificate). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

Breaches of Agreements. To the Actual Knowledge of Beazer Homes,

(a) Beazer Homes and its Relevant Entities are not in breach of or in default under any applicable judgment or decree or any loan agreement, line of credit, option agreement, development agreement (including mitigation agreements or joint community facilities agreements), indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which Beazer Homes or its Relevant Entities are a party or otherwise subject, which could reasonably be expected to materially and adversely affect the ability of Beazer Homes to perform its obligations under the Developer Continuing Disclosure Certificate or to develop the Property as stated in this Official Statement or to pay the Special Taxes prior to delinquency with respect to the Property, and

(b) no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default under any Material Agreement that could reasonably be expected to materially and adversely affect the ability of Beazer Homes to develop the Property as stated in this Official Statement or to pay the Special Taxes prior to delinquency with respect to the Property.

No Litigation. No action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, public board or body is pending against Beazer Homes (with proper service of process or proper notice to Beazer Homes having been accomplished), or, to the Actual Knowledge of Beazer Homes, is pending against any current Relevant Entity (with proper service of process to such Relevant Entity having been accomplished), or, to the Actual Knowledge of Beazer Homes, is threatened in writing against Beazer Homes or any such Relevant Entity:

(a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the 2020 Bonds (e.g., the Reserve Fund established under the Fiscal Agent Agreement),

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(b) to restrain or enjoin the execution of and performance of the obligation of Beazer Homes under the Developer Continuing Disclosure Certificate,

(c) to restrain or enjoin the development of the Property as stated in this Official Statement,

(d) in any way contesting or affecting the validity of the Special Taxes or the Agreements, or

(e) which if successful, is reasonably likely to materially and adversely affect the ability of Beazer Homes to complete the development and sale of the Property or to pay Special Taxes or ad valorem tax obligations prior to delinquency with respect to the Property.

Special Tax and Assessment Delinquencies. Beazer Homes has been developing or has been involved in the development of numerous projects over an extended period of time. It is likely that Beazer Homes and its Relevant Entities have been delinquent at one time or another in the payment of ad valorem property taxes, special assessments or special taxes. However, to the Actual Knowledge of Beazer Homes, neither Beazer Homes nor any current Relevant Entity is currently delinquent in any material amount in the payment of ad valorem property taxes, special assessments or special taxes on property in California owned by Beazer Homes or any such Relevant Entity. To the Actual Knowledge of Beazer Homes, neither Beazer Homes nor any Relevant Entity has been delinquent in the last five years in the payment of special assessments or special taxes on property in California owned by Beazer Homes or by any such Relevant Entity during the period of its ownership included within the boundaries of a community facilities district or assessment district within California that would have caused a draw on a reserve fund relating to such assessment district or community facilities district financing or resulted in a foreclosure action being commenced.

No Bankruptcy. To the Actual Knowledge of Beazer Homes, Beazer Homes is able to pay its bills as they become due and no legal proceedings are pending against Beazer Homes (with proper service of process having been accomplished) or, to the Actual Knowledge of Beazer Homes, threatened in writing in which Beazer Homes may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation.

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BOND OWNERS’ RISKS

The purchase of the 2020 Bonds described in this Official Statement involves a degree of risk that may not be appropriate for some investors. The following includes a discussion of some of the risks which should be considered before making an investment decision. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the 2020 Bonds.

Risks of Real Estate Secured Investments Generally

The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the Community Facilities District, the supply of or demand for competitive properties in such area, and the market value of property in the event of sale or foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, earthquakes, landslides, wildfires, floods, droughts and pandemics), which may result in uninsured losses.

Limited Obligation of the Community Facilities District to Pay Debt Service

The Community Facilities District has no obligation to pay principal of and interest on the 2020 Bonds if Special Tax collections are delinquent or insufficient, other than from amounts, if any, on deposit in the Reserve Fund or funds derived from the tax sale or foreclosure and sale of parcels for Special Tax delinquencies. Neither the School District nor the Community Facilities District is obligated to advance funds to pay debt service on the 2020 Bonds.

Future Property Development

Continuing development of the undeveloped parcels in the Community Facilities District may be adversely affected by changes in general or local economic conditions, fluctuations in or a deterioration of the real estate market, increased construction costs, development, financing and marketing capabilities of the Developer, water or electricity shortages, discovery on the undeveloped property of any plants or animals in their habitat that have been listed as endangered species, and other similar factors. Development in Improvement Area B of the Community Facilities District may also be affected by development in surrounding areas, which may compete with Improvement Area B of Community Facilities District.

In addition, partially developed land is less valuable than developed land and provides less security for the 2020 Bonds (and therefore to the owners of the 2020 Bonds) should it be necessary for the Community Facilities District to foreclose on undeveloped property due to the nonpayment of Special Taxes. Moreover, failure to complete future development on a timely basis could adversely affect the land values of those parcels which have been completed. Lower land values result in less security for the payment of principal of and interest on the 2020 Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of Special Taxes.

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Extraordinary Redemption From Prepaid Special Taxes

The 2020 Bonds are subject to mandatory call and redemption prior to maturity, as a whole or in part on any Interest Payment Date from amounts in the Special Tax Prepayments Account available to redeem 2020 Bonds under the Fiscal Agent Agreement. Prepayments could be made by any of the owners of any of the property within the Community Facilities District including any of the Developers, or any individual owner; and they could also be made from the proceeds of bonds issued by or on behalf of an overlapping special assessment district or community facilities district. The resulting redemption of 2020 Bonds that were purchased at a price greater than the applicable redemption price could reduce the otherwise expected yield on such 2020 Bonds. See “THE 2020 BONDS – Redemption – Mandatory Redemption from Special Tax Prepayments.”

Concentration of Ownership

[Update] The Developer does not anticipate issuance of building permits for any of the 55 lots of Sutton Place located within Improvement Area B to occur prior to May 1, 20__ and the Developer will be responsible for approximately $[______of $130,982.56 of the Fiscal Year 2020-21 Special Tax levy, and the Developer anticipates that it will continue to be responsible for a portion of each annual Special Tax levy until building permits are issued, homes constructed and sales to individual homeowners occur. See Table 3 in “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Special Taxes and Projected Debt Service Coverage,” Table 5 in “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Assigned Special Tax Rates and Projected Revenue Assuming All Building Permits Are Issued” and Table 6A in “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Appraised Value-to-Debt Ratio.” As of July 27, 2018, Beazer Homes expects to close all of the homes in Improvement Area B by the end of 2023.

Until the construction and sale of the remaining homes on the undeveloped property to individual homeowners, the receipt of the Special Taxes is dependent in part on the willingness and the ability of the Developer to pay its Special Taxes when due. Failure of the Developer, or any successor(s), to pay its annual Special Taxes when due could result in a draw on the Reserve Fund, and potentially a default in payments of the principal of, and interest on, the 2020 Bonds, when due. No assurance can be given that the Developer, or its successors, will complete the remaining intended construction and development of its property in Improvement Area B of the Community Facilities District.

No assurance can be given that the Developer, or its successors, will pay Special Taxes for which it is responsible in the future or that it will be able to pay such Special Taxes on a timely basis. See “ – Bankruptcy Delays” for a discussion of certain limitations on the Community Facilities District’s ability to pursue judicial proceedings with respect to delinquent parcels. See “SECURITY FOR THE 2020 BONDS – Covenant to Foreclose” and “ – Bankruptcy Delays” below for a discussion of certain limitations on the Community Facilities District’s ability to pursue judicial proceedings with respect to delinquent parcels. See “SECURITY FOR THE 2020 BONDS – Special Taxes” and “PROPERTY OWNERSHIP AND DEVELOPMENT.” Levy and Collection of the Special Tax

General. The principal source of payment of principal of and interest on the 2020 Bonds is the proceeds of the annual levy and collection of the Special Tax against property within Improvement Area B of the Community Facilities District.

Limitation on Maximum Special Tax Rate. The annual levy of the Special Tax is subject to the maximum annual Special Tax rate authorized in the Rate and Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the 2020 Bonds. Generally, the 56

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Community Facilities District levies Special Taxes at the Assigned Annual Special Tax rate on Developed Property in Improvement Area B, and [confirm: it is not expected that there will be a levy of Special Taxes on Approved Property during the first few years after issuance of the 2020 Bonds. In the event that delinquencies occur in the receipt of Special Taxes within Improvement Area B in any fiscal year, the Community Facilities District may increase the Special Tax levy up to the maximum rates as permitted in the Rate and Method in the following fiscal years if determined necessary to cure any delinquencies on the 2020 Bonds. There may be little or no difference between the Assigned Annual Special Tax rate and the maximum rates where the property within Improvement Area B is all categorized as Developed Property.

If owners are delinquent in the payment of Special Taxes, the Community Facilities District may not increase Special Tax levies to make up for delinquencies for prior Fiscal Years above the Maximum Special Tax rates specified for each category of property within Improvement Area B of the Community Facilities District. See “SECURITY FOR THE 2020 BONDS – Rate and Method.” In addition, Section 53321(d) of the Act provides that the special tax levied against any parcel for which an occupancy permit for private residential use has been issued may not be increased as a consequence of delinquency or default by the owner of any other parcel within a community facilities district by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquencies or defaults. In cases of significant delinquency, these factors may result in defaults in the payment of principal of and interest on the 2020 Bonds.

No Relationship Between Property Value and Special Tax Levy. Because the Special Tax formula set forth in the Rate and Method is not based on property value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular parcels of Taxable Property and the amount of the levy of the Special Tax against those parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of Taxable Property and their proportionate share of debt service on the 2020 Bonds, and certainly not a direct relationship.

Factors That Could Lead to Special Tax Deficiencies. The following are some of the factors that might cause the levy of the Special Tax on any particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:

Transfers to Governmental Entities. The number of parcels of Taxable Property could be reduced through the acquisition of an interest in Taxable Property by a governmental entity and failure of the government to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof or sponsored thereby, immunity from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels. Such entities and agencies include the FDIC, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Drug Enforcement Agency, the Internal Revenue Service (the “IRS”) or other similar federal governmental agencies. The FDIC could obtain such an interest by taking over a financial institution which has made a loan which is secured by property within Improvement Area B of the Community Facilities District, and Fannie Mae or Freddie Mac could obtain such an interest by acquiring a mortgage secured by property within Improvement Area B of the Community Facilities District. See “ – Exempt Properties – Property Owned by FDIC” below.

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Property Tax Delinquencies. Failure of the owners of Taxable Property to pay the Special Tax, or delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, could result in a deficiency in the collection of Special Taxes. For a summary of Special Tax collections in Improvement Area B of the Community Facilities District for the prior Fiscal Year, see “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Special Tax Collection History and Delinquencies.” Sustained or increased delinquencies in the payment of the Special Taxes could cause a draw on the Reserve Fund established for the 2020 Bonds and perhaps, ultimately, a default in the payment on the 2020 Bonds.

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

Delays Following Special Tax Delinquencies and Foreclosure Sales. The Fiscal Agent Agreement generally provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in “SECURITY FOR THE 2020 BONDS – Covenant to Foreclose” and in the Act, and is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County.

If sales or foreclosures of property are necessary, there could be a delay in payments to owners of the 2020 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the Community Facilities District of the proceeds of sale if the Reserve Fund is depleted. See “SECURITY FOR THE 2020 BONDS – Covenant to Foreclose.”

Risks Related to Declines in Home Values

Declines in home values in Improvement Area B the Community Facilities District could result in property owner unwillingness or inability to pay mortgage payments, as well as ad valorem property taxes and Special Taxes, when due. Under such circumstances, bankruptcies could occur. Bankruptcy by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes.

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

An owner of Taxable Property is not personally obligated to pay the Special Taxes. Rather, the Special Taxes are an obligation running only against the parcels of Taxable Property. If, after a default in the payment of the Special Tax and a foreclosure sale by the Community Facilities District, the resulting proceeds are insufficient, taking into account other obligations also constituting a lien against the affected parcels of Taxable Property, the Community Facilities District has no recourse against the owner.

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Appraised Values

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

The opinion of value assumes a sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information. In addition, the opinion is based upon the facts and circumstances at the date of value of the Appraisal Report. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from such date of value. No assurance can be given that any of the Taxable Property in Improvement Area B of the Community Facilities District could be sold for the estimated market value contained in the Appraisal Report if that property should become delinquent in the payment of Special Taxes and be foreclosed upon.

Property Values

The value of Taxable Property within Improvement Area B of the Community Facilities District is a critical factor in determining the investment quality of the 2020 Bonds. If a property owner defaults in the payment of the Special Tax, the Community Facilities District’s only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to pay the delinquent Special Tax. Land values could be adversely affected by economic and other factors beyond the Community Facilities District’s control, such as a general economic downturn, relocation of employers out of the area, shortages of water, electricity, natural gas or other utilities, destruction of property caused by earthquake, flood, drought, landslides, wildfires, pandemics, or other natural disasters, environmental pollution or contamination, or unfavorable economic conditions. The following is a discussion of specific risk factors that could affect the value of property in Improvement Area B of the Community Facilities District.

Risks Related to Availability of Mortgage Loans. In past years, events in the United States and world- wide capital markets have adversely affected the availability of mortgage loans to homeowners, including potential buyers of homes within Improvement Area B of the Community Facilities District. Any such unavailability could hinder the ability of the current homeowners to resell their homes, or the sale of newly completed homes in the future.

Natural Disasters. The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. The areas in and surrounding Improvement Area B of the Community Facilities District, like those in much of California, may be subject to unpredictable seismic activity, including earthquakes and landslides. Other natural disasters could include, without limitation, floods, droughts, wildfires, tornadoes or pandemics. One or more natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances there

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could be significant delinquencies in the payment of Special Taxes, and the value of the Taxable Property may well depreciate or disappear.

Drought Conditions. As of [June __, 2020, most areas in northern California and central California had experienced below normal levels of rainfall and most areas of Southern California had experienced above normal levels of rainfall. The State’s prior five-year drought underscored the need for permanent improvements in long- term efficient water use and drought preparedness, as called for in a previous executive order made by then Governor Brown. The State has implemented various actions which are intended to help to ensure all communities have sufficient water supplies and are conserving water regardless of the conditions of any one year. The Community Facilities District cannot predict if and when the State will experience drought conditions again in the future, what effect such conditions may have on property values or whether or to what extent any water reduction requirements may affect homeowners within Improvement Area B of the Community Facilities District or their ability or willingness to pay Special Taxes.

Wildfires. In recent years, portions of California have experienced wildfires that have burned thousands of acres and destroyed thousands of homes and structures, even in areas not previously thought to be prone to wildfires. Such areas affected by wildfires are more prone to flooding and mudslides that can lead to the destruction of homes. While the Community Facilities District is not aware of any particular risk of wildfire within the Community Facilities District, there can be no assurances that wildfires won’t occur within the Community Facilities District. Property damage due to wildfire could result in a significant decrease in the market value of property in the Community Facilities District and in the ability or willingness of property owners to pay Special Taxes when due.

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

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

The appraised values and assessed values set forth in this Official Statement do not take into account the possible reduction in marketability and value of any of the Taxable Property by reason of the possible liability of the owner or operator for the remedy of a hazardous substance condition of the parcel. Although the Community Facilities District is not aware that the owner or operator of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it is possible that such liabilities do currently exist and that the Community Facilities District is not aware of them.

Further, it is possible that liabilities may arise in the future with respect to any of the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but that has not been released or the release of which is not presently threatened, or may arise in the future resulting from the 60

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

Other Possible Claims Upon the Value of Taxable Property

While the Special Taxes are secured by the Taxable Property, the security only extends to the value of such Taxable Property that is not subject to priority and parity liens and similar claims. The table in the section entitled “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Direct and Overlapping Governmental Obligations” shows the presently outstanding amount of governmental obligations (with stated exclusions), the tax or assessment for which is or may become an obligation of one or more of the parcels of Taxable Property. The table also states the additional amount of general obligation bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table does not specifically identify which of the governmental obligations are secured by liens on one or more of the parcels of Taxable Property. In addition, other governmental obligations may be authorized and undertaken or issued in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2020 Bonds. In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the 2020 Bonds, the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata basis. Although the Special Taxes will generally have priority over non- governmental liens on a parcel of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See “ – Bankruptcy Delays” below.

