PRELIMINARY OFFICIAL STATEMENT DATED JANUARY __, 2012 NEW ISSUE – BOOK ENTRY ONLY NO RATING

In the opinion of Nossaman LLP, Irvine, California, Bond Counsel, based on existing statutes, regulations, rulings and court decisions and assuming, among other matters, compliance with certain covenants, interest on the Bonds is excludable from gross income for federal income tax purposes, and is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that it is included in adjusted current earnings in calculating corporate alternative minimum taxable income. In the further opinion of Bond Counsel, interest on the Bonds is, under existing law, exempt from State of California personal income taxes. Bond Counsel expresses no opinion regarding other federal or State tax consequences relating to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “TAX MATTERS” herein.

$6,340,000* CITY OF REDWOOD CITY COMMUNITY FACILITIES DISTRICT NO. 2000-1 (PACIFIC SHORES PROJECT) SPECIAL TAX REFUNDING BONDS, SERIES 2012

Dated: date of issuance Due: September 1, as shown on inside cover The City of Redwood City, California (the “City”), for and on behalf of the City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) (the “District”), is issuing the above-captioned bonds (the “Bonds”) to (i) refund in full and defease the City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) Special Tax Bonds, Series 2000A (the “Prior Bonds”), (ii) fund a reserve fund for the Bonds, and (iii) pay costs of issuing the Bonds and es may not be sold nor offers to buy accepted prior the time refunding the Prior Bonds. See “PLAN OF REFUNDING.” The Prior Bonds were issued by the City, for and on behalf of the District, to finance public improvements authorized to be funded by the District. The Bonds are being issued pursuant to a ffer to sell or a solicitation of an offer buy nor shall there be any sale these Fiscal Agent Agreement, dated as of January 1, 2012 (the “Fiscal Agent Agreement”), by and between the City, for and on behalf of the District, and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”).

on under the securities laws of such jurisdiction. The Bonds are payable from the proceeds of an annual Special Tax (as defined in the Fiscal Agent Agreement) being levied on certain property located within the District (see “THE DISTRICT”), and from certain funds pledged under the Fiscal Agent Agreement. The Special Tax is being levied according to a Rate and Method of Apportionment of Special Tax for the District. See “SECURITY FOR THE BONDS—Special Taxes” and Appendix B – “Rate and Method.” Interest on the Bonds is payable on March 1 and September 1 of each year, commencing on September 1, 2012. The Bonds will be issued in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form only. Purchasers of the Bonds will not receive physical certificates representing their ownership interests in the Bonds purchased. The Bonds will be issued in the principal amount of $5,000 and any integral multiple thereof. Principal of and interest on the Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Bonds. See “THE BONDS” and Appendix F – “DTC and the Book-Entry Only System.” The Bonds are subject to mandatory redemption prior to maturity from Special Tax Prepayments. See “THE BONDS— Redemption.” NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE OF CALIFORNIA OR OF ANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NEITHER GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE CITY FOR THE DISTRICT, PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. This cover page contains certain information for quick reference only. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the Bonds. The purchase of the Bonds involves significant risks, and the Bonds are not appropriate investments for all types of investors. See “SPECIAL RISK FACTORS” in this Official Statement for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. The Bonds are offered when, as and if issued, subject to approval as to their legality by Nossaman LLP, Irvine, California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the Bonds will be passed upon for the City by the City Attorney, and by Quint & Thimmig LLP, San Francisco, California, in its capacity as Disclosure Counsel to the City for the Bonds. Certain legal matters related to the Bonds will be passed upon for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California, acting as Underwriter’s Counsel. It is anticipated that the Bonds in definitive form will be available for delivery to DTC on or about January 31, 2012.

The date of this Official Statement is January __, 2012.

* This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securiti Official Statement is delivered in final form. Under no circumstances shall this Preliminary constitute an o securities in any jurisdiction which such offer, solicitation or sale would be unlawful prior to registration or qualificati Preliminary, subject to change.

18008.02:J11563

MATURITY SCHEDULE*

Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Price Number(1) 2012 2013 2014 2015 2016

(1) Copyright 2012, American Bankers Association. CUSIP data is provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. * Preliminary, subject to change.