Assessed Values. Prospective purchasers of the 2020 Bonds should not assume that the land within Improvement Area B of the Community Facilities District could be sold for the assessed amount described in the Official Statement at a foreclosure sale for delinquent Special Taxes.

The assessed values summarized hereto estimates the fee simple interest assessed value of the property within Improvement Area B of the Community Facilities District. This value is merely the amount of the assessed value in the records maintained by the County Assessor. The assessed value relates to sale by a willing seller to a willing buyer at a point in time, as adjusted by State law. Consequently, the assessed value is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information.

No assurance can be given that if any of the Taxable Property in Improvement Area B of the Community Facilities District should become delinquent in the payment of Special Taxes, and be foreclosed upon, that such property could be sold for the assessed values.

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Value-to-Debt Ratios

Value-to-debt ratios have traditionally been used in land-secured bond issues as a measure of the “collateral” supporting the willingness of property owners to pay their special taxes and assessments (and, in effect, their general property taxes as well). The value-to-debt ratio is mathematically a fraction, the numerator of which is the value of the property (usually either the assessed value or a market value as determined by an appraiser) and the denominator of which is the “debt” of the assessments or special taxes. A value-to-debt ratio should not, however, be viewed as a guarantee of credit-worthiness. Land values are especially sensitive to economic cycles. A downturn of the economy may depress land values and hence the value-to-debt ratios. Further, the value-to-debt ratio cited for a bond issue is an average. Individual parcels in a community facilities district may fall above or below the average, sometimes even below a 1:1 ratio. (With a 1:1 ratio, the land is worth less than the debt on it.) Although judicial foreclosure proceedings can be initiated rapidly, the process can take several years to complete, and the bankruptcy courts may impede the foreclosure action. Finally, local agencies may form overlapping community facilities districts or assessment districts. They typically do not coordinate their bond issuances. Debt issuance by another entity can dilute value-to-debt ratios. See “IMPROVEMENT AREA B OF THE COMMUNITY FACILITIES DISTRICT – Direct and Overlapping Governmental Obligations.”

Exempt Properties

Exemptions Under Rate and Method and the Act. Certain properties are exempt from the Special Tax in accordance with the Rate and Method and the Act, which provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within Improvement Area B of the Community Facilities District acquired by a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. See “SECURITY FOR THE 2020 BONDS – Rate and Method.” In addition, although the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning that such property could become exempt from the Special Tax. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax.

Property Owned by FDIC. The ability of the Community Facilities District to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax installment may be limited in certain respects with regard to property in which the FDIC has or obtains an interest. The FDIC has asserted a sovereign immunity defense to the payment of special taxes and assessments. The Community Facilities District is unable to predict what effect this assertion would have in the event of a delinquency on a parcel within Improvement Area B of the Community Facilities District in which the FDIC has or obtains an interest. In addition, although the FDIC does not claim immunity from ad valorem property taxation, it requires a foreclosing entity to obtain FDIC’s consent to foreclosure proceedings. Prohibiting a foreclosure on property owned by the FDIC could reduce the amount available to pay the principal of and interest on the 2020 Bonds. Either outcome would cause a draw on the Reserve Fund established for the 2020 Bonds and perhaps, ultimately, a default in the payment on the 2020 Bonds.

Property Owned by Fannie Mae or Freddie Mac. If a parcel of taxable property is owned by a federal government entity or federal government-sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government- sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. 62

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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 interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the Community Facilities District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. No investigation has been made as to whether any governmental entity or government-sponsored entity currently owns or has an interest in any property in Improvement Area B of the Community Facilities District.

Depletion of Reserve Fund

The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. See “SECURITY FOR THE 2020 BONDS – Reserve Fund.” The Reserve Fund will be used to pay principal of and interest on the 2020 Bonds if insufficient funds are available from the proceeds of the levy and collection of the Special Tax against property within Improvement Area B of the Community Facilities District. If the Reserve Fund is depleted, it can be replenished from the proceeds of the levy and collection of the Special Taxes that exceed the amounts to be paid to the Bond owners under the Fiscal Agent Agreement. However, because the Special Tax levy is limited to the maximum annual Special Tax rates, it is possible that no replenishment would be possible if the Special Tax proceeds, together with other available funds, remain insufficient to pay all such amounts. Thus, it is possible that the Reserve Fund will be depleted and not be replenished by the levy and collection of the Special Taxes.

Bankruptcy Delays

The payment of the Special Tax and the ability of the Community Facilities District to foreclose the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE 2020 BONDS,” may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the 2020 Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the 2020 Bonds.

In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the 2020 Bonds and the possibility of delinquent Special Taxes not being paid in full.

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Disclosure to Future Purchasers

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

Limitations on Remedies

Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2020 Bonds or to preserve the tax-exempt status of the 2020 Bonds. See “– Levy and Collection of the Special Tax” above and “ – No Acceleration Provisions” below.

No Acceleration Provisions

The 2020 Bonds do not contain a provision allowing for their acceleration in the event of a payment default or other default under the terms of the 2020 Bonds or the Fiscal Agent Agreement. Under the Fiscal Agent Agreement, a Bond owner is given the right for the equal benefit and protection of all Bond owners similarly situated to pursue certain remedies. See APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT.” So long as the 2020 Bonds are in book-entry form, DTC will be the sole Bond owner and will be entitled to exercise all rights and remedies of Bond owners.

Tax Cuts and Jobs Act of 2017

Changes enacted by federal tax legislation (the Public Law No. 115-97, also referred to as the “Tax Cuts and Jobs Act of 2017”) were enacted into law on December 22, 2017. The Tax Cuts and Jobs Act of 2017 made significant changes to many aspects of the Internal Revenue Code of 1986, as amended (the “Tax Code”). For example, the Tax Cuts and Jobs Act of 2017 reduced the amount of mortgage interest deduction to the first $750,000 of a home loan on new purchases (existing loans are grandfathered in), increased the standard deduction, and put a limit of $10,000 on deductions for state and local income tax, sales tax and property tax expenses that individuals may deduct from their gross income for federal income tax purposes. The changes made by the Tax Cuts and Jobs Act of 2017 could increase the cost of home ownership within the Community Facilities District.

None of the School District or the Community Facilities Districts can predict the effect that the Tax Cuts and Jobs Act of 2017 may have on the cost of home ownership or the price of homes in the Community Facilities District, the rate at which homes in the Community Facilities Districts are sold to end users by the Developer or the ability or willingness of home owners to pay Special Taxes or property taxes.

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Loss of Tax Exemption

As discussed under the caption “LEGAL MATTERS – Tax Exemption,” interest on the 2020 Bonds might become includable in gross income for purposes of federal income taxation retroactive to the date the 2020 Bonds were issued as a result of future acts or omissions of the Community Facilities District in violation of its covenants in the Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature triggered by the occurrence of an event of taxability. As a result, if interest on the 2020 Bonds were to become includable in gross income for purposes of federal income taxation, the 2020 Bonds would continue to remain outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or redemption upon prepayment of the Special Taxes. See “THE 2020 BONDS – Redemption.” Should such an event of taxability occur, the 2020 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.

IRS Audit of Tax-Exempt Bond Issues

The IRS has initiated an expanded program for the auditing or examination of tax-exempt bond issues, including both random and targeted audits and examinations. It is possible that the 2020 Bonds will be selected for audit or examination by the IRS. It is also possible that the market value of the 2020 Bonds might be affected as a result of such an audit or examination of the 2020 Bonds (or by an audit or examination of similar bonds or securities).

Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption

Recent legislation, future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 2020 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 Bond owners from realizing the full current benefit of the tax status of such interest. See, for example, “ – Tax Cuts and Jobs Act of 2017,” above.

The Tax Cuts and Jobs Act of 2017, the introduction or enactment of any such or future legislative proposals, clarification of the Code or court decisions may also affect the market price for, liquidity of, or marketability of, the 2020 Bonds. Prospective purchasers of the 2020 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation.

Backup Withholding

Interest paid with respect to tax-exempt obligations such as the 2020 Bonds is subject to information reporting to the IRS in a manner similar to interest paid on taxable obligations. In addition, interest with respect to the 2020 Bonds may be subject to backup withholding if such interest is paid to a registered owner that (a) fails to provide certain identifying information (such as the registered owner’s taxpayer identification number) in the manner required by the IRS, or (b) has been identified by the IRS as being subject to backup withholding.

Voter Initiatives and State Constitutional Provisions

Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power through the adoption of Proposition 13 and similar measures, including Proposition 218, which was approved in the general election held on November 5, 1996, and Proposition 26, which was approved on November 2, 2010.

Proposition 218. Proposition 218 – Voter Approval for Local Government Taxes – Limitation on Fees, Assessments, and Charges – Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the 65

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California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. 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 prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless the legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt.

Proposition 26. On November 2, 2010, California voters approved Proposition 26, entitled the “Supermajority Vote to Pass New Taxes and Fees Act.” Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as “fees.” Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature.

Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes require a majority vote and taxes for specific purposes (“special taxes”) require a two-thirds vote. The Special Taxes and the 2020 Bonds were each authorized by not less than a two- thirds vote of the landowners within Improvement Area B of the Community Facilities District who constituted the qualified electors at the time of such voted authorization, and the statute of limitations period for any challenges to the formation of the Community Facilities District and the levy of the Special Taxes has expired. The Community Facilities District believes, therefore, that issuance of the 2020 Bonds does not require the conduct of further proceedings under the Act, Proposition 218 or Proposition 26. Like their antecedents, Proposition 218 and Proposition 26 have undergone, are likely to undergo, both judicial and legislative scrutiny.

For example, in August 2014, in City of San Diego. v. Melvin Shapiro, an Appellate Court invalidated an election held by the City of San Diego to authorize the levying of special taxes on hotels City-wide pursuant to a City charter ordinance creating a convention center facilities district which specifically defined the electorate to consist solely of (1) the owners of real property in the City on which a hotel is located, and (2) the lessees of real property owned by a governmental entity on which a hotel is located. The court held that such landowners and lessees are neither “qualified electors” of the City for purposes of Articles XIII A, Section 4 of the California Constitution, nor a proper “electorate” under Article XIIIC, Section 2(d) of the California Constitution. The court specifically noted that the decision did not require the Court to consider the distinct question of whether landowner voting to impose special taxes under Section 53326(b) of the Act (which was the nature of the voter approval through which the Community Facilities District was formed) violates the California Constitution in districts that lack sufficient registered voters to conduct an election among registered voters. Accordingly, this case should have no effect on the levy of the Special Taxes by the Community Facilities District.

The School District and the Community Facilities District cannot predict the ultimate outcome or effect of any such judicial scrutiny, legislative actions, or future initiatives. These initiatives, and any future initiatives, may affect the collection of fees, taxes and other types of revenue by local agencies such as the Community Facilities District. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the 2020 Bonds.

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Limited Secondary Market for 2020 Bonds

There can be no guarantee that there will be a secondary market for the 2020 Bonds or, if a secondary market exists, that any 2020 Bonds can be sold for any particular price. Although the Community Facilities District has committed to provide certain statutorily-required financial and operating information, there can be no assurance that such information will be available to Bond Owners on a timely basis. 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 bond issues for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price.

No assurance can be given that the market price for the 2020 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Tax Code), or changes in interpretation of the Tax Code, or any action of the IRS, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2020 Bonds for audit or examination, or the course or result of any IRS audit or examination of the 2020 Bonds or obligations that present similar tax issues as the 2020 Bonds.

Cyber Security

The School District, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other electronic sensitive information, the School District is potentially subject to multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computer and other sensitive digital networks and systems. Entities or individuals may attempt to gain unauthorized access to the School District’s systems for the purposes of misappropriating assets or information or causing operational disruption or damage. The School District has never had a major cyber breach that resulted in a financial loss. The School District maintains insurance coverage for cyber security losses should a successful breach ever occur.

[Update: In connection with the transition to distance learning due to the COVID-19 pandemic, the School District is aware of online safety, such as arises in connection with utilization of programs which are used to run live classroom sessions and meetings. The School District has provided teachers with the recommended settings for certain programs in order to facilitate student safety and security. Teachers also have access to detailed tutorials and live virtual professional development sessions regarding safety measures that should be taken when setting up online meetings for students.

No assurance can be given that the School District’s efforts to manage cyber threats and attacks will, in all cases, be successful or that any such attack will not materially impact the operations or finances of the School District or the Community Facilities District. The School District is also reliant on other entities and service providers, such as the County Treasurer for the levy and collection of Special Taxes securing payment of the 2020 Bonds, the Fiscal Agent in its role as paying agent, and the Dissemination Agent in connection with compliance with its disclosure undertakings. No assurance can be given that the School District or the Community Facilities District may not be affected by cyber threats and attacks against other entities or service providers in a manner which may affect the Bond owners, e.g., systems related to the timeliness of payments to Bond owners or compliance with disclosure filings pursuant to the Community Facilities District Continuing Disclosure Certificate.

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Emergency Preparedness; Coronavirus (COVID-19)

[Review/update prior to printing POS]

The current spread of COVID-19, a new strain of coronavirus, is altering the behavior of businesses and people in a manner that is having negative effects on global, national and local economies. Additionally, stock markets in the U.S. and globally have seen significant recent declines and volatility attributed to concerns about the COVID-19 virus. As a result, the amount of Special Taxes to be collected semi-annually on the real property within Improvement Area B and development and/or sale of homes within Improvement Area B could be adversely affected by such events beyond the Community Facilities District’s or the Developer’s control. See also, “SECURITY FOR THE 2020 BONDS – Special Taxes,” and “ – Proceeds of Foreclosure Sales” for further information regarding the collection and distribution of delinquent Special Taxes.

The current impacts of COVID-19 have raised awareness that the ability or willingness of property owners to pay the Special Tax on property in Improvement Area B when due, the value of the property in Improvement Area B, development and/or sale of homes within Improvement Area B or the ability of the Community Facilities District to collect delinquent Special Taxes through judicial foreclosure could be adversely affected by a global, national or localized outbreak of an infectious disease, such as the COVID-19 virus, or by the fear of such an outbreak. Further, alterations in the behavior of businesses and people due to an infectious disease can occur in a manner that has a negative impact on global and/or local economies, and which results in a volatile stock market response. Such events and other factors resulting from such an outbreak, particularly if prolonged, could result in, or increase the likelihood of, the occurrence of certain of the other potential adverse effects described in this Official Statement, including those relating to declines in the value of property, slowing of development and/or sale of homes within Improvement Area B, the inability or unwillingness to pay the Special Tax, and delays in (or insufficient funds received from) the collection of delinquent Special Taxes through judicial foreclosure. A future outbreak of the COVID-19 virus or another infectious disease or the fear of any such outbreak could have similar or additional adverse effects. The Community Facilities District cannot predict the ultimate effects of the COVID-19 virus outbreak or any future outbreak or potential future outbreak of an infectious disease, or whether any such effects would have a material adverse effect on the ability to develop Improvement Area B as planned, the ability or willingness of property owners to pay Special Taxes when due, or the ability of the Community Facilities District to pay debt service on the 2020 Bonds when due.

Likewise, the School District’s financial results could be harmed by a national or localized outbreak of a highly contagious or epidemic disease, such as the COVID-19 virus. School districts in California are funded based on the Local Control Funding Formula (the “Local Control Funding Formula” or “LCFF”), which allocates a base grant per unit of average daily attendance with additional supplemental grants based on certain factors. The outbreak of a highly contagious disease at one of the School District’s facilities may result in a temporary shutdown and a temporary shutdown of a school or an entire school district would reduce the average daily attendance and could impact the funding a school district receives unless the State legislature or California Department of Education takes action to exclude such days from the calculations for funding purposes. Further, any impact on the State’s tax and other revenue receipts as a result of a highly contagious or epidemic disease may in turn impact other educational funding that the School District receives from the State. In addition, the School District may incur increased operational costs to clean, sanitize and maintain its facilities either before or after an outbreak of an infectious disease. Neither the School District nor the Community Facilities District can predict any costs associated with the potential outbreak of an infectious disease.

Specific Information Regarding Responses to the COVID-19 Virus. In particular, as a result of the threat of the COVID-19 virus, on March 13, 2020, Governor Newsom issued Executive Order N-26-20, proclaiming a State of Emergency to exist in California and providing that if any California school districts, county offices of education, and charter schools (each a “Local Educational Agency” or “LEA”) closes its schools to address the 68

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COVID-19 virus, the LEA will continue to receive state funding during the period of closure. [Confirm: The District is in compliance with Executive Order N-26-20.

On March 13, 2020, the Riverside County Public Health Officer issued an order that all schools within the jurisdiction of the Public Health Officer of the County of Riverside would close effective March 16, 2020, in order to curb the potential transmission of COVID-19.

With respect to school district funding, on March 17, 2020, Governor Newsom signed Senate Bill 117 (“SB 117”) as urgency legislation effective immediately, which for fiscal year 2019-20 limits the average daily attendance reported to the California Department of Education to include the full school months from July 1, 2019, to February 29, 2020. This condensed A.D.A. period applies to school districts that comply with Executive Order N-26-20. SB 117 further states the intent of the State Legislature that a school district’s employees and contractors are paid during the period of a school closure due to the COVID-19 virus. SB 117 also waives instructional time penalties that would otherwise accrue, as long as the school district superintendent, county superintendent or charter school administrator certify that the closure due to the COVID-19 virus caused the school district to fall below applicable instructional time requirements. While SB 117 provides some immediate relief to school districts, the short-term and long-term impacts of the COVID-19 outbreak are unknown as the situation is rapidly evolving. Neither the Community Facilities District nor the School District can predict whether similar legislation would be enacted in the event the outbreak of the COVID-19 virus continues into fiscal year 2020-21 or beyond or a similar or other outbreak of a highly contagious disease or epidemic disease were to occur in the future.

Thereafter on March 19, 2020, Governor Newsom issued Executive Order N-33-20, a State-wide stay at home order to protect the health and well-being of all Californians and to establish consistency across the State in order to slow the spread of the COVID-19 virus. Such order to go into effect immediately and to stay in effect until further notice. The order directs all individuals living in the State to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors as outlined at https://www.cisa.gov/identifying-critical-infrastructure-during-COVID-19. This includes 16 critical infrastructure sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof. Neither the Community Facilities District nor the School District can take responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated in this Official Statement by such reference. Notwithstanding that home construction is a critical infrastructure sector, six northern California counties for a period of time from approximately Mary, 31, 2020 through May 4, 2020, provided that most construction, including resident construction which was not affordable housing, was temporarily halted. The northern California counties order was lifted provided residential construction projects followed certain safety protocols.

On April 1, 2020, Governor Newsom directed that all California schools remain closed to students through the end of the current school year due to the COVID-19 virus and on April 2, 2020, the County Public Health Officer extended the physical closer of the County’s schools to June 19. The School District has indicated its schools will follow the Governor’s direction.

After California Governor Gavin Newsom’s declaration of a State of Emergency to exist in California as a result of the threat of COVID-19 virus and the issuance of the State-wide stay-at-home order, the Riverside County Treasurer-Tax Collector on April __, 2020, announced his plan to grant waivers on penalties to taxpayers as allowed by existing law to assist them during these challenging times, providing for taxpayers that do not make payment of property taxes, including the Special Taxes, due to the COVID-19 virus by April 10. Such taxpayers would be expected to submit to the Treasurer-Tax Collector a “cancellation of penalty request form” and 69

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documentation to support the cancellation of penalties as allowed in limited circumstances under current State law, allowing for waiver of penalties, costs and other charges when failure to make a timely payment is due to reasonable cause and circumstances beyond the taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect. Related thereto, On May 6, 2020, California Governor Gavin Newsom issued Executive Order N-61-20, which ordered that certain provisions of the Revenue and Taxation Code were suspended until May 6, 2021, to the extent those provisions require a tax collector to impose penalties, cost, or interest for the failure to pay taxes on property on the secured or unsecured roll, or to pay a supplemental bill, before the dates and time such taxes became delinquent, and that a tax collector shall cancel such penalties, costs, and interest provided all of several conditions are satisfied, including that the taxpayer demonstrates to the satisfaction of the tax collector that the taxpayer has suffered economic hardship, or was otherwise unable to tender payment of taxes in a timely fashion, due to the COVID-19 pandemic, or any local, state or federal government response to COVID-19.

In addition, Congress enacted and President Trump signed legislation, including H.R. 748, known as “Phase 3,” providing stimulus and supplemental spending plans to address the effects of the COVID-19 virus. Congress is continuing to consider additional measures to address the effects of the COVID-19 virus.

Locally, the School District management has been working with the Riverside County Public Health (Riverside University Health System), the lead agency for the School District’s service area and the other school districts in Riverside County. The School District expects to fully follow the guidance of the Riverside County Health Officer, along with state and federal public health agencies.

[Sample from another School District: In addition, the School District has in place an Emergency Preparedness Program that includes a Pandemic Influenza Plan, which School District management has been reviewing and updating sections as needed for potential use with the COVID-19 virus. Pandemic response activities are highly dependent on direction from County Health Officials.]

More recently, Governor Newsom has been working with various County officials to enable reopening of businesses and relief from the State-wide stay at home order. The School District cannot predict when or in what manner schools will reopen, or costs associated with adjustments required due to COVID-19.

Impacts to School District Finances. On May 14, 2020, Governor Newsom released the 2020-21 May Revision to the 2020-21 proposed State budget (the “2020-21 May Revision”). The 2020-21 May Revision includes total funding of $99.7 billion ($47.7 billion General Fund and $52 billion other funds) for all K-12 education programs. The 2020-21 May Revision notes that the COVID-19 Recession is having a massive impact on the economy and the State’s General Fund revenues, which in turn is having an equally significant negative impact on the State’s K-14 Proposition 98 funding guarantee. The 2020-21 May Revision estimates that the Proposition 98 funding guarantee will decline by $19 billion from the proposed Governor’s State budget released in January 2020. The decline in funding is approximately 23% of the 2019 State Budget Act Proposition 98 funding level. The 2020-21 May Revision also notes that declining average daily attendance and declining per capita income number estimates cause future Proposition 98 funding guarantee estimates to stay at a depressed level through December 2023, the entire forecast period of the May 2020-21 Revision. To mitigate the deleterious impacts of the State's revenue decline impacts on funding for K-14 schools immediately, the 2020-21 May Revision proposes a number of measures, including temporary revenue increases, allocation of federal Coronavirus Relief Fund and Emergency Education Relief Funds to local educational agencies, revising CalPERS and CalSTRS contributions in the 2019 State Budget Act which was to be allocated towards the employer long- term unfunded liability to provide local education agencies with increased fiscal relief. The School District’s general fund is not a source of repayment of the 2020 Bonds.

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Potential impacts to the School District associated with the COVID-19 health crisis include, but are not limited to, increasing costs and challenges relating to establishing distance learning programs or other measures to permit instruction while schools remain closed, costs relating to safety measure once students return to in-room instruction, costs related to social distancing requirements on campuses, costs relating to operations such as sanitizing and cleaning requirements throughout the school day, disruption of the regional and local economy with corresponding decreases in tax revenues, including property tax revenue, sales tax revenue and other revenues, increases in tax delinquencies, potential declines in property values, and decreases in new home sales, and real estate development. The economic consequences and the declines in the U.S. and global stock markets resulting from the spread of COVID-19, and responses thereto by local, State, and the federal governments, could have a material impact on the investments in the State pension trusts, which could materially increase the unfunded actuarial accrued liability of the STRS Defined Benefit Program and PERS Schools Pool, which, in turn, could result in material changes to the School District’s required contribution rates in future fiscal years. Information provided by County Health Officials is available at: https://rivcoph.org/coronavirus. Neither the Community Facilities District nor the School District can take responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated in this Official Statement by such reference.

The COVID-19 health crisis is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the health crisis, and the economic and other of actions that may be taken by governmental authorities to contain the health crisis or to treat its impact are uncertain. Additional information with respect to events surround the health crisis of COVID-19 and responses thereto can be found on State and local government websites, including but not limited to: the Governor’s office (http://www.gov.ca.gov), the California Department of Public Health (https://covid19.ca.gov/) and the local County health agency (https://santacruzhealth.org). The information on these websites are not incorporated by reference herein, and the District does not assume any responsibility for the accuracy of the information on such websites.

The ultimate impact of COVID-19 on the School District’s operations and finances is unknown. There can be no assurances that the spread of COVID-19, or the responses thereto by local, State, or the federal government, will not materially adversely impact the local, State and national economies or the assessed valuation of property within the School District, or adversely impact enrollment or average daily attendance within the School District and, notwithstanding Executive Order N-26-20 or SB 117, materially adversely impact the financial condition or operations of the School District.

LEGAL MATTERS

Legal Opinion

The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the 2020 Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX H. A copy of the legal opinion will be attached to each 2020 Bond. Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. James F. Anderson Law Firm, A Professional Corporation, Laguna Hills, California, will pass upon certain legal matters for the Community Facilities District as disclosure counsel. Certain matters will be passed upon for the Community Facilities District by Fagan, Friedman & Fulfrost LLP, Carlsbad, California, as the School District’s general counsel. Kutak Rock LLP, Irvine, California, is serving as counsel to the Underwriter.

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Tax Exemption

Federal Tax Status. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2020 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax.

The opinions set forth in the preceding paragraph are subject to the condition that the Community Facilities District comply with all requirements of the Tax Code that must be satisfied subsequent to the issuance of the 2020 Bonds in order that the interest thereon be, and continue to e, excludable from gross income for federal income tax purposes. The Community Facilities District has made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2020 Bonds.

Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2020 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes “original issue discount” for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2020 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes “bond premium” for purposes of federal income taxes and State of California personal income taxes. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2020 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2020 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2020 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2020 Bonds who purchase the 2020 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2020 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2020 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2020 Bonds is sold to the public.

Under the Tax Code, bond premium is amortized on an annual basis over the term of the 2020 Bond (said term being the shorter of the 2020 Bond’s maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2020 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2020 Bond is amortized each year over the term to maturity of the 2020 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2020 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2020 Bonds.

California Tax Status. In the further opinion of Bond Counsel, interest on the 2020 Bonds is exempt from California personal income taxes.

Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2020 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 beneficial 72

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owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2020 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.

The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2020 Bonds, or as to the consequences of owning or receiving interest on the 2020 Bonds, as of any future date. Prospective purchasers of the 2020 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

Owners of the 2020 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2020 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2020 Bonds, the ownership, sale or disposition of the 2020 Bonds, or the amount, accrual or receipt of interest on the 2020 Bonds.

No Litigation

At the time of delivery of the 2020 Bonds, the Community Facilities District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Community Facilities District has been served with process or threatened:

• which, in any way, questions the powers of the Board, the School District, or the Community Facilities District, or

• which, in any way, questions the validity of any proceeding taken by the Board in connection with the issuance of the 2020 Bonds, or

• wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the purchase agreement with respect to the 2020 Bonds, or

• which, in any way, could adversely affect the validity or enforceability of the resolutions of the Board adopted in connection with the formation of the Community Facilities District or the issuance of the 2020 Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate or the purchase agreement with respect to the 2020 Bonds, or

• which to the knowledge of the Community Facilities District, in any way questions the exclusion from gross income of the recipients thereof of the interest on the 2020 Bonds for federal income tax purposes, or

• which, in any other way, questions the status of the 2020 Bonds under State tax laws or regulations.

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CONTINUING DISCLOSURE

Community Facilities District

The Community Facilities District will covenant for the benefit of owners of the 2020 Bonds to provide certain financial information and operating data relating to the 2020 Bonds by not later than six months after the end of the Community Facilities District’s fiscal year, or December 31 each year based on the Community Facilities District’s current fiscal year end of June 30 (the “Annual Report”), commencing with the Annual Report for the fiscal year ending on June 30, 2020 (which report is due no later than December 31, 2020), and to provide notices of the occurrence of certain listed events as required by Securities Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). These covenants have been made in order to assist the Underwriter in complying with the Rule. The specific nature of the information to be contained in the Annual Report or the notices of listed events by the Community Facilities District is set forth in APPENDIX F. These filings are required to be posted on the electronic filing system (“EMMA”) maintained by 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.

Prior Compliance by the Community Facilities District. The Community Facilities District has entered into a continuing disclosure agreement in 2018 in connection with the issuance of its Improvement Area A 2018 Special Tax Bonds. A review of previous disclosure filings since June 15, 2015, with respect to the Community Facilities District did not identify a failure to comply with its prior undertaking.

Prior Compliance by the School District, the Menifee Union School District Public Financing Authority and Other Community Facilities Districts formed by the School District. A review of previous disclosure filings since June 15, 2015, with respect to financings by the School District, the Menifee Union School District Public Financing Authority (the “Authority”) and the other community facilities districts formed by the School District indicates that the School District, the Authority or such other community facilities districts did not comply in all respects with prior undertakings. Identification of the below described instances of non- compliance does not constitute a representation by the Community Facilities District, the School District, the Authority or the other community facilities districts formed by the School District that any such instances were material.

Prior Compliance by the School District.

• [Update: With respect to continuing disclosure undertakings made in connection with its outstanding general obligation bonds, the School District’s annual disclosure reports omitted certain required information and when submitting annual disclosure report filings for Fiscal Year 2013-14, CUSIPS relating to three maturities of capital appreciation bonds were not included within the list of CUSIPS to which such reports related, resulting in EMMA not linking the reports to the CUSIPS for those three maturities.

Prior Compliance by the Authority.

• With respect to certain outstanding revenue bonds of the Authority, the Authority did not timely file listed event notices for changes in the ratings of bond insurers.

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Prior Compliance by Community Facilities Districts formed by the School District.

• With respect to certain outstanding community facilities district bonds of community facilities districts formed by the School District, certain fiscal year annual disclosure reports were filed after their respective due dates, without a notice of late filing, in one instance, were filed lacking all required information, and in another instance, an annual disclosure report does not show as having been timely posted on the EMMA system, though the School District’s records indicate that an annual disclosure report had been prepared in a timely manner.

The School District, the Authority or the corresponding community facilities district, as applicable, has made remedial filings to correct all known instances of non-compliance during the last five years. The School District believes it has established processes to ensure that the School District, the Authority and the applicable community facilities districts will make required filings on a timely basis in the future, which include appointing its Municipal Advisor, Cooperative Strategies, LLC, as an outside dissemination agent to assist in preparing the continuing disclosure filings of the Community Facilities District, the School District, the Authority and the other community facilities districts, as applicable.

Beazer Homes

Beazer Homes will covenant in a continuing disclosure certificate, the form of which is set forth in APPENDIX G – “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE” (the “Beazer Homes Continuing Disclosure Certificate”), for the benefit of holders and beneficial owners of the 2020 Bonds, to provide certain information relating to Beazer Homes and the parcels it owns within Improvement Area B of the Community Facilities District on a semi-annual basis, and to provide notices of the occurrence of certain enumerated events. The initial Dissemination Agent under the Beazer Homes Continuing Disclosure Certificate will be Zions Bancorporation, National Association.

Beazer Homes’ obligations under the Beazer Homes Continuing Disclosure Certificate will terminate on the earlier of (i) legal defeasance, prior redemption or payment in full of all the 2020 Bonds, (ii) the date on which Beazer Homes is no longer responsible for 15% or more of the Special Taxes [DISCUSS CHANGING TERMINATION THRESHOLD TO WHEN BEAZER OWNS FEWER THAN 15% OF THE 76 RESIDENTIAL LOTS WIHIN THE PORTION OF THE PROVENCE AT HERITAGE RANCH NEIGHBORHOOD WITHIN IMPROVEMENT AREA B], or (iii) the date on which Beazer Homes prepays in full all of the Special Taxes attributable to its property in Improvement Area B of the Community Facilities District. A default under the Beazer Homes Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Fiscal Agent Agreement, and the sole remedy under the Beazer Homes Continuing Disclosure Certificate in the event of any failure of Beazer Homes or the Dissemination Agent to comply will be an action to compel specific performance.