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

The information contained in this Official Statement has been obtained from sources that are believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter as to the accuracy or completeness of any information in this Official Statement, including, without limitation, the information contained in the Appendices, and nothing contained in this Official Statement should be relied upon as a promise or representation by the Underwriter.

Neither the City nor the Underwriter has authorized any dealer, broker, salesperson or other person to give any information or make any representations with respect to the offer or sale of Bonds other than as contained in this Official Statement. If given or made, any such information or representations must not be relied upon as having been authorized by the City or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall under any circumstances create any implication that there has been no change in the affairs of any party described in this Official Statement, or in the status of any property described in this Official Statement, subsequent to the date as of which such information is presented.

This Official Statement and the information contained in this Official Statement are subject to amendment without notice. The Bonds may not be sold, and no offer to buy the Bonds may be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

When used in this Official Statement and in any continuing disclosure by the City, in any press release and in any oral statement made with the approval of an authorized officer of the City or any other entity described or referenced in this Official Statement, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized, and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

All summaries of the documents referred to in this Official Statement are qualified by the provisions of the respective documents summarized and do not purport to be complete statements of any or all of such provisions.

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 the completeness of such information.”

In connection with the offering of the Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.

The Bonds have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon an exemption from the registration requirements contained in the Securities Act. The Bonds have not been registered or qualified under the securities laws of any state.

The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement.

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CITY OF REDWOOD CITY

City Council

Alicia C. Aguirre, Mayor Jeffrey Gee, Vice Mayor Jeff Ira, Councilmember Ian Bain, Councilmember Rosanne Foust, Councilmember Barbara Pierce, Councilmember John D. Seybert, Councilmember

City Officials

Robert Bell, City Manager Brian Ponty, Director of Finance Pamela Thompson, Esq., City Attorney Silvia Vonderlinden, City Clerk

PROFESSIONAL SERVICES

Bond Counsel Nossaman LLP Irvine, California

Financial Advisor William Euphrat Municipal Finance, Inc. San Francisco, California

Fiscal Agent and Escrow Bank U.S. Bank National Association Los Angeles, California

District Administrator Willdan Financial Services Temecula, California

Disclosure Counsel Quint & Thimmig LLP San Francisco, California

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TABLE OF CONTENTS

Special Tax Levies and Delinquencies ...... 27 INTRODUCTION...... 1 Direct and Overlapping Governmental General ...... 1 Obligations...... 27 Authority for Issuance...... 1 Projected Debt Service Coverage ...... 28 The Bonds ...... 2 Security for the Bonds ...... 2 SPECIAL RISK FACTORS ...... 29 Reserve Fund ...... 3 Concentration of Property Ownership...... 29 The District ...... 3 Payment of the Special Tax is not a Personal Limited Obligation ...... 4 Obligation...... 29 No Parity Bonds ...... 4 No General Obligation of the City or the Bondowners’ Risks ...... 4 District ...... 29 Continuing Disclosure...... 4 Property Value...... 30 Other Information...... 4 Exempt Properties...... 30 Parity Taxes and Special Assessments ...... 31 PLAN OF REFUNDING ...... 5 Insufficiency of Special Taxes...... 31 Redemption of Prior Bonds ...... 5 Tax Delinquencies...... 31 Estimated Sources and Uses of Funds ...... 5 Bankruptcy Delays ...... 32 THE BONDS...... 6 Proceeds of Foreclosure Sales...... 32 Authority for Issuance...... 6 Natural Disasters...... 33 General Provisions ...... 6 Hazardous Substances...... 34 Redemption ...... 7 Disclosure to Future Purchasers ...... 34 Transfer or Exchange of Bonds ...... 8 FDIC/Federal Government Interests in Discontinuance of DTC Services ...... 8 Properties ...... 34 Scheduled Debt Service...... 9 No Acceleration Provision...... 36 Taxability and Audit Risk...... 36 SECURITY FOR THE BONDS ...... 9 Enforceability of Remedies...... 37 General ...... 9 No Secondary Market ...... 37 Limited Obligation ...... 9 Proposition 218...... 37 Special Taxes ...... 10 Ballot Initiatives...... 38 Special Tax Fund ...... 10 Summary of Rate and Method ...... 11 TAX MATTERS...... 39 County Teeter Plan...... 16 LEGAL MATTERS ...... 41 Reserve Fund ...... 17 Covenant for Superior Court Foreclosure ...... 18 FINANCIAL ADVISOR...... 41 Investment of Moneys ...... 19 No Parity Bonds ...... 19 NO RATING...... 41 THE DISTRICT...... 19 LITIGATION ...... 41 Location and Description of the District ...... 19 UNDERWRITING...... 41 History of the District ...... 19 Development in the District ...... 20 CONTINUING DISCLOSURE ...... 42 Land Ownership and Current Special Tax MISCELLANEOUS...... 42 Levy ...... 22 Value-to-Burden Ratio ...... 26