Beazer Homes’ Prior Disclosure Compliance. [Update: To the Actual Knowledge of Beazer Homes (as defined in “PROPERTY OWNERSHIP AND DEVELOPMENT – History of Property Tax Payments; Loan Defaults; Litigation; Bankruptcy,” except as described below, Beazer has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities districts or assessment districts in California within the past five years.

However, Beazer Homes filed a semi-annual report ten days late for the Menifee Union School District Community Facilities District No. 2006-1, 2014 Special Tax Bonds, the Dissemination Agent for the same bonds mistakenly failed to file a semi-annual report for the same bonds that been provided to it by Beazer and with respect to two series of special tax bonds issued in 2014 and in 2015 by Saugus Unified School District 75

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Community Facilities District No. 2006-2 with respect to Improvement Area 3, the notice of termination of reporting was posted four days after the semi-annual reporting date. Identification of the above-described events does not constitute a representation by Beazer Homes that any such event was material.

NO RATINGS

The Community Facilities District has not made, and does not contemplate making, any application to a rating agency for a rating on the 2020 Bonds. No such rating should be assumed from any credit rating that the School District or the Community Facilities District may obtain for other purposes. Prospective purchasers of the 2020 Bonds are required to make independent determinations as to the credit quality of the 2020 Bonds and their appropriateness as an investment.

UNDERWRITING

The 2020 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated at a purchase price of $______(which represents the principal amount thereof ($______, plus a net original issue premium of $______and less the Underwriter’s discount of $______). The purchase agreement relating to the 2020 Bonds provides that the Underwriter will purchase all of the 2020 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell 2020 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.

While the Underwriter does not believe that the following represent a potential or actual material conflict of interest, the Underwriter notes that:

On March 22, 2019, the Underwriter sponsored the Menifee Valley Community Cupboard 14th Annual Celebrity Karaoke and over the last four years, the Underwriter sponsored the Menifee Union School District’s Annual Evening of Excellence event.

FINANCIAL INTERESTS

In connection with the issuance of the 2020 Bonds, fees or compensation payable to certain professionals are contingent upon the issuance and delivery of the 2020 Bonds. Those professionals include:

• the Underwriter; • Jones Hall, A Professional Law Corporation, as Bond Counsel; • James F. Anderson Law Firm, A Professional Corporation, as Disclosure Counsel; • Kutak Rock LLP, as Underwriter’s Counsel; • A portion of the fees of Cooperative Strategies, LLC, as Municipal Advisor and Special Tax Consultant; and • Zions Bancorporation, National Association, as Fiscal Agent.

From time to time, Bond Counsel represents the Underwriter on matters unrelated to the 2020 Bonds. Disclosure Counsel has in the past worked as, and is currently working as, counsel to the Underwriter on matters unrelated to the 2020 Bonds.

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EXECUTION

The execution and delivery of the Official Statement by the Community Facilities District have been duly authorized by the Governing Board of the Menifee Union School District, acting as the legislative body of the Community Facilities District.

COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT

By: [Dr.Gary Rutherford, Interim Superintendent, Menifee Union School District, on behalf of Community Facilities District No. 2016-1 of the Menifee Union School District

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APPENDIX A

GENERAL INFORMATION ABOUT THE CITY OF MENIFEE, CITY OF MURRIETA, AND RIVERSIDE COUNTY

The 2020 Bonds are not a debt of the Menifee Union School District (the “School District”), the City of Menifee, City of Murrieta, or the County of Riverside (the “County”). The County, including its Board of Supervisors, officers, officials, agents and other employees, are required, only to the extent required by law, to: (i) levy and collect Special Taxes for payment of the 2020 Bonds in accordance with the law; and (ii) transmit the proceeds of such taxes to the paying agent for the payment of the principal of and interest on 2020 Bonds at the time such payment is due. The property within the Community Facilities District is located in an unincorporated area of the County, adjacent to (and within the sphere of influence of) the City of Murrieta, in the southwestern portion of the County, north of Winchester Road (Highway 79), generally east of Leon Road , in an area also known as the French Valley. The following information is included only for the purpose of supplying general information regarding the City of Menifee, City of Murrieta, and the County. This information is provided only for general informational purposes, and provides prospective investors limited information about the City of Menifee, City of Murrieta, Riverside County and their economic base. The 2020 Bonds are not a debt of the School District, the County, the State or any of its political subdivisions, and none of the School District, the City of Menifee, City of Murrieta, the County, the State or any of its political subdivisions is liable therefor. General The School District is located in the southwestern portion of the County, partially in the City of Menifee. The School District was originally formed in 1890 as the Menifee School District and in 1951 the Menifee School District and the Antelope School District merged as a single school district. The School District currently operates two preschools, ten elementary schools and three middle schools, with an average daily attendance as of the Second Interim Report (as of January 30, 2020) of approximately [10,307 students in Fiscal Year 2019-20 and estimated to be approximately [10,641 students in Fiscal Year 2020- 21. [confirm: Two additional elementary schools and one middle school are being planned. City of Menifee The City of Menifee (the “City of Menifee”) was incorporated on October 1, 2008 and includes the formerly unincorporated communities of Menifee, Sun City, Quail Valley and portions of Romoland. The City of Menifee is located in the south-central portion of the County, north of Murrieta, west of Hemet, east of Canyon Lake and southeast of Perris. The City of Menifee spans nearly 50 square miles and has a population estimated at approximately 97,093. City of Murrieta The City of Murrieta (the “City of Murrieta”) was incorporated on July 1, 1991. The City of Murrieta is located in the southwestern portion of the County, with the City of Temecula to the south and the cities of Menifee and Wildomar to the north. The City of Menifee spans nearly 34 square miles and has a population estimated at approximately 115,561.

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History and Location of Riverside County The County, which encompasses 7,177 square miles, was organized in 1893 from territory in San Bernardino and San Diego Counties. Located in the southeastern portion of California, the County is bordered on the north by San Bernardino County, on the east by the State of Arizona, on the south by San Diego and Imperial Counties and on the west by Orange and Los Angeles Counties. There are 28 incorporated cities in Riverside County. The County’s varying topology includes desert, valley and mountain areas as well as gently rolling terrain. Three distinct geographical areas characterize the County: the western valley area, the higher elevations of the mountains and the deserts. The western valley, the San Jacinto mountains and the Cleveland National Forest experience the mild climate typical of Southern California. The eastern desert areas experience warmer and dryer weather conditions. The County is the site for famous resorts, such as Palm Springs, as well as a leading area for inland water recreation. Nearly 20 lakes in the County are open to the public. The dry summers and moderate to cool winters make it possible to enjoy these and other recreational and cultural facilities on a year-round basis. County Population According to the State Department of Finance, Demographic Research Unit, the County’s population was estimated at 2,442,304 as of January 1, 2020. The largest cities in the County are the cities of Riverside, Moreno Valley, Corona, Murrieta, Temecula, Jurupa Valley, Menifee, Indio, Hemet and Perris. The areas of most rapid population growth continue to be those more populated and industrialized cities in the western and central regions of the County and the southwestern unincorporated region of the County between Sun City and Temecula.

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The following table sets forth annual population figures as of January 1, 2020, for cities located within the County for each of the years listed:

COUNTY OF RIVERSIDE Population Estimates

2016 2017 2018 2019 2020 Banning 30,769 30,981 31,091 31,142 31,125 Beaumont 44,685 46,025 47,776 49,630 51,475 Blythe 19,410 19,313 19,524 19,256 19,255 Calimesa 8,410 8,644 8,793 8,830 9,329 Canyon Lake 10,899 10,962 10,970 10,995 11,000 Cathedral City 52,576 52,868 53,104 53,320 53,580 Coachella 45,382 45,813 46,317 46,885 47,186 Corona 161,294 164,745 166,154 166,723 168,248 Desert Hot Springs 28,692 28,937 29,525 29,683 29,660 Eastvale 63,331 64,645 65,416 65,611 66,413 Hemet 83,886 84,601 84,969 85,159 85,175 Indian Wells 5,243 5,304 5,342 5,379 5,403 Indio 86,625 87,898 88,989 90,087 90,751 Jurupa Valley 100,196 102,468 104,728 106,115 107,083 Lake Elsinore 60,408 61,574 62,536 63,154 63,453 La Quinta 39,769 40,065 40,217 40,389 40,660 Menifee 88,131 90,197 92,157 94,732 97,093 Moreno Valley 202,021 203,661 205,549 207,181 208,838 Murrieta 109,686 112,178 113,313 114,193 115,561 Norco 26,543 26,618 26,557 26,426 27,564 Palm Desert 51,863 52,389 52,726 52,911 52,986 Palm Springs 46,628 47,005 47,148 47,296 47,427 Perris 76,108 77,925 79,127 79,856 80,201 Rancho Mirage 18,356 18,556 18,708 18,886 19,114 Riverside 320,962 323,583 325,417 326,427 328,155 San Jacinto 47,709 48,321 49,113 50,431 51,028 Temecula 109,985 111,145 111,680 111,879 111,970 Wildomar 35,351 36,113 36,698 37,126 37,183 Balance of County 368,867 374,046 377,118 382,444 385,388 County Total 2,343,785 2,376,580 2,400,762 2,422,146 2,442,304

Source: State Department of Finance Estimates (as of January 1, 2020).

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County Employment The following table shows the average annual estimated numbers of wage and salary workers by industry in the County for which data is available. The data does not include proprietors, the self-employed, unpaid volunteers or family workers, domestic workers in households and persons in labor management disputes.

RIVERSIDE COUNTY Civilian Labor Force, Employment and Unemployment (Annual Averages)

2014 2015 2016 2017 2018 Civilian Labor Force (1) 1,011,100 1,033,300 1,051,400 1,072,200 1,091,400 Employment 928,300 964,100 987,200 1,015,800 1,042,700 Unemployment 82,900 69,200 64,200 56,300 48,700 Unemployment Rate 8.2% 6.7% 6.1% 5.3% 4.5% Wage and Salary Employment: (2) * Agriculture 11,900 12,600 12,800 12,300 12,500 Mining and Logging 300 300 300 400 400 Construction 47,500 52,900 58,600 62,600 67,300 Manufacturing 40,100 41,300 42,700 42,900 44,400 Wholesale Trade 23,100 23,300 23,800 23,900 24,900 Retail Trade 85,500 88,700 91,600 92,700 92,700 Transportation, Warehousing and Utilities 27,800 34,100 37,400 42,400 46,000 Information 6,300 6,400 6,300 6,100 6,300 Finance and Insurance 11,500 11,600 11,700 11,900 11,800 Real Estate and Rental and Leasing 8,900 9,400 9,700 9,490 10,300 Professional and Business Services 60,900 62,600 65,200 66,600 70,500 Educational and Health Services 89,500 95,200 100,200 107,000 115,000 Leisure and Hospitality 80,500 83,400 88,200 91,200 93,500 Other Services 21,600 21,700 22,300 22,600 22,600 Federal Government 6,800 6,900 7,100 7,100 7,200 State Government 15,900 16,300 17,000 17,500 17,700 Local Government 89,900 91,400 93,600 101,800 105,500 Total All Industries 628,100 657,900 688,400 718,400 748,400

(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. Source: State of California Employment Development Department, March 2019 Benchmark.

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Largest Employers

The following tables list the largest employers within the City of Menifee, the City of Murrieta, and the County:

CITY OF MENIFEE Major Employers as of June 2019

Employer Name Industry Number of Employees Mt. San Jacinto College District Education 2,100 Menifee Union School District Education 1,800 Romoland Elementary School District Education 489 Target Corporation Retail 420 Menifee Valley Medical Center Hospital 360 Southern California Edison Utilities 345 Stater Bros Supermarket 255 Lowe’s Home Building Supply 167 Texas Roadhouse Restaurant 155 BJ’s Restaurant Restaurant 152

Source: City of Menifee Comprehensive Annual Financial Report (CAFR), fiscal year ended June 30, 2019. CITY OF MURRIETA Major Employers as of June 2019

Employer Name Number of Employees Murrieta Valley Unified School District 2,264 Southwest Healthcare System 1,616 Loma Linda Univ. Medical Center 1,029 County of Riverside 854 Target Corporation 354 OakGrove Institute 346 City of Murrieta 321 Walmart 313 Sam’s Club 211 Murrieta Health & Rehab Center 191

Source: City of Murrieta Comprehensive Annual Financial Report (CAFR), fiscal year ended June 30, 2019.

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COUNTY OF RIVERSIDE Largest Employers as of June 2019

% of County Rank Name of Business Type of Business Employees Employment 1. County of Riverside County Government 21,215 2.04% 2. March Air Reserve Base Military Reserve Base 9,000 0.87 3. University of California, Riverside University 8,735 0.84 4. Kaiser Permanente Riverside Med. Center Medical Center 5,592 0.54 5. Corona-Norco Unified School District School District 4,989 0.48 6. Pechanga Resort Casino Casino 4,683 0.45 7. Riverside Unified School District School District 4,335 0.42 8. Hemet Unified School District School District 4,302 0.41 9. Eisenhower Medical Center Medical Center 3,743 0.36 10. Moreno Valley Unified School District School District 3,684 0.36

Source: County of Riverside ‘Comprehensive Annual Financial Report’ for the year ending June 30, 2019.

Construction Trends Provided below are the building permits and valuations for the City of Menifee for calendar years 2014 through 2018.

CITY OF MENIFEE Building Permit Valuation (Valuation in Thousands of Dollars)

2014 2015 2016 2017 2018 Permit Valuation New Single-family $3,632.5 $129,002.5 $175,663.2 $215,729.8 $293,565.2 New Multi-family 0.0 0.0 0.0 0.0 0.0 Res. Alterations/Additions 477.9 8,780.9 8,169.5 4,538.8 2,849.5 Total Residential $4,110.4 $137,783.4 $183,832.7 $220,268.6 $296,414.7

New Commercial $600.0 $419.5 $17,882.4 $9,557.3 $18,951.3 New Industrial 0.0 0.0 0.0 0.0 0.0 New Other 145.0 335.2 10,797.7 5,583.3 13,957.1 Com. Alterations/Additions 2.5 84.3 10,272.6 2,564.4 6,083.8 Total Nonresidential $747.5 $839.1 $38,952.7 $17,705.0 $38,992.2

New Dwelling Units Single-family 12 404 564 714 967 Multiple Family 0 0 0 0 0 TOTAL 12 404 564 714 967

Source: Building Permit Summary, California Homebuilding Foundation/Construction Industry Research Board.

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Provided below are the building permits and valuations for the City of Murrieta for calendar years 2014 through 2018.

CITY OF MURRIETA Building Permit Valuation (Valuation in Thousands of Dollars)

2014 2015 2016 2017 2018 Permit Valuation New Single-family $5,125.4 $65,285.9 $58,375.1 $76,887.0 $117,276.3 New Multi-family 28,746.2 26,890.1 15,192.4 16,609.7 25,175.0 Res. Alterations/Additions 5,012.1 1,463.7 945.7 1,249.4 1,277.5 Total Residential $38,883.7 $93,639.7 $74,513.2 $94,746.1 $143,728.8

New Commercial $6,260.5 $2,643.6 $20,679.7 $25,720.4 $18,114.5 New Industrial 0.0 98.3 0.0 3,500.0 2,320.0 New Other 5,351.6 366.7 9,448.3 8,168.1 9,514.8 Com. Alterations/Additions 3,699.3 2,276.9 5,776.7 13,489.5 6,067.8 Total Nonresidential $15,311.4 $5,385.5 $35,904.7 $50,878.0 $36,017.1

New Dwelling Units Single-family 20 174 144 204 341 Multiple Family 248 271 139 155 120 TOTAL 268 445 283 359 461

Note: Totals may not add to sums because of rounding. Source: Building Permit Summary, California Homebuilding Foundation/Construction Industry Research Board.

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Provided below are the building permits and valuations for the County for calendar years 2014 through 2018.

COUNTY OF RIVERSIDE Building Permit Valuation 2014-2018 (Valuation in Thousands of Dollars)

2014 2015 2016 2017 2018 Permit Valuation New Single-family $1,296,552.8 $1,313,084.2 $1,526,767.8 $1,670,541.6 $2,200,020.7 New Multi-family 178,116.7 110,458.4 106,291.8 109,309.0 232,706.8 Res. Alterations/Additions 147,081.2 113,199.9 126,474.9 123,566.7 125,353.5 Total Residential $1,621,750.8 $1,536,742.5 $1,759,534.5 $1,903,417.3 $2,558,081.0

New Commercial $184,137.5 $36,541.2 $605,176.8 $529,284.9 $727,517.4 New Industrial 161,321.1 18,886.7 59,439.2 410,275.3 529,326.4 New Other 142,204.3 10,124.1 310,187.3 130,419.0 387,065.6 Com. Alterations/Additions 327,327.1 18,905.8 371,216.4 363,711.3 315,771.0 Total Nonresidential $814,990.0 $84,457.9 $1,346,019.7 $1,433,690.5 $1,959,680.4

New Dwelling Units Single-family 5,007 5,007 5,662 6,265 7,540 Multiple Family 1,931 1,189 1,039 1,070 1,628 TOTAL 6,938 6,196 6,701 7,335 9,168

Note: Totals may not add to sums because of rounding. Source: Building Permit Summary, California Homebuilding Foundation/Construction Industry Research Board.

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County Commercial Activity Commercial activity is an important factor in the County’s economy. Much of the County’s commercial activity is concentrated in central business districts or small neighborhood commercial centers in cities. There are eight regional shopping malls in the County: Riverside Plaza, Galleria at Tyler (Riverside), Palm Springs Mall, Desert Fashion Mall, Indio Fashion Mall, Hemet Valley Mall, Palm Desert Town Center and Moreno Valley Mall at Towngate. There are also three factory outlet malls (Cabazon Outlets, Desert Hills Factory Stores and Lake Elsinore Outlet Center) and over 200 area centers in the County. County Agriculture

Agriculture remains a leading source of income in the County. Principal agricultural products are nursery stock, milk, table grapes, lemons, bell peppers, dates, eggs, hay, grapefruit, and avocados. Four areas in Riverside County account for the major portion of agricultural activity: the Riverside/Corona and San Jacinto/Temecula Valley Districts in the western portion of the County, the Coachella Valley in the central portion and the Palo Verde Valley near the County’s eastern border.

County Transportation

Easy access to job opportunities in the County and nearby Los Angeles, Orange and San Diego Counties is important to the County’s employment picture. Several major freeways and highways provide access between the County and all parts of Southern California. The Riverside Freeway (State Route 91) extends southwest through Corona and connects with the Orange County freeway network in Fullerton. Interstate 10 traverses the width of the County, the western-most portion of which links up with major cities and freeways in the eastern part of Los Angeles County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U.S. 60) provides an alternate (to Interstate 10) east-west link to Los Angeles County.

Currently, Metrolink provides commuter rail service to Los Angeles and Orange Counties from several stations in the County. Transcontinental passenger rail service is provided by Amtrak with a stop in Indio. Freight service to major west coast and national markets is provided by two transcontinental railroads – Burlington Northern/Santa Fe and Union Pacific. Truck service is provided by several common carriers, making available overnight delivery service to major California cities.

Transcontinental bus service is provided by Greyhound Lines. Intercounty, intercity and local bus service is provided by the Riverside Transit Agency to western County cities and communities. The SunLine Transit Agency provides local bus service throughout the Coachella Valley, including the cities of Palm Springs and Indio. The City of Banning also operates a local bus system.

The County seat, located in the City of Riverside, is within 20 miles of the Ontario International Airport in neighboring San Bernardino County. This airport is operated by the Los Angeles Department of Airports. Four major airlines schedule commercial flight service at Palm Springs Regional Airport. County-operated general aviation airports include those in Thermal, Hemet, Blythe and French Valley. The cities of Riverside, Corona and Banning also operate general aviation airports. There is a military base at March Air Reserve Base, which converted from an active duty base to a reserve-only base on April 1, 1996. Plans for joint military and civilian use of the base thereafter are presently being formulated by the March AFB Joint Powers Authority, comprised of the County and the Cities of Riverside, Moreno Valley and Perris.

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County Environmental Control Services

Water Supply. The County obtains a large part of its water supply from groundwater sources, with certain areas of the County, such as the City of Riverside, relying almost entirely on groundwater. As in most areas of Southern California, this groundwater source is not sufficient to meet countywide demand and the County’s water supply is supplemented by imported water. At the present time, imported water is provided by the Colorado River Aqueduct and the State Water Project.

At the regional and local level, there are several water districts that were formed for the primary purpose of supplying supplemental water to the cities and agencies within their areas. The Rancho California Water District, the Coachella Valley Water District, the Western Municipal Water District and the Eastern Municipal Water District are the largest of these water districts in terms of area served. The County is also served by the San Gorgonio Pass Water Agency, Desert Water Agency and Palo Verde Irrigation District.

Flood Control. Primary responsibility for planning and construction of flood control and drainage systems within the County is provided by the Riverside County Flood Control and Water Conservation District and the Coachella Valley Storm Water Unit.

Sewage. There are 18 wastewater treatment agencies in the County’s Santa Ana River region and nine in the County’s Colorado River Basin region. Most residents in the rural unsewered areas of the County rely upon septic tanks and leach fields as an environmentally acceptable method of sewage disposal.

County Education

There are four elementary school districts, one high school district, eighteen unified (K-12) school districts and four community college districts in the County. Ninety-five percent of all K-12 students attend schools in the unified school districts. The three largest unified districts are Riverside Unified School District, Moreno Valley Unified School District and Corona-Norco Unified School District.

There are nine two-year community college campuses located in the communities of Riverside, Moreno Valley, Norco, San Jacinto, Menifee, Coachella Valley and Palo Verde Valley. There are also two universities and a four-year college located in the City of Riverside – the University of California, Riverside, La Sierra University and California Baptist College.

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APPENDIX B

RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR IMPROVEMENT AREA B OF COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT

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RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES FOR IMPROVEMENT AREA B OF COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT

A Special Tax (as defined herein) shall be levied on and collected from all Assessor’s Parcels in Improvement Area B of Community Facilities District (“CFD”) No. 2016-1 of the Menifee Union School District (“School District”) each Fiscal Year commencing in Fiscal Year 2016/2017, in an amount determined by the Board through the application of the Rate and Method of Apportionment of Special Taxes (“RMA”) described below. All of the real property within the District, unless exempted by law or by provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided.

SECTION A DEFINITIONS

For purposes of this RMA, the terms hereinafter set forth have the following meanings:

“Acreage” means the number of acres of land area of an Assessor’s Parcel as shown on an Assessor’s Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the Administrator may rely on the land area shown on the applicable Final Map.

“Act” means the Mello-Roos Communities 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 any ordinary and necessary expense incurred by the School District on behalf of the District related to the determination of the amount of the levy of Special Taxes, the collection of Special Taxes, including, but not limited to, the reasonable expenses of collecting delinquencies, the administration of Bonds, the proportionate payment of salaries and benefits of any School District employee whose duties are directly related to the administration of the District, and reasonable costs otherwise incurred in order to carry out the authorized purposes of the District including a proportionate amount of School District general administrative overhead related thereto.

“Administrator” means an official of the School District or designee thereof, responsible for determining the levy and collection of the Special Taxes.

“Annual Special Tax” means the Special Tax actually levied in any Fiscal Year on any Assessor’s Parcel.

“Approved Property” means all Assessor’s Parcels of Taxable Property that (i) are associated with a Lot in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied and (ii) have not been issued a building permit on or before the May 1st preceding the Fiscal Year in which the Special Tax is being levied.

“Assessor’s Parcel” means a parcel of land designated on an Assessor’s Parcel Map with an assigned Assessor’s Parcel Number within the boundaries of the District.

“Assessor’s Parcel Map” means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number.

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“Assessor’s Parcel Number” means that number assigned to an Assessor’s Parcel by the County for purposes of identification.

“Assigned Annual Special Tax” means the Special Tax of that name described in Section D hereof.

“Backup Annual Special Tax” means the Special Tax of that name described in Section E hereof.

“Board” means the Governing Board of the School District, or its designee, acting as the Legislative Body of the District.

“Bond Index” means the national Bond Buyer Revenue Index, commonly referenced as the 25-Bond Revenue Index. In the event the Bond Index ceases to be published, the index used shall be based on a comparable index for revenue bonds maturing in 30 years with an average rating equivalent to Moody’s A1 and/or Standard & Poor’s A+, as determined by the Board.

“Bond Yield” means the yield of the last series of Bonds issued. For purposes of this calculation the yield of the Bonds shall be the yield calculated at the time such Bonds are issued, pursuant to Section 148 of the Internal Revenue Code of 1986, as amended, for the purpose of the Non-Arbitrage (Tax) Certificate or other similar bond issuance document.

“Bonds” means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which the Special Taxes have been pledged for repayment.

“Building Square Footage” or “BSF” means the square footage of assessable internal living space of a Unit, exclusive of any carports, walkways, garages, overhangs, patios, enclosed patios, detached accessory structure, other structures not used as living space, or any other square footage excluded under Government Code Section 65995 as determined by reference to the building permit(s) for such Unit.

“District” means Improvement Area B of Community Facilities District No. 2016-1 of the School District.

“County” means the County of Riverside.

“Developed Property” means all Assessor’s Parcels of Taxable Property for which building permit(s) were issued on or before May 1 of the prior Fiscal Year, provided that such Assessor’s Parcels were created on or before January 1 of the prior Fiscal Year, as reasonably determined by the Administrator.

“Exempt Property” means all Assessor’s Parcels designated as being exempt from Special Taxes pursuant to Section K hereof.

“Final Map” means a final tract map, parcel map, lot line adjustment, or functionally equivalent map or instrument that creates individual Lots, recorded in the Office of the County Recorder.

“Fiscal Year” means the period commencing on July 1 of any year and ending on the following June 30. RMA_Fn Page 2 of 12 June 14, 2016

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“Land Use Class or Classes” means the tax class classifications depicted in Table 1 for all Assessor’s Parcels of Developed Property based on the Building Square Footage of the Units permitted on such Assessor’s Parcel.

“Lot” means an individual legal lot created by a Final Map for which a building permit for residential construction has been or could be issued.

“Maximum Special Tax” means for each Assessor’s Parcel, the maximum Special Tax, determined in accordance with Section C, which can be levied by the District in a given Fiscal Year on such Assessor’s Parcel.

“Mitigation Agreement” means the “Amended and Restated School Facilities Mitigation Agreement,” dated as of May 11, 2016, by and among the School District and Beazer Homes Holding Corporation.

“Net Taxable Acreage” means the total Acreage of Developed Property expected to exist in the District after all Final Maps are recorded.

“Partial Prepayment Amount” means the amount required to prepay a portion of the Special Tax obligation for an Assessor’s Parcel as described in Section H hereof.

“Prepayment Administrative Fees” means any fees or expenses of the School District or the District associated with the prepayment of the Special Tax obligation of an Assessor’s Parcel. Prepayment Administrative Fees shall include among other things the cost of computing the Prepayment Amount, redeeming Bonds, and recording any notices to evidence the prepayment and redemption of Bonds.

“Prepayment Amount” means the amount required to prepay the Special Tax obligation in full for an Assessor’s Parcel as described in Section G hereof.

“Present Value of Taxes” means for any Assessor’s Parcel the present value of (i) the unpaid portion, if any, of the Annual Special Tax applicable to such Assessor’s Parcel in the current Fiscal Year and (ii) the Special Taxes expected to be levied on such Assessor’s Parcel in each remaining Fiscal Year, as determined by the Administrator, until the termination date specified in Section J, but in no event longer than 33 Fiscal Years. The discount rate used for this calculation shall be equal to (a) the Bond Yield after Bond issuance or (b) the most recently published Bond Index prior to Bond issuance.

“Proportionately” means that the ratio of the actual Annual Special Tax levy to the applicable Assigned Annual Special Tax is equal for all applicable Assessor’s Parcels. In the case of Developed Property subject to apportionment of the Annual Special Tax under Step Four of Section F, “Proportionately” shall mean that the quotient of (i) the Annual Special Tax less the Assigned Annual Special Tax divided by (ii) the Backup Annual Special Tax less the Assigned Annual Special Tax is equal for all applicable Assessor’s Parcels.

“Provisional Undeveloped Property” means all Assessor’s Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuant to Section K, but cannot be classified as Exempt Property because to do so would reduce the Net Taxable Acreage below the required minimum Acreage set forth in Section K, as applicable.

“Reserve Fund Credit” means an amount equal to the lesser of (i) the reduction in the applicable reserve fund requirement(s) resulting from the redemption of Bonds with the Prepayment Amount or (ii) ten percent (10%) of the amount of Bonds which will be redeemed. RMA_Fn Page 3 of 12 June 14, 2016

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In the event that a surety bond or other credit instrument satisfies the reserve requirement or the reserve requirement is underfunded at the time of the prepayment, no Reserve Fund Credit shall be given.

“School District” means the Menifee Union School District, a public school district organized and operating pursuant to the Constitution and laws of the State of California.

“Special Tax” means any of the special taxes authorized to be levied by the District pursuant to the Act and this RMA.

“Special Tax Requirement” means the amount required in any Fiscal Year to pay (i) the debt service or the periodic costs on all outstanding Bonds, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account or accounts established in association with the Bonds, (iv) any amount required to establish or replenish any reserve funds (or accounts thereof) established in association with the Bonds, and (v) the collection or accumulation of funds for the acquisition or construction of school facilities and certain costs associated with the maintenance and operations of school facilities authorized by the District provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property, Undeveloped Property, or Provisional Undeveloped Property as set forth in Steps Two through Four of Section F, less (vi) any amount(s) available to pay debt service or other periodic costs on the Bonds pursuant to any applicable bond indenture, fiscal agent agreement, trust agreement, or equivalent agreement or document. In arriving at the Special Tax Requirement, the Administrator shall take into account the reasonably anticipated delinquent Special Taxes, provided that the amount included cannot cause the Annual Special Tax of an Assessor Parcel of Developed Property to increase by greater than ten percent (10%) of what would have otherwise been levied.

“Taxable Property” means all Assessor’s Parcels which are not Exempt Property.

“Undeveloped Property” means all Assessor’s Parcels of Taxable Property which are not Developed Property or Approved Property.

“Unit” means each separate residential dwelling unit, including but not limited to a single family attached or detached unit, condominium, an apartment unit, mobile home, or otherwise, excluding hotel and motels.

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SECTION B CLASSIFICATION OF ASSESSOR’S PARCELS

Each Fiscal Year, commencing with Fiscal Year 2016/2017, all Assessor’s Parcels within the District shall be classified as either Taxable Property or Exempt Property. In addition, each Assessor’s Parcel of Taxable Property shall be classified as Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property. Developed Property shall be further assigned to a Land Use Class, according to Table 1 below, based on the Building Square Footage of each Unit.

Table 1 Land Use Classification Building Land Use Class 1 Sq3,950 sq. ft.

SECTION C MAXIMUM SPECIAL TAX RATE

Prior to the issuance of Bonds, the Maximum Special Tax and Assigned Annual Special Tax on Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property may be reduced in accordance with and subject to the conditions set forth in this Section C without the need for any proceedings to make changes as permitted under the Act. If it is reasonably determined by the Administrator that the maximum tax burden in the District exceeds the School District’s maximum tax burden objective set forth in the Mitigation Agreement, the Maximum Special Tax and Assigned Annual Special Tax on Developed Property for a Land Use Class may be reduced. The Maximum Special Tax and Assigned Annual Special Tax may be reduced to the amount necessary to equal such maximum tax burden level with the written consent of the Administrator and without the need for any additional Board proceedings.

Furthermore, reductions in the Maximum Special Tax and Assigned Annual Special Tax for Developed Property for one or more Land Use Classes and the Maximum Special Tax and Assigned Annual Special Tax for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall also be implemented in accordance with Section 3.B of the Mitigation Agreement.