APPENDIX A CITY AND COUNTY GENERAL DEMOGRAPHIC INFORMATION APPENDIX B RATE AND METHOD APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT APPENDIX D FORM OF OPINION OF BOND COUNSEL APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX F DTC AND THE BOOK-ENTRY ONLY SYSTEM APPENDIX G DISTRICT BOUNDARY MAP

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OFFICIAL STATEMENT

$6,340,000* CITY OF REDWOOD CITY COMMUNITY FACILITIES DISTRICT NO. 2000-1 (PACIFIC SHORES PROJECT) SPECIAL TAX REFUNDING BONDS, SERIES 2012

INTRODUCTION

This introduction is not a summary of this Official Statement and is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement by those interested in purchasing the Bonds. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. Certain capitalized terms used in this Official Statement and not defined herein have the meaning set forth in Appendix C – “Summary of the Fiscal Agent Agreement—Definitions” and in Appendix B – “Rate and Method.”

General

The purpose of this Official Statement, which includes the cover page, the inside cover page, the table of contents and the attached appendices (the “Official Statement”), is to provide certain information concerning the issuance of the above-captioned bonds (the “Bonds”). The Bonds are being issued by the City of Redwood City, California (the “City”), for and on behalf of the City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) (the “District”), to (i) refund in full and defease the City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) Special Tax Bonds, Series 2000A (the “Prior Bonds”), (ii) fund a reserve fund for the Bonds, and (iii) pay costs of issuing the Bonds and the refunding of the Prior Bonds. See “PLAN OF REFUNDING.” The Prior Bonds were issued to finance public improvements authorized to be funded by the District (the “Improvements”). See “THE DISTRICT.”

Authority for Issuance

General. The District was formed under the authority of the Mello-Roos Community Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California Government Code (the “Act”), which was enacted by the California Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of the district. Subject to approval by at least a two-thirds vote of the votes cast by the qualified electors within a district and compliance with the provisions of the Act, the legislative body may issue bonds for the community facilities district established by it and may levy and collect a special tax within such district to repay such bonds.

Bond Authority. The Bonds are authorized to be issued pursuant to the Act, a resolution adopted on January 9, 2012 by the City Council of the City (the “City Council”) acting as the legislative body of the District, and the Fiscal Agent Agreement dated as of January 1, 2012 (the “Fiscal Agent Agreement”), between the City, for and on behalf of the

* Preliminary, subject to change.

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District, and U.S. Bank National Association, as fiscal agent (the “Fiscal Agent”). For more detailed information about the formation of the District and the authority for issuance of the Bonds, see “THE DISTRICT—Authority for Issuance.”

The Bonds

General. The Bonds will be issued only as fully registered bonds, in denominations of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The Bonds will be dated the date of their issuance and interest on the Bonds will be payable on March 1 and September 1 of each year (individually an “Interest Payment Date”), commencing September 1, 2012. See “THE BONDS.” The Bonds will be issued in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Bonds. See “THE BONDS—General Provisions.”