The Maximum Special Tax and Assigned Annual Special Tax for Approved Property, Undeveloped Property and Provisional Undeveloped Property may also be reduced in accordance with the Maximum Special Tax reductions for Developed Property, if the Administrator reasonably determines that such

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reductions are necessary. Each Maximum Special Tax and Assigned Annual Special Tax reduction for a Land Use Class shall be calculated separately, as reasonably determined by the Administrator, and it shall not be required that such reduction be proportionate among Land Use Classes. The reductions permitted pursuant to this Section C shall be reflected in an amended notice of Special Tax lien

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which the School District shall cause to be recorded by executing a certificate in substantially the form attached herein as Exhibit A.

1. Developed Property

The Maximum Special Tax for each Assessor’s Parcel classified as Developed Property shall be the greater of the amount derived by the application of the (a) Assigned Annual Special Tax or (b) Backup Annual Special Tax.

2. Approved Property

The Maximum Special Tax for each Assessor’s Parcel classified as Approved Property shall be derived by the application of the Assigned Annual Special Tax.

3. Undeveloped Property

The Maximum Special Tax for each Assessor’s Parcel classified as Undeveloped Property or Provisional Undeveloped Property shall be derived by the application of the Assigned Annual Special Tax.

SECTION D ASSIGNED ANNUAL SPECIAL TAXES

1. Developed Property

The Assigned Annual Special Tax for each Assessor’s Parcel of Developed Property will be determined in accordance with Table 2 below according to the Land Use Class of the Unit, subject to the increases as described below.

Table 2 Assigned Annual Special Taxes for Developed Property Land Use Building Square Assigned Annual Class Footage Special Tax 1 < 1,751 sq. ft. $1,807.83 per Unit 2 1,751 – 1,950 sq. ft. $1,898.04 per Unit 3 1,951 - 2,150 sq. ft. $1,980.12 per Unit 4 2,151 - 2,350 sq. ft. $2,041.63 per Unit 5 2,351 - 2,550 sq. ft. $2,103.14 per Unit 6 2,551 - 2,750 sq. ft. $2,164.65 per Unit 7 2,751 - 2,950 sq. ft. $2,226.16 per Unit 8 2,951 - 3,150 sq. ft. $2,246.68 per Unit 9 3,151 - 3,350 sq. ft. $2,267.20 per Unit 10 3,351 - 3,550 sq. ft. $2,324.51 per Unit 11 3,551 - 3,750 sq. ft. $2,369.61 per Unit 12 3,751 - 3,950 sq. ft. $2,414.72 per Unit 13 >3,950 sq. ft. $2,455.76 per Unit

2. Approved Property, Undeveloped Property and Provisional Undeveloped Property

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The Assigned Annual Special Tax for each Assessor’s Parcel of Approved Property, Undeveloped Property, or Provisional Undeveloped Property shall be $7,332.59 per acre of Acreage, subject to increases as described below.

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a. Developed Property

On each July 1, commencing July 1, 2017, the Assigned Annual Special Tax rate applicable to Developed Property shall be increased by two percent (2.00%).

b. Approved Property, Undeveloped Property and Provisional Undeveloped Property

On each July 1, commencing July 1, 2017, the Assigned Annual Special Tax rate per acre of Acreage for Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%).

SECTION E BACKUP ANNUAL SPECIAL TAX

Each Fiscal Year, each Assessor’s Parcel of Developed Property shall be subject to a Backup Annual Special Tax.

1. Calculation of the Backup Annual Special Tax Rate

The Backup Annual Special Tax rate for an Assessor’s Parcel of Developed Property within a Final Map shall be the rate per Lot calculated in accordance with the following formula in Fiscal Year 2016/2017 or such later Fiscal Year in which such Final Map is created, subject to increases as described below:

B = (U x A) / L

The terms above have the following meanings:

B = Backup Annual Special Tax per Lot for the applicable Fiscal Year

U = Assigned Annual Special Tax per Acre of Undeveloped Property in the Fiscal Year the calculation is performed

A = Acreage of Taxable Property expected to exist within such Final Map at the time of calculation, as determined by the Administrator

L = Number of Lots within the applicable Final Map at the time of calculation

2. Changes to a Final Map

If the Final Map(s) described in the preceding paragraph are subsequently changed or modified, then the Backup Annual Special Tax for each Assessor’s Parcel of Developed Property changed or modified in each such Final Map shall be a rate per square foot of Acreage calculated as follows:

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a. Determine the total Backup Annual Special Tax revenue anticipated to apply to the changed or modified Assessor’s Parcels prior to the change or modification.

b. The result of paragraph a above shall be divided by the Acreage of Taxable Property of the modified Assessor’s Parcels, as reasonably determined by the Administrator.

c. The result of paragraph b above shall be divided by 43,560. The result is the Backup Annual Special Tax per square foot of Acreage that shall be applicable to the modified Assessor’s Parcels, subject to increases as described below.

3. Increase in the Backup Annual Special Tax

Each July 1, commencing the July 1 following the initial calculation of the Backup Annual Special Tax rate for Developed Property within a Final Map, the Backup Annual Special Tax for each Lot within such Final Map shall be increased by two percent (2.00%) of the amount in effect the prior Fiscal Year.

SECTION F METHOD OF APPORTIONMENT OF THE ANNUAL SPECIAL TAX

Commencing Fiscal Year 2016/2017 and for each subsequent Fiscal Year, the Board shall levy Annual Special Taxes on all Taxable Property in accordance with the following steps:

Step One: The Annual Special Tax shall be levied on each Assessor’s Parcel of Developed Property at the Assigned Annual Special Tax applicable to each such Assessor’s Parcel.

Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor’s Parcel of Approved Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the second step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Four: If additional moneys are needed to satisfy the Special Tax Requirement after the third step has been completed, the Annual Special Tax on each Assessor’s Parcel of Developed Property, for which the Maximum Special Tax is the Backup Annual Special Tax, shall be increased Proportionately from the Assigned Annual Special Tax up to 100% of the Backup Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the fourth step has been completed, the Annual Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Assigned Annual Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.

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SECTION G PREPAYMENT OF SPECIAL TAXES

1. Special Tax Prepayment Times and Conditions The Special Tax obligation of an Assessor’s Parcel of Taxable Property may be prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcel. An owner of an Assessor’s Parcel intending to prepay the Special Tax shall provide the School District with written notice of intent to prepay. Within thirty (30) days of receipt of such written notice, the Administrator shall determine the Prepayment Amount for such Assessor’s Parcel and shall notify such owner of such Prepayment Amount.

2. Special Tax Prepayment Calculation

The Prepayment Amount shall be calculated according to the following formula:

P = PVT – RFC + PAF

The terms above have the following meanings:

P = Prepayment Amount

PVT = Present Value of Taxes

RFC = Reserve Fund Credit

PAF = Prepayment Administrative Fees

3. Special Tax Prepayment Procedures and Limitations The amount representing the Present Value of Taxes attributable to the prepayment less the Reserve Fund Credit attributable to the prepayment shall, prior to the issuance of Bonds, be deposited into a separate account held with the School District and disbursed in accordance with the Mitigation Agreement and after the issuance of Bonds be deposited into the applicable account or fund established under the trust agreement or indenture agreement or fiscal agent agreement and used to pay debt service or redeem Bonds. The amount representing the Prepayment Administrative Fees attributable to the prepayment shall be retained and deposited into the applicable account by the District. With respect to any Assessor’s Parcel for which the Special Tax is prepaid, the Board shall indicate in the records of the District that there has been a prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act to indicate the prepayment of the Special Tax obligation and the release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such Special Tax shall cease. Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Assigned Annual Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such prepayment net of Administrative Expenses, shall be at least RMA_Fn Page 9 of 12 June 14, 2016

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1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination shall include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

Notwithstanding the above, the ability to prepay the Annual Special Tax obligation of an Assessor’s Parcel may be suspended, by the Administrator, acting in his or her absolution and sole discretion for and on behalf of the District, without notice to the owners of property within the District for a period of time, not to exceed sixty (60) days, prior to the scheduled issuance of Bonds by the District to assist in the efficient preparation of the required bond market disclosure.

SECTION H PARTIAL PREPAYMENT OF SPECIAL TAXES

1. Partial Prepayment Times and Conditions

The Special Tax obligation for Assessor’s Parcels of Taxable Property may be partially prepaid in increments of ten (10) Units, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor’s Parcels at the time the Special Tax obligation would be partially prepaid. An owner of an Assessor’s Parcel(s) intending to partially prepay the Special Tax shall provide the District with written notice of their intent to partially prepay. Within thirty (30) days of receipt of such written notice, the Administrator shall determine the Partial Prepayment Amount of such Assessor’s Parcel and shall notify such owner of such Partial Prepayment Amount.

2. Partial Prepayment Calculation

The Partial Prepayment Amount shall be calculated according to the following formula:

PP = PVT x F – RFC + PAF

The terms above have the following meanings:

PP = the Partial Prepayment Amount

PVT = Present Value of Taxes

F = the percent by which the owner of the Assessor’s Parcel is partially prepaying the Special Tax obligation

RFC = Reserve Fund Credit

PAF = Prepayment Administrative Fees

3. Partial Prepayment Procedures and Limitations

The amount representing the Present Value of Taxes attributable to the prepayment less the Reserve Fund Credit attributable to the prepayment shall, prior to the issuance of Bonds, be RMA_Fn Page 10 of 12 June 14, 2016

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deposited into a separate account held with the School District and disbursed in accordance with the Mitigation Agreement and after the issuance of Bonds be deposited into the applicable account or fund established under the trust agreement or indenture agreement or fiscal agent agreement and used to pay debt service or redeem Bonds. The amount representing the Prepayment Administrative Fees attributable to the prepayment shall be retained and deposited into the applicable account by the District.

With respect to any Assessor’s Parcel for which the Special Tax obligation is partially prepaid, the Board shall indicate in the records of the District that there has been a partial prepayment of the Special Tax obligation and shall cause a suitable notice to be recorded in compliance with the Act to indicate the partial prepayment of the Special Tax obligation and the partial release of the Special Tax lien on such Assessor’s Parcel, and the obligation of such Assessor’s Parcel to pay such prepaid portion of the Special Tax shall cease. Additionally, the notice shall indicate that the Assigned Annual Special Tax and the Backup Annual Special Tax if applicable for the Assessor’s Parcel has been reduced by an amount equal to the percentage which was partially prepaid.

Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Special Taxes that may be levied on Taxable Property, excluding Provisional Undeveloped Property, after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently outstanding Bonds in each future Fiscal Year and such partial prepayment will not impair the security of all currently outstanding Bonds, as reasonably determined by the Administrator. Such determination shall include identifying all Assessor’s Parcels that are expected to be classified as Exempt Property.

Notwithstanding the above, the ability to prepay the Annual Special Tax obligation of an Assessor’s Parcel may be suspended, by the Administrator, acting in his or her absolution and sole discretion for and on behalf of the District, without notice to the owners of property within the District for a period of time, not to exceed sixty (60) days, prior to the scheduled issuance of Bonds by the District to assist in the efficient preparation of the required bond market disclosure.

SECTION I ANNUAL SPECIAL TAX REMAINDER

In any Fiscal Year which the Annual Special Taxes collected from Developed Property exceeds the amount needed to make regularly scheduled annual interest and principal payments on outstanding Bonds and pay Administrative Expenses, the School District may use such amount for acquisition, construction or financing of school facilities and certain costs associated with the maintenance and operations of school facilities in accordance with the Act, District proceedings and other applicable laws as determined by the Board.

SECTION J TERMINATION OF SPECIAL TAX

The Annual Special Tax shall be levied for a term of three (3) Fiscal Years after the final maturity of the last series of Bonds, provided that the Annual Special Tax shall not be levied later than Fiscal Year 2065/2066. However, the Special Tax may cease to be levied in an earlier Fiscal Year if the Board has determined (i) that all required interest and principal payments on the Bonds have been paid, (ii) all authorized facilities of the District have been acquired and all reimbursements have been paid, and (iii) all other obligations of the District have been satisfied.

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SECTION K EXEMPTIONS

The Administrator shall classify as Exempt Property in the chronological order in which each Assessor Parcel becomes (i) owned by the State of California, federal or other local governments, (ii) used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) owned by a homeowners’ association, (iv) burdened with a public or utility easements making impractical their utilization for other than the purposes set forth in the easement, or (v) any other Assessor’s Parcels at the reasonable discretion of the Board, provided that no such classification would reduce the Net Taxable Acreage to less 38.2127 (“Minimum Taxable Acreage”).

Notwithstanding the above, the Administrator or Board shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than the Minimum Taxable Acreage. Assessor’s Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than the Minimum Taxable Acreage will be classified as Provisional Undeveloped Property, as applicable, and will continue to be subject to Special Taxes accordingly.

SECTION L APPEALS

Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Administrator to be received by the Administrator not later than six (6) months after having paid the first installment of the Special Tax that is disputed. The reissuance or cancellation of a building permit is not an eligible reason for appeal. In order to be considered sufficient, any notice of appeal must (i) specifically identify the property by address and Assessor’s Parcel Number, (ii) state the amount in dispute and whether it is the whole amount or only a portion of the Annual Special Tax, (iii) state all grounds on which the property owner is disputing the amount or application of the Annual Special Tax, including a reasonably detailed explanation as to why the amount or application of such Special Tax is incorrect, (iv) include all documentation, if any, in support of the claim, and (v) be verified under penalty of perjury by the person who paid the Special Tax or his or her guardian, executor or administrator. The Administrator shall promptly review the appeal, and if necessary, meet with the property owner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the representative’s decision requires that the Special Tax for an Assessor’s Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Annual Special Tax on that Assessor’s Parcel in the subsequent Fiscal Year(s) as the representative’s decision shall indicate.

SECTION M MANNER OF COLLECTION

The Annual Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the District may directly bill all or a portion of the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and if so collected, a delinquent penalty of ten percent (10%) of the Special Tax will attach at 5:00 p.m. on the date the Special Tax becomes delinquent and interest at 1.5% per month of the Special Tax will attach on the July 1 after the delinquency date and the first of each month thereafter until such Special Taxes are paid. RMA_Fn Page 12 of 12 June 14, 2016

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EXHIBIT A

CERTIFICATE TO AMEND SPECIAL TAX

DISTRICT CERTIFICATE

1. Pursuant to Section C of the Rate and Method of Apportionment, Improvement Area B of Community Facilities District No. 2016-1 of the Menifee Union School District (“District”) hereby approves a reduction in the Assigned Annual Special Tax for Developed Property, Approved Property, Undeveloped Property, and Provisional Undeveloped Property within the District.

a. The information in Table 2 relating to the Fiscal Year 2016/2017 Assigned Annual Special Tax for Developed Property within the District shall be modified as follows:

Table 2 Assigned Annual Special Taxes for Developed Property Land Use Building Square Assigned Annual Class Footage Special Tax Rate 1 < 1,751 sq. ft. $_,___.__ per Unit 2 1,751 – 1,950 sq. ft. $_,___.__ per Unit 3 1,951 - 2,150 sq. ft. $_,___.__ per Unit 4 2,151 - 2,350 sq. ft. $_,___.__ per Unit 5 2,351 - 2,550 sq. ft. $_,___.__ per Unit 6 2,551 - 2,750 sq. ft. $_,___.__ per Unit 7 2,751 - 2,950 sq. ft. $_,___.__ per Unit 8 2,951 - 3,150 sq. ft. $_,___.__ per Unit 9 3,151 - 3,350 sq. ft. $_,___.__ per Unit 10 3,351 - 3,550 sq. ft. $_,___.__ per Unit 11 3,551 - 3,750 sq. ft. $_,___.__ per Unit 12 3,751 - 2,950 sq. ft. $_,___.__ per Unit 13 >3,950 sq. ft. $_,___.__ per Unit

b. The Fiscal Year 2016/2017 Assigned Annual Special Tax for each Assessor’s Parcel of Approved Property, Undeveloped Property, and Provisional Undeveloped Property as adjusted annually pursuant to Section D.2 of the RMA shall be $[ ] per acre.

Date: , 20___ By: Administrator

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APPENDIX C APPRAISAL REPORT

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APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE FISCAL AGENT AGREEMENT

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APPENDIX E DTC AND THE BOOK-ENTRY ONLY SYSTEM

The following description of DTC (defined herein), the procedures and record keeping with respect to beneficial ownership interests in the 2020 Bonds, payment of principal, interest and other payments on the 2020 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2020 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the School District nor the Fiscal Agent takes any responsibility for the information contained in this Section.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2020 Bonds, (b) 2020 Bonds representing ownership interest in or other confirmation or ownership interest in the 2020 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2020 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (in this Appendix, the “2020 Bonds”). The 2020 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 maturity of the 2020 Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 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 E-1

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corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of 2020 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2020 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2020 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2020 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 2020 Bonds representing their ownership interests in 2020 Bonds, except in the event that use of the book-entry system for the 2020 Bonds is discontinued.

4. To facilitate subsequent transfers, all 2020 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of 2020 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2020 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2020 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.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2020 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the 2020 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2020 Bond documents. For example, Beneficial Owners of 2020 Bonds may wish to ascertain that the nominee holding the 2020 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

6. Redemption notices will be sent to DTC. If less than all of the 2020 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the 2020 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to School 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 the 2020 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and interest payments on the 2020 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 E-2

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to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from School District or 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 nor its nominee, Fiscal Agent, or School 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 other nominee as may be requested by an authorized representative of DTC) is the responsibility of School District or 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.

9. DTC may discontinue providing its services as securities depository with respect to the 2020 Bonds at any time by giving reasonable notice to School District or Fiscal Agent. Under such circumstances, in the event that a successor securities depository is not obtained, 2020 Bonds are required to be printed and delivered.

10. The School District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, 2020 Bond certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that School District believes to be reliable, but School District takes no responsibility for the accuracy thereof.

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APPENDIX F

FORM OF COMMUNITY FACILITIES DISTRICT CONTINUING DISCLOSURE CERTIFICATE

$[PRINCIPAL AMOUNT] * COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B 2020 SPECIAL TAX BONDS

This Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”) in connection with the issuance of the bonds captioned above (the “2020 Bonds”). The 2020 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of [Closing Month] 1, 2020 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and Zions Bancorporation, National Association, as fiscal agent (the “Fiscal Agent”). The Community Facilities District hereby covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Community Facilities District for the benefit of the owners and beneficial owners of the 2020 Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report provided by the Community Facilities District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Annual Report Date” means the date that is six months after the end of the Community Facilities District’s fiscal year (currently December 31 based on the Community Facilities District’s fiscal year end of June 30).

“Disclosure Representative” means the Assistant Superintendent, Business Services of the School District, acting on behalf of the Community Facilities District, or his or her designee(s), or such other officer(s) or employee(s) as the Community Facilities District shall designate in writing to the Fiscal Agent from time to time.

“Dissemination Agent” means Cooperative Strategies, LLC or any successor Dissemination Agent designated in writing by the Community Facilities District and which has filed with the Community Facilities District a written acceptance of such designation.

* Preliminary, subject to change. F-1

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“EMMA System” means the Electronic Municipal Market Access System of the MSRB (as defined below) or such other electronic system designated by the MSRB or the Securities and Exchange Commission for compliance with the Rule.

“Financial Obligation” means a: (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of a clause (i) debt obligation or of a clause (ii) a derivative instrument described above; provided, however, that the term “Financial Obligation” shall not include “municipal securities” (as such term is defined in the Securities Exchange Act of 1934, as amended) as to which a “final official statement” (as such term is defined in the Rule) has been provided to the MSRB consistent with the Rule.

“Improvement Area B” means Improvement Area B of the Community Facilities District.

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule and any successor entity designated by the Securities and Exchange Commission as the repository for filings made pursuant to the Rule.

“Obligated Person” means any person, including an issuer of municipal securities, who is either generally or thorough an enterprise, fund, or account of such person committed by contract or other arrangement (e.g., the Community Facilities District as to the 2020 Bonds) to support payment of all, or part of the obligations of the municipal securities to be sold (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities.

“Official Statement” means the final official statement dated [______, 2020, executed by the Community Facilities District in connection with the issuance of the 2020 Bonds.

“Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the 2020 Bonds required to comply with the Rule in connection with offering of the 2020 Bonds.

“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“School District” means Menifee Union School District, Menifee, California.

Section 3. Provision of Annual Reports.

(a) The Community Facilities District shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing December 31, 2020, with the report for the 2019-20 fiscal year, provide to the MSRB through the EMMA System, in an electronic format and accompanied by identifying information as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 business days prior to the Annual Report Date, the Community Facilities District shall provide the Annual Report to the Dissemination Agent (if other than the Community Facilities District). If by the Annual Report Date the Dissemination Agent (if other than the Community Facilities District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the Community Facilities District to determine if the Community F-2

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Facilities District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that audited financial statements (if any are prepared) of the Community Facilities District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date; provided that as set forth in Section 4(a)(1), unaudited financial statements shall be submitted once available in connection with filing the Annual Report prior to the Annual Report Date. For purposes of this section and Section 4(a), the financial statements of the School District shall not be deemed to be the financial statements of the Community Facilities District, unless such audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances. If the Community Facilities District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c).

(b) If the Community Facilities District does not provide, or cause the Dissemination Agent to provide to the MSRB through the EMMA System, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent (or the Community Facilities District if there is no Dissemination Agent), in a timely manner, shall provide to the MSRB, in an electronic format as prescribed by the MSRB and in a timely manner, a notice in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-applicable rules and electronic filing requirements and format prescribed by the MSRB for the filing of annual continuing disclosure reports; and

(ii) if the Dissemination Agent is other than the Community Facilities District, file a report with the Community Facilities District and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and confirming that it has been filed with the MSRB through the EMMA System.

Section 4. Content of Annual Reports. The Community Facilities District’s Annual Report shall contain or incorporate by reference the following documents and information:

(a) The Community Facilities District does not currently prepare audited financial statements and it is not anticipated that the Community Facilities District will prepare audited financial statements in the future. If the Community Facilities District does prepare audited financial statements, the Community Facilities District’s Annual Report shall contain or incorporate by reference such audited financial statements, if any, for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If audited financial statements of the Community Facilities District are to be prepared, but are not available at the time required for filing, unaudited financial statements of the Community Facilities District shall be submitted with the Annual Report and the audited financial statements shall be submitted once available. As stated in Section 3(a), the financial statements of the School District shall not be deemed to be the financial statements of the Community Facilities District, unless such audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances. If the School District’s audited financial statements contain specific information as to the Community Facilities District, its revenues, expenses and account balances, the Community Facilities District’s Annual Report shall contain or incorporate by reference such School District’s audited financial statements and in such event, the School District’s audited financial statements may be accompanied by a statement substantially to the following effect: F-3

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THE SCHOOL DISTRICT’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE SCHOOL DISTRICT OR THE COMMUNITY FACILITIES DISTRICT OTHER THAN NET SPECIAL TAXES ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE 2020 BONDS, AND NEITHER THE COMMUNITY FACILITIES DISTRICT NOR THE SCHOOL DISTRICT IS OBLIGATED TO ADVANCE AVAILABLE FUNDS TO COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE SCHOOL DISTRICT IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE 2020 BONDS.

(b) To the extent audited financial statements are not provided or to the extent not included in audited financial statements provided, the following information as of the Annual Report Date (except as otherwise noted below):

(i) The principal amount of the 2020 Bonds and any other outstanding bonds issued under the Fiscal Agent Agreement (including refunding bonds).

(ii) The balances in the funds and accounts established under the Fiscal Agent Agreement.

(iii) The current debt service schedule for the 2020 Bonds.

(iv) A statement of the current Reserve Requirement, whether or not the amount on deposit in the Reserve Fund is equal to the Reserve Requirement and, if not, the amount of the delinquency or surplus, as applicable.

(v) If any moneys are still on deposit in the Improvement Fund, the estimated date of completion of the improvements being financed with the 2020 Bond proceeds.

(vi) A statement showing the following for the prior Fiscal Year: the actual Special Taxes levied: the amount of Special Taxes levied on Developed Property and Approved Property; the amount of such Special Taxes actually collected by the Community Facilities District with respect to Developed Property and Approved Property; and the delinquency rate of such Special Taxes.

(vii) A table showing the total dollar amount of delinquencies and number of delinquent parcels, if any, in Improvement Area B of the Community Facilities District as of June 30.

(viii) If the total delinquencies within Improvement Area B of the Community Facilities District as of June 30 in the prior calendar year exceed 5% of the Special Tax for the previous Fiscal Year, information for each parcel delinquent in the payment of 5 or more installments of the Special Tax, including amounts of delinquencies, length of delinquency, status of any foreclosure or enforcement actions regarding each such parcel and summary of results of foreclosure sales, if any.

(ix) An update to Table [6B] in the Official Statement entitled “Appraised Values and Value-to-Debt Ratios by Categories,” which update may be based on assessed values rather than an appraisal.

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(x) The number of parcels which prepaid and the amount of prepayments of the Special Tax for the prior Fiscal Year.

(xi) If one or more single taxpayers are responsible for 5% or more of the annual Special Tax, a listing of such taxpayers responsible for 5% or more of the annual Special Tax and the amount of Special Tax levied on property owned by each such taxpayer the then-current Fiscal Year.

(xii) Any changes to the Rate and Method of Apportionment of Special Tax for Improvement Area B of the Community Facilities District.

(xiii) A copy of the most recent annual information required to be filed by the Community Facilities District with respect to Improvement Area B with the California Debt and Investment Advisory Commission pursuant to the Act and relating generally to outstanding Community Facilities District bond amounts, fund balances, assessed values, special tax delinquencies and foreclosure information with respect to Improvement Area B.

(c) In addition to any of the information expressly required to be provided under paragraph (b) above, the Community Facilities District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading for purposes of applicable federal securities laws.

(d) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Community Facilities District or related public entities, which are available to the public on the MSRB’s EMMA System or filed with the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Community Facilities District shall clearly identify each such other document so included by reference.

Section 5. Reporting of Listed Events.

(a) The Community Facilities District shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2020 Bonds:

(1) Principal and interest payment delinquencies.

(2) Non-payment related defaults, if material.

(3) Unscheduled draws on debt service reserves reflecting financial difficulties.

(4) Unscheduled draws on credit enhancements reflecting financial difficulties.

(5) Substitution of credit or liquidity providers, or their failure to perform.

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.

(7) Modifications to rights of security holders, if material. F-5

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(8) Bond calls, if material, and tender offers.

(9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities, if material.

(11) Rating changes.

(12) Bankruptcy, insolvency, receivership or similar event of the Obligated Person.

(13) 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 or an 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, if material.

(14) Appointment of a successor or additional Fiscal Agent or the change of name of the Fiscal Agent, if material.

(15) Incurrence of a Financial Obligation of the Obligated Person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the Obligated Person, any of which affect security holders, if material.

(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the Obligated Person, any of which reflect financial difficulties.

(b) If a Listed Event occurs, the Community Facilities District shall, or shall cause the Dissemination Agent (if not the Community Facilities District) to, file a notice of such occurrence with the MSRB through the EMMA System, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events regarding bond calls described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected 2020 Bonds under the Fiscal Agent Agreement.

(c) The Community Facilities District acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the 2020 Bonds. The Community Facilities District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that the Community Facilities District determines the event’s occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the Community Facilities District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the Community Facilities District will cause a notice to be filed as set forth in paragraph (b) above. F-6

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For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Community Facilities District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Community Facilities District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Community Facilities District.

Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The Community Facilities District’s obligations under this Disclosure Certificate shall terminate upon the earliest to occur of (i) the legal defeasance of the 2020 Bonds, (ii) prior redemption of the 2020 Bonds, (iii) payment in full of all of the 2020 Bonds or (iv) upon delivery to the Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. If such termination occurs prior to the final maturity of the 2020 Bonds, the Community Facilities District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. The Community Facilities District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing at least thirty days prior written notice to the School District. The initial Dissemination Agent will be Cooperative Strategies, LLC. If at any time there is no designated Dissemination Agent appointed by the Community Facilities District, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the Community Facilities District agrees to provide written notice to the Fiscal Agent requesting the Fiscal Agent to act as Dissemination Agent, and if the Community Facilities District and the Fiscal Agent agree upon the fees for services as Dissemination Agent and the Fiscal Agent accepts appointment as Dissemination Agent, the Fiscal Agent will act as Dissemination Agent under this Disclosure Certificate. If the Fiscal Agent does not agree to perform the duties of Dissemination Agent hereunder, the Community Facilities District shall be the Dissemination Agent and undertake or assume the obligations of the Dissemination Agent hereunder until such time as a separate Dissemination Agent undertakes or assumes such obligations.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Community Facilities District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an Obligated Person with respect to the 2020 Bonds, or type of business conducted;

(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the F-7

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primary offering of the 2020 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) the proposed amendment or waiver either (i) is approved by owners of the 2020 Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of the Fiscal Agent or nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the 2020 Bonds.

If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Community Facilities District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed with the MSRB through the EMMA System in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Community Facilities District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Community Facilities District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Community Facilities District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Community Facilities District to comply with any provision of this Disclosure Certificate, the Participating Underwriter, any owner or beneficial owner of the 2020 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Community Facilities District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Community Facilities District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Community Facilities District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination F-8

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Agent’s negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Community Facilities District, the Property Owner, the Fiscal Agent, the Bond owners or any other party. The obligations of the Community Facilities District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2020 Bonds.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Community Facilities District, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2020 Bonds, and shall create no rights in any other person or entity.

Section 14. Notices. Any notice or communications to or among any of the parties to this Disclosure Certificate may be given as follows:

To the Issuer: Community Facilities District No. 2016-1 of the Menifee Union School District 29775 Haun Road Menifee, CA 92586 Attention: Assistant Superintendent, Business

To the Dissemination Agent: Cooperative Strategies, LLC 8955 Research Drive Irvine, CA 92618

To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, CA 90071 Attention: Public Finance

Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent.

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Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Date: [Closing Date], 2020 COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT

By: [______, Superintendent, Menifee Union School District, on behalf of Community Facilities District No. 2016-1 of the Menifee Union School District

AGREED AND ACCEPTED: Cooperative Strategies, LLC, as Dissemination Agent

By: Name: Title:

[EXECUTION PAGE OF CONTINUING DISCLOSURE CERTIFICATE]

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Board Meeting Date: 06-23-2020 Page 132 of 150

EXHIBIT A

NOTICE OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”)

Name of Bond Issue: Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

Date of Issuance: [Closing Date], 2020

NOTICE IS HEREBY GIVEN that the Community Facilities District has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated [Closing Date], 2020, executed by the Community Facilities District and countersigned by Cooperative Strategies LLC, as dissemination agent. The Community Facilities District anticipates that the Annual Report will be filed by ______.

Dated:

DISSEMINATION AGENT:

Cooperative Strategies, LLC

By: Its:

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Board Meeting Date: 06-23-2020 Page 134 of 150 APPENDIX G

FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE

$[PRINCIPAL AMOUNT] COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B 2020 SPECIAL TAX BONDS

This Developer Continuing Disclosure Certificate (this “Disclosure Certificate”) is executed and delivered by Beazer Homes Holdings, LLC, a Delaware limited liability company (the “Developer”), in connection with the issuance by Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”) of the bonds captioned above (the “2020 Bonds”) for its Improvement Area B (the “Improvement Area”). The 2020 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of [Closing Month] 1, 2020 (the “Fiscal Agent Agreement”), by and between the Community Facilities District and Zions Bancorporation, National Association, a national banking association, in its capacity as fiscal agent (the “Fiscal Agent”) and as Dissemination Agent under this Disclosure Certificate. The Developer covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the owners and Beneficial Owners (defined below) of the 2020 Bonds.

Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Assumption Agreement” means an undertaking of a Major Owner or a Relevant Entity thereof, for the benefit of the owners and Beneficial Owners of the 2020 Bonds, containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the property of such Major Owner within the Improvement Area within the Community Facilities District), whereby the Major Owner or Relevant Entity agrees to provide semi- annual reports and notices of significant events, setting forth the information described in Sections 4 and 5 hereof, respectively, with respect to the portion of the property in the Improvement Area owned by such Major Owner and its Relevant Entities.