Redemption Prior to Maturity. The Bonds are not subject to optional redemption prior to maturity; however, the Bonds are subject to mandatory redemption prior to maturity from Special Tax prepayments and related transfers of funds from the Reserve Fund. See “THE BONDS—Redemption.”

Security for the Bonds

Pledge Under the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, the Bonds are secured by a pledge of all of the Special Tax Revenues (except for the Annual Administrative Expense Deposit) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, the Special Tax Fund. “Special Tax Revenues,” as defined in the Fiscal Agent Agreement, means the proceeds of the Special Taxes received by the City, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes. “Annual Administrative Expense Deposit,” as defined in the Fiscal Agent Agreement, means, in each Fiscal Year, an amount of Special Taxes initially equal to $25,000; increasing, commencing in Fiscal Year 2012/13 and in each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Annual Administrative Expense Deposit for the previous Fiscal Year. The Special Tax Revenues (except for the Annual Administrative Expense Deposit) and all moneys deposited into the Bond Fund, the Reserve Fund and the Special Tax Fund (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 in accordance with the Fiscal Agent Agreement until all of the Bonds have been paid or defeased. See “SECURITY FOR THE BONDS—Special Taxes” and Appendix B—“Rate and Method.”

The Annual Administrative Expense Deposit and amounts in the Administrative Expense Fund, the Surplus Fund and the Series 2012 Costs of Issuance Fund (referred to herein as the “Costs of Issuance Fund”), each of which is established under the Fiscal Agent Agreement, are not pledged to the repayment of the Bonds. Proceeds of the Bonds and other amounts deposited to the Escrow Fund established under the Escrow Instructions (which will be used to pay the redemption price of the Prior Bonds) are not pledged to, and are not available for, the repayment of the Bonds. See “PLAN OF REFUNDING—Redemption of Prior Bonds.”

Special Taxes; Rate and Method. The Special Taxes to be used to pay debt service on the Bonds will be levied in accordance with the Rate and Method (as described under the heading “THE BONDS—Authority for Issuance”). “Special Taxes” are those taxes levied on

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the Taxable Parcels (as defined under the heading “INTRODUCTION—The District” below) within the District pursuant to the Rate and Method and the Fiscal Agent Agreement.

Limitations. The Improvements are not pledged to pay the debt service on the Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the debt service on the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the Bonds are amounts held by the Fiscal Agent in the Bond Fund, the Special Tax Fund and the Reserve Fund established under the Fiscal Agent Agreement, and the proceeds, if any, from foreclosure sales of the specific Taxable Parcels with delinquent Special Taxes.

Reserve Fund

The Fiscal Agent Agreement establishes a Reserve Fund as a reserve for the payment of principal of and interest on the Bonds. The Reserve Fund is required to be funded in an amount equal to the lesser of (i) Maximum Annual Debt Service on the Outstanding Bonds, (ii) 125% of average Annual Debt Service for any Bond Year, or (iii) 10% of the original aggregate principal amount of the Bonds (the “Reserve Requirement”). The Reserve Fund will be available to pay the debt service on the Bonds in the event of a shortfall in the amount in the Bond Fund for such purpose, and amounts in the Reserve Fund may also be withdrawn to pay any rebate liability due to the federal government, to pay a portion of the redemption price of Bonds to be redeemed with Special Tax Prepayments, and to transfer to the Bond Fund of amounts therein in excess of the then Reserve Requirement. The Reserve Requirement as of the date of issuance of the Bonds will be $634,000*. See “ SECURITY FOR THE BONDS—Reserve Fund.”

The District

The District was formed by the City Council pursuant to proceedings conducted under the Act on April 24, 2000. The District includes 11 separate San Mateo County Assessor’s parcels subject to the levy of Special Taxes (collectively, the “Taxable Parcels”) located within the Pacific Shores Center, a 106-acre waterfront corporate campus located in the City. The 11 buildings located on the Taxable Parcels have approximately 1,588,000 commercial square feet, and the Pacific Shores Center includes a 50-acre public access park, a full-featured fitness center, a cafe and other on-site amenities. See “THE DISTRICT—Development in the District.”

The land and improvements comprising the Taxable Parcels were valued by the San Mateo County Assessor for ad valorem property tax purposes on the Fiscal Year 2011-12 property tax roll at an aggregate value of $597,536,244. Based on the County’s Fiscal Year 2011-12 property valuation, all but one of the 11 Taxable Parcels in the District have assessed value to estimated share of Bond principal ratios in excess of 89:1, with one Taxable Parcel having an assessed value to estimated share of Bond principal ratio in excess of 62:1. See “THE DISTRICT—Value-to-Burden Ratios.”

The value of individual parcels vary significantly. In addition, County assessed values may not reflect current market values. No recent independent appraisal of the Taxable Parcels has been conducted in connection with the Bonds, and no assurance can be given that should Special Taxes levied on one or more of the Taxable Parcels become delinquent, and should the delinquent Taxable Parcels be offered for sale at a judicial foreclosure sale, that any bid would be received for the property or, if a bid is received, that such bid would be sufficient to pay such parcel’s delinquent Special Taxes. For the current and historical County Assessor’s valuation of each of the Taxable Parcels in the District, see “THE DISTRICT—Land Ownership

* Preliminary, subject to change.

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and Current Special Tax Levy.” See also “SPECIAL RISK FACTORS—Property Value” and “SPECIAL RISK FACTORS—Insufficiency of Special Taxes.”

Limited Obligation

NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE OF CALIFORNIA OR OF ANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NEITHER GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE CITY FOR THE DISTRICT PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT.

No Parity Bonds

The City has agreed in the Fiscal Agent Agreement not to issue any additional obligations payable from the Special Taxes on a parity with the Bonds. See “SECURITY FOR THE BONDS—No Parity Bonds.”

Bondowners’ Risks

Certain events could affect the ability of the City to pay the principal of and interest on the Bonds when due. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. See “SPECIAL RISK FACTORS” for a discussion of certain factors that should be considered in evaluating an investment in the Bonds. The purchase of the Bonds involves significant risks, and the Bonds are not appropriate investments for all types of investors.

Continuing Disclosure

For purposes of complying with Rule 15c2-12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended (the “Rule”), the City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (the “MSRB”) certain annual financial information and operating data and notice of certain significant events. These covenants have been made in order to assist the Underwriter in complying with the Rule. See “CONTINUING DISCLOSURE” and Appendix E for a description of the specific nature of the annual reports and notices of significant events, as well as the terms of the Continuing Disclosure Agreement pursuant to which such reports and notices are to be made.

Other Information

This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change without notice. Except where otherwise indicated, all information contained in this Official Statement has been provided by the City on behalf of the District.

Copies of the Fiscal Agent Agreement and certain other documents referenced in this Official Statement are available for inspection at the office of, and (upon written request and payment to the City of a charge for copying, mailing and handling) are available for delivery from, the City’s Director of Finance, 1017 Middlefield Road, Redwood City, California 94603.

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PLAN OF REFUNDING

Redemption of Prior Bonds

The net proceeds of the sale of the Bonds, together with certain other funds held under the Fiscal Agent Agreement, dated as of August 1, 2000, pursuant to which the Prior Bonds were issued (the “Prior Fiscal Agent Agreement”), will be deposited in an escrow account (the “Escrow Fund”) held by U.S. Bank National Association, in its capacity as escrow bank (the “Escrow Bank”) and as the Prior Fiscal Agent, pursuant to Escrow Instructions from the City, dated for reference purposes as of January 1, 2012, and will be applied to legally defease all of the outstanding Prior Bonds on the date of delivery of the Bonds.

Amounts in the Escrow Fund will be sufficient, without reinvestment, to redeem the Prior Bonds on March 1, 2012, at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest to the redemption date, without premium. Upon the deposit of funds with the Escrow Bank in the Escrow Fund and in accordance with the Escrow Instructions, the Prior Bonds will be legally defeased and will no longer be entitled to the benefits of, or be secured by, the Prior Fiscal Agent Agreement or any pledge of, or lien on, the Special Taxes levied in the District.

Amounts deposited in the Escrow Fund are not in any way pledged to the payment of, or available to pay, the debt service on the Bonds.

Estimated Sources and Uses of Funds

The sources and uses of funds in connection with the Bonds are expected to be as follows:

Principal of Bonds $ Amounts relating to the Prior Bonds Less: Original Issue Discount Less: Underwriter’s Discount

Total Sources $

Deposit to Escrow Fund(1) $ Deposit to Reserve Fund(2) Deposit to Costs of Issuance Fund(3)

Total Uses $

(1) See “PLAN OF REFUNDING—Redemption of Prior Bonds.” (2) Equal to the initial Reserve Requirement. See “SECURITY FOR THE BONDS—Reserve Fund.” (3) Costs of issuance include, without limitation, Fiscal Agent fees and expenses, Financial Advisor fees and expenses, fees and expenses of Bond Counsel and Disclosure Counsel and other legal fees and expenses, Escrow Bank fees and expenses, and printing costs.

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THE BONDS

Authority for Issuance

Pursuant to the Act, on April 24, 2000, the City Council adopted Resolution No. 13889 establishing the District (“Resolution of Formation”). At that time, the then sole owner of all of the land in the District and the sole qualified elector for the District authorized the issuance of bonded indebtedness to finance the Improvements, and approved the rate and method of apportionment of Special Tax (the “Rate and Method”), a copy of which is attached to this Official Statement as Appendix B. See “THE DISTRICT—History of the District.”

The Bonds are authorized to be issued pursuant to the Act, a resolution adopted on January 9, 2012, by the City Council, acting as the legislative body of the District, and the Fiscal Agent Agreement. The Special Taxes to be used to pay debt service on the Bonds will be levied in accordance with the Rate and Method.

General Provisions

The Bonds will be issued only as fully registered Bonds, in the denomination of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page of this Official Statement. The Bonds will be dated the date of their issuance and interest will be payable on each Interest Payment Date, commencing September 1, 2012.

Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof by the Fiscal Agent, unless (a) it is authenticated on an Interest Payment Date, in which event it will bear interest from such Interest Payment Date; (b) the date of authentication is after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (c) it is authenticated on or before August 15, 2012, in which case it will bear interest from the Closing Date; provided, however, that if, as of the date of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest with respect to each Bond will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The Bonds will be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. Subject to the book-entry only provisions of the Fiscal Agent Agreement, interest on the Bonds is payable on the Interest Payment Dates by check mailed via first class mail on the Interest Payment Date by the Fiscal Agent to the respective Owners thereof as of the preceding Record Date at their addresses as they appear in the registration books of the Fiscal Agent or, upon the written request from any Owner of Bonds aggregating at least $1,000,000 in principal amount received on or prior to the fifteenth day of the month preceding an applicable Interest Payment Date, by wire in Federal Reserve funds to an account within the United States, on the Interest Payment Date with regard to which such payment is made. The principal of the Bonds and any premium due upon the redemption thereof will be payable upon presentation and surrender of the Bonds at the Principal Office of the Fiscal Agent.

The Bonds will be issued in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form only. Purchasers of the Bonds will not receive physical certificates representing their ownership interests in the Bonds purchased. Principal and interest payments represented by the Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC

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will in turn distribute such payments to the beneficial owners of the Bonds. See Appendix F— “DTC and the Book-Entry Only System.” So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references in this Official Statement to the owners shall mean Cede & Co., and shall not mean the purchasers or beneficial owners of the Bonds.

Redemption

No Optional Redemption. The Bonds are not subject to optional redemption prior to their stated maturities.

Mandatory Redemption From Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity on any Interest Payment Date, from the proceeds of Special Tax Prepayments and corresponding transfers of funds from the Reserve Fund (as described below under “SECURITY FOR THE BONDS—Reserve Fund”), as a whole or in part, in inverse order of maturity and by lot within a maturity, at a redemption price equal to 102%* of the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption. There have been no Special Tax Prepayments since the District was formed in 2000; however, no assurance can be given that Special Tax Prepayments will not occur in the future.

Purchase of Bonds In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase prior to the selection of Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase, plus the related premium otherwise payable at redemption.

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 Securities Depositories and to one or more Information Services, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; but such mailing is not a condition precedent to 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 Bonds. The redemption notice will state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, will designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or will state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, will state as to any Bond called in part the principal amount thereof to be redeemed, and will require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such Bonds will not accrue after the redemption date.

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 Bonds so called for redemption have been deposited in the Bond Fund, such Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive

* Preliminary, subject to change.

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payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice.

Tender of Bonds in Payment of Special Taxes. The City has covenanted in the Fiscal Agent Agreement not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Consultant that to accept such tender will not result in the City having insufficient Special tax Revenues to pay the principal or and interest on the Bonds that will remain Outstanding following such tender.

Transfer or Exchange of Bonds

So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of Bonds shall be made in accordance with DTC procedures. See Appendix F – “DTC and the Book-Entry Only System.” If the book-entry only system for the Bonds is ever discontinued, any Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender to the Fiscal Agent of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. Whenever any Bond or Bonds are surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new Bond or Bonds, for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity. 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 or exchange.

No transfers or exchanges of Bonds will be required to be made (i) within 15 days prior to the date established by the Fiscal Agent as the date for selecting Bonds for redemption, or (ii) with respect to any Bond after such Bond has been selected for redemption.

Discontinuance of DTC Services

DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Fiscal Agent during any time that the Bonds are Outstanding, and discharging its responsibilities with respect to the Bonds under applicable law. The City may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book-entry transfers through DTC is not in the best interest of the beneficial owners of the Bonds. The City will mail any such notice of termination to the Fiscal Agent.

Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions can be found which is willing and able to undertake such functions upon reasonable or customary terms, or if the City determines that it is in the best interest of the beneficial owners of the Bonds that they obtain certificated Bonds, the Bonds will no longer be restricted to being registered in the registration books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or name the Owners designate at that time, in accordance with the Fiscal Agent Agreement.

In the event the City determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain Bonds, the City may notify the Depository System Participants of the availability of such Bond through the Depository. In such event, the Fiscal Agent will, at the expense of the City, authenticate, transfer and exchange Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository so requests, the City shall cooperate with the Depository in taking appropriate action (i) to make

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available one or more separate Bonds evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or (ii) to arrange for another qualified securities depository to maintain custody of a single Bond evidencing such Bonds, all at the City’s expense.

Scheduled Debt Service

The following is the debt service schedule for the Bonds, assuming no redemption of Bonds with proceeds of Special Tax Prepayments:

Period Ending September 1 Principal Interest Total Debt Service 2012 2013 2014 2015 2016 Totals

SECURITY FOR THE BONDS

General

Pursuant to the Fiscal Agent Agreement, the Bonds are secured by a pledge of, and first lien on, all of the Special Tax Revenues (except for the Annual Administrative Expense Deposit) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, the Special Tax Fund. The Special Tax Revenues (except for the Annual Administrative Expense Deposit) and all moneys deposited into said 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 in accordance with the Fiscal Agent Agreement until all of the Bonds have been paid or defeased. “Special Tax Revenues,” as defined in the Fiscal Agent Agreement, means the proceeds of the Special Taxes received by the City, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes. “Annual Administrative Expense Deposit,” as defined in the Fiscal Agent Agreement, means, in each Fiscal Year, an amount of Special Taxes initially equal to $25,000; increasing, commencing in Fiscal Year 2012/13 and in each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Annual Administrative Expense Deposit for the previous Fiscal Year.

Limited Obligation

The Bonds are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues (except for the Annual Administrative Expense Deposit) and the amounts in the Bond Fund, the Reserve Fund and the Special Tax Fund created pursuant to the Fiscal Agent Agreement.

The Annual Administrative Expense Deposit and amounts in the Administrative Expense Fund, the Surplus Fund and the Costs of Issuance Fund are not pledged to the repayment of the Bonds. The Improvements are not pledged to pay the Debt Service on the Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the Debt Service on the Bonds.

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In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund, the Special Tax Fund and the Reserve Fund, and the proceeds, if any, from foreclosure sales of Taxable Parcels with delinquent Special Tax levies.

Special Taxes

In accordance with the provisions of the Act, the Rate and Method was approved in 2000 by the then qualified elector and sole owner of land in the District and is set forth in its entirety in Appendix B. Under the Fiscal Agent Agreement, the City is obligated to fix and levy the amount of Special Taxes within the District required for the timely payment of principal of and interest on the outstanding Bonds becoming due and payable, including any necessary replenishment of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative Expenses during the applicable year, all in accordance with the Rate and Method and the Ordinance. The Special Taxes levied on any Taxable Parcel may not exceed the maximum allowed under the Rate and Method. See “SECURITY FOR THE BONDS— Summary of Rate and Method” and Appendix B—Rate and Method.”

The Special Taxes are payable and are collected in the same manner, at the same time and in the same installment as the County ad valorem taxes on property levied on the secured tax roll are payable, and pursuant to the Act have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the taxes levied on the tax roll; provided, however, that the Special Taxes may be collected in such other manner as the City shall prescribe if necessary to pay the debt service on the Bonds

Although the Special Taxes will constitute a lien on Taxable Parcels within the District, they do not constitute a personal indebtedness of the owners of the Taxable Parcels. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on a Taxable Parcel, the City may order the institution of a superior court action to foreclose the lien on the Taxable Parcel within specified time limits. In such an action, the Taxable Parcel, along with a parcel with related Parking Units (see “SECURITY FOR THE BONDS— Summary of Rate and Method – Undivided Levy”), may be sold at judicial foreclosure sale. The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem property taxes. See “—Summary of Rate and Method,” “—Covenant for Superior Court Foreclosure” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.”

Other liens for taxes and assessments may already exist on the property located within the District and others could come into existence in the future. See “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” There is no assurance that any owner of a Taxable Parcel will be financially able to pay the annual Special Taxes or that it will pay such taxes even if financially able to do so. See “SPECIAL RISK FACTORS.”

For historical information regarding the payment of, or delinquencies with respect to, Special Taxes in the District, see “THE DISTRICT—Special Tax Levies and Delinquencies.”

Special Tax Fund

Deposit of Special Tax Revenues. The City is obligated by the Fiscal Agent Agreement to deposit in the Special Tax Fund held by the City, immediately upon receipt by the City, all Special Tax Revenue received by the City (except for amounts necessary to pay the Annual Administrative Expense Deposit, which will be deposited to the Administrative Expense

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Fund). The City will also deposit into the Special Tax Fund certain amounts transferred from the Costs of Issuance Fund and the Surplus Fund pursuant to the Fiscal Agent Agreement. Notwithstanding the foregoing, (i) in each Fiscal Year, from the first remittance of Special Taxes received from the County, the City will transfer an amount equal to that year’s Annual Administrative Expense Deposit to the Administrative Expense Fund, and (ii) any proceeds of Special Tax Prepayments shall be transferred by the Director of Finance to the Fiscal Agent for deposit by the Fiscal Agent in the Series 2012 Prepayments Account established pursuant to the Fiscal Agent Agreement. “Annual Administrative Expense Deposit,” as defined in the Fiscal Agent Agreement, means, in each Fiscal Year, an amount of Special Taxes initially equal to $25,000; increasing, commencing in Fiscal Year 2012/13 and in each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Annual Administrative Expense Deposit for the previous Fiscal Year. Moneys in the Special Tax Fund will be held in trust by the City for the benefit of the Owners of the Bonds, will be disbursed as described below and, pending such disbursement, will be subject to a lien in favor of the Owners of the Bonds.

Disbursements. No later than ten (10) Business Days prior to each Interest Payment Date, the City shall withdraw from the Special Tax Fund and transfer, in the following order of priority: (i) to the Fiscal Agent for deposit in the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund such that the amount in the Bond Fund equals the principal, premium, if any, and interest due on the Bonds on the next Interest Payment Date, and (ii) to the Reserve Fund an amount such that the amount then on deposit therein is equal to the Reserve Requirement.

Any remaining Special