“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 tax purposes.

“Development Plan” means, with respect to the Developer, the specific improvements the Developer intends to make, or cause to be made, to the Developer’s Property in order for such Property to enable production units to be completed and sold to third parties, the time frame in which such improvements are intended to be made and the estimated costs of such improvements; the Developer’s Development Plan, as of the date hereof, is described in the Official Statement under the caption “PROPERTY OWNERSHIP AND DEVELOPMENT – Development and Financing – Beazer Homes – Homes Sales and Projected Absorption.”

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Board Meeting Date: 06-23-2020 Page 135 of 150 “Dissemination Agent” means Zions Bancorporation, National Association, or any successor Dissemination Agent designated in writing by the Developer, with the written consent of the Community Facilities District, and which has filed with the Developer and the Community Facilities District a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.

“EMMA System” means the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission.

“Financing Plan” means, with respect to the Developer, the method by which the Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan; the Developer’s Financing Plan, as of the date hereof, is described in the Official Statement under the caption “PROPERTY OWNERSHIP AND DEVELOPMENT – Development and Financing – Financing Plan.”

“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.

“Major Owner” means, as of any Report Date, an owner (including all Relevant Entities of such owners) of land in the Improvement Area responsible in the aggregate for 15% or more of the Special Taxes actually levied at any time during the then-current fiscal year.

“MSRB” means the Municipal Securities Rulemaking Board and any successor entity as the repository for filings.

“Official Statement” means the final official statement dated ______, 2020, executed by the Community Facilities District in connection with the issuance of the 2020 Bonds.

“Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original underwriter of the 2020 Bonds.

“Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.

“Property” means (i) the property owned by the Developer or a Relevant Entity in the Improvement Area and subject to the Special Taxes as of the Report Date, and (ii) the property that was formerly owned by the Developer or a Relevant Entity but is still subject to the undertakings of this Disclosure Certificate under Section 7(b).

“Relevant Entity” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is controlling, controlled by or under common control with such Person, and (ii) for whom information, including financial information or operating data, concerning such Person referenced in clause (i) is material to an evaluation of the Community Facilities District and the 2020 Bonds (i.e. such Person’s assets or funds would materially affect the Developer’s ability to develop its Property as described in the Official Statement or to pay its Special Taxes on the Property). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the present possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Report Date” means (a) September 30 of each year, and (b) March 31 of each year. G-2

Board Meeting Date: 06-23-2020 Page 136 of 150 “Semi-Annual Report” means any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Special Taxes” means the special taxes levied on taxable property within the Improvement Area by the Community Facilities District.

“State” means the State of California.

Section 3. Provision of Semi-Annual Reports.

(a) The Developer shall, or, upon written direction of the Developer, the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2021, provide to the MSRB through the EMMA System, in an electronic format and accompanied by identifying information as prescribed by the MSRB, a Semi-Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Community Facilities District. If the Developer utilizes the Dissemination Agent to file the Semi-Annual Report, then not later than 15 calendar days prior to the Report Date, the Developer shall provide the Semi-Annual Report to the Dissemination Agent (if different from the Developer) and the Developer shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent (if different from the Developer), and the Community Facilities District to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent and the Community Facilities District may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate.

(b) If the Dissemination Agent does not receive a Semi-Annual Report from the Developer and cannot verify that a Semi-Annual Report has been filed with the MSRB through the EMMA System by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Developer that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall request the Developer to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 7 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Developer does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the MSRB through the EMMA System by the Report Date as required in subsection (a) above, the Dissemination Agent shall, in a timely manner, provide to the MSRB through the EMMA System, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A, with a copy to the Community Facilities District.

(c) The Dissemination Agent shall:

(i) determine prior to each Report Date the then applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and

(ii) to the extent the Semi-Annual Report has been furnished to it, file a report with the Developer (if the Dissemination Agent is other than the Developer) and the Community Facilities District certifying that the Semi-Annual Report has been provided to the MSRB through the EMMA System pursuant to this Disclosure Certificate and stating the date it was provided.

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Board Meeting Date: 06-23-2020 Page 137 of 150 Section 4. Content of Semi-Annual Reports. The Developer’s Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit B attached hereto, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Developer or public entities, which are available to the public on the EMMA System or filed with the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Developer shall clearly identify each such other document so included by reference.

In addition to any of the information expressly required to be provided in Exhibit B, each Semi- Annual Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

Section 5. Reporting of Listed Events.

(a) The Developer shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:

(i) bankruptcy or insolvency proceedings commenced by or against the Developer and, if known, any bankruptcy or insolvency proceedings commenced by or against any Relevant Entity of the Developer that owns property subject to the Special Taxes that, in the reasonable judgment of the Developer, could have a material adverse impact on the Developer’s ability to pay its Special Taxes prior to delinquency or to sell or develop the Property as proposed in the Official Statement or most recent Semi-Annual Report;

(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property prior to the delinquency date to the extent such failure is not promptly cured by the Developer or a Relevant Entity upon discovery thereof;

(iii) filing of a lawsuit against the Developer or, if known, a Relevant Entity of the Developer, seeking damages which, if successful, could have, or a final judgment in a lawsuit against the Developer or if known, a Relevant Entity which has, a material and adverse impact on the Developer’s (or a Relevant Entity’s, if the Relevant Entity owns property within the Improvement Area) ability to pay Special Taxes prior to delinquency or to sell or develop the Property as proposed in the Official Statement or most recent Semi-Annual Report;

(iv) any conveyance by the Developer or a Relevant Entity of any of the Property to an entity that is not a Relevant Entity of the Developer, the result of which conveyance is to cause the transferee to become a Major Owner and the related assumption of any obligation by a Major Owner pursuant to Section 7;

(v) material damage to or destruction of any of the improvements on the Property; and

(vi) any payment default or other material default by the Developer that continues to exist beyond any applicable notice and cure periods on any loan or line of credit with respect to the construction of improvements on the Property that would have a material adverse effect on the Developer’s most recently disclosed Development Plan or Financing Plan with respect to the Property, or the ability of the Developer or any Relevant Entity to pay its Special Taxes prior to delinquency; and

(vii) any cancellation of, failure to renew, or amendment or modification of any letter of credit to be provided by the Developer and described in the Official Statement, but excluding

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Board Meeting Date: 06-23-2020 Page 138 of 150 any permitted replacement or termination of the letter of credit or permitted reductions in the amount thereof.

(b) The Developer shall in a timely manner not in excess of 10 business days after the occurrence of the event, determine if such event would be material under applicable Federal securities law.

(c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Developer shall, or shall cause the Dissemination Agent to, file in a timely manner not in excess of 10 business days of the occurrence of such Listed Event, a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, with a copy to the Community Facilities District.

Section 6. Identifying Information for Filings with the MSRB; Format for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Any report or filing with the MSRB pursuant to this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.

Section 7. Duration of Reporting Obligation.

(a) All of the Developer’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following:

(i) upon the legal defeasance, prior redemption or payment in full of all the 2020 Bonds, or

(ii) at such time as the Developer is no longer responsible for payment of 15% or more of the Special Taxes levied in the Improvement Area, or

(iii) the date on which the Developer prepays in full all of the Special Taxes attributable to the Property.

The Developer shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5.

(b) If a portion of the Property is conveyed to a person or entity that, upon such conveyance, will be a Major Owner, the obligations of the Developer hereunder with respect to the property conveyed to such Major Owner may be assumed by such Major Owner or by a Relevant Entity thereof, and the Developer’s obligations hereunder with respect to that portion of the Property conveyed will be terminated. In order to effect such an assumption, such Major Owner or a Relevant Entity shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the Community Facilities District and the Participating Underwriter. Until such time as such Assumption Agreement is entered into, the Developer shall continue to be responsible for the obligations hereunder.

Section 8. Dissemination Agent. The Developer may, from time to time, with the written consent of the Community Facilities District, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, without cause, with the written consent of the Community Facilities District, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Zions Bancorporation, National Association.

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Board Meeting Date: 06-23-2020 Page 139 of 150 The Dissemination Agent may resign by providing thirty days’ written notice to the Community Facilities District, the Developer and the Fiscal Agent (if different from the Dissemination Agent). The Fiscal Agent and the Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Developer. 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 Developer in a timely manner and in a form suitable for filing. The Dissemination Agent shall have no duty or power to enforce compliance by the Developer with the provisions of this Disclosure Certificate.

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):

(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2020 Bonds, or type of business conducted; (b) the proposed amendment or waiver either (i) is approved by owners of the 2020 Bonds in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or Beneficial Owners of the 2020 Bonds.

(c) In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Developer shall describe such amendment in the next Semi-Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Developer.

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Participating Underwriter and any owner or Beneficial Owner of the 2020 Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer or Dissemination Agent, as the case may be, 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 Developer to comply with this Disclosure Certificate shall be an action to compel performance. Neither the Developer nor the Dissemination Agent shall have any liability to the owners of the 2020 Bonds or any other party for monetary damages or financial liability of any kind whatsoever relating to or arising from this Disclosure Certificate.

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Board Meeting Date: 06-23-2020 Page 140 of 150 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 Developer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each an “Indemnified Party”), harmless from and against any loss, expense, claims, suits, and liabilities which it may incur arising out of or in the reasonable exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to the Indemnified Party’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Fiscal Agent Agreement in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the School District, the Community Facilities District, the Developer, the Fiscal Agent, owners or Beneficial Owners of the 2020 Bonds, or any other party. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and the legal defeasance, prior redemption or payment in full of the 2020 Bonds.

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Board Meeting Date: 06-23-2020 Page 141 of 150 Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows:

If to the Community Facilities District No. 2016-1 of the Community Menifee Union School District Facilities District: 29775 Haun Road Menifee, California 92586 Attention: Assistant Superintendent, Business Telephone: (951) 872-1851 Telecopier: (951) 679-7237

If to the Zions Bancorporation, National Association Dissemination 550 South Hope Street, Suite 2875 Agent: Los Angeles, California 90071 Attention: Corporate Trust Services Telecopier: (213) 593-3150

If to the Stifel, Nicolaus & Company, Incorporated Participating 515 South Figueroa Street, Suite 1800 Underwriter Los Angeles, California 90071 Attention: Public Finance Telephone: (213) 443-5006 Telecopier: (213) 443-5023

If to the Developer: Beazer Homes 310 Commerce, Suite 150 Irvine, California 92602 Attention: Kim Molina Telephone: (714) 710-1900 Email: [email protected]

With a copy to: O'Neil LLP 19900 MacArthur Blvd., Suite 1050 Irvine, California 92612 Attention: John Yeager Telephone: (949) 798-0722 Telecopier: (949) 798-0711 Email: [email protected]

Any Person may, by written notice to the other Persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent.

Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Community Facilities District, the Developer, the Dissemination Agent, the Participating Underwriter and owners and Beneficial Owners from time to time of the 2020 Bonds, and shall create no rights in any other Person or entity. All obligations of the Developer hereunder shall be assumed by any legal successor to the obligations of the Developer as a result of a sale, merger, consolidation or other reorganization.

Section 15. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.

Section 16. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act.

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Board Meeting Date: 06-23-2020 Page 142 of 150 Date: [Closing Month] 1, 2020 BEAZER HOMES HOLDINGS, LLC A Delaware Limited Liability Company

By: ______Name: Title:

AGREED AND ACCEPTED:

ZIONS BANCORPORATION, NATIONAL ASSOCIATION, as Dissemination Agent

By: ______Mark D. Petrasso Senior Vice President Zions Bank Division

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Board Meeting Date: 06-23-2020 Page 143 of 150 EXHIBIT A

NOTICE OF FAILURE TO FILE SEMI-ANNUAL REPORT

Name of Issuer: Community Facilities District No. 2016-1 of the Menifee Union School District

Name of Bond Issue: Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds Date of Issuance: ______, 2020

NOTICE IS HEREBY GIVEN that(the “Major Owner”) has not provided a Semi-Annual Report with respect to the above-named bonds as required by the Developer Continuing Disclosure Certificate, dated [Closing Month] 1, 2020. The Major Owner anticipates that the Semi-Annual Report will be filed by ______.

Dated:

Zions Bancorporation, National Association, as Dissemination Agent cc: Beazer Homes O’Neil LLP

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Board Meeting Date: 06-23-2020 Page 144 of 150 EXHIBIT B

SEMI-ANNUAL REPORT

COMMUNITY FACILITIES DISTRICT NO. 2016-1 OF THE MENIFEE UNION SCHOOL DISTRICT IMPROVEMENT AREA B 2020 SPECIAL TAX BONDS

This Semi-Annual Report is hereby submitted under Section 4 of the Developer Continuing Disclosure Certificate (the “Disclosure Certificate”), dated as of [Closing Month] 1, 2020, executed by the undersigned (the “Developer”) in connection with the issuance of the above-captioned bonds by Community Facilities District No. 2016-1 of the Menifee Union School District (the “Community Facilities District”) for its Improvement Area B (the “Improvement Area”).

Capitalized terms used in this Semi-Annual Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.

I. Ownership and Development

The information in this section is provided as of ______(this date must be not more than 60 days before the date of this Semi-Annual Report).

A. Description of the Property currently owned by the Developer and its Relevant Entities in the Improvement Area (the “Property”), in substance and form similar to such information in the Official Statement for the 2020 Bonds.

B. Updated information regarding land development and home construction activities with regard to the Property described in the Official Statement for the 2020 Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

C. Status of building permits and any material changes to the description of land use or development entitlements with regard to the Property described in the Official Statement for the 2020 Bonds or the Semi-Annual Report last filed in accordance with the Disclosure Certificate:

______

______

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Board Meeting Date: 06-23-2020 Page 145 of 150 D. Status of any land purchase contracts with regard to the Property, whether acquisition of land in the Improvement Area by the Developer or sales of land to other developers (other than individual homeowners).

E. A statement as to whether or not the Developer and all of its Relevant Entities paid, prior to their becoming delinquent, all Special Taxes levied on the Property and if such Developer or any of such Relevant Entities is delinquent in the payment of such Special Taxes, a statement identifying each entity that is so delinquent, specifying the amount of each such delinquency and describing any plans to resolve such delinquency:

______

______

II. Legal and Financial Status of Developer

Unless such information has previously been included or incorporated by reference in a Semi- Annual Report, describe any material change in the legal structure of the Developer or the financial condition and Financing Plan of the Developer that would materially and adversely interfere with its ability to complete its Development Plan with regard to the Property described in the Official Statement.

III. Change in Development or Financing Plans

Unless such information has previously been included or incorporated by reference in a Semi- Annual Report, describe any Development Plans or Financing Plans relating to the Property that are materially different from the proposed development and Financing Plan described in the Official Statement.

______

______

IV. Official Statement Updates

Unless such information has previously been included or incorporated by reference in a Semi- Annual Report, describe any other significant changes in the information relating to the Developer or the Property contained in the Official Statement under the heading “PROPERTY OWNERSHIP AND DEVELOPMENT” that would materially and adversely interfere with the Developer’s ability to develop and sell the Property as described in the Official Statement.

______

______

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Board Meeting Date: 06-23-2020 Page 146 of 150 V. Other Material Information

In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.

______

______

VI. Certification

The undersigned Developer hereby certifies that this Semi-Annual Report constitutes the Semi- Annual Report required to be furnished by the Developer under the Disclosure Certificate.

ANY OTHER STATEMENTS REGARDING THE DEVELOPER, THE DEVELOPMENT OF THE PROPERTY, THE DEVELOPER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE 2020 BONDS, OTHER THAN STATEMENTS MADE BY THE DEVELOPER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE DEVELOPER. THE DEVELOPER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.

THE DEVELOPER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE

DATED: ______

BEAZER HOMES HOLDINGS, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

By: ______

Title:

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APPENDIX H FORM OF OPINION OF BOND COUNSEL

[Closing Date], 2020

Governing Board Menifee Union School District 29775 Haun Road Menifee, CA 92586

OPINION: $[Principal Amount] Community Facilities District No. 2016-1 of the Menifee Union School District Improvement Area B 2020 Special Tax Bonds

[s]

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APPENDIX I COMMUNITY FACILITIES DISTRICT BOUNDARY MAP

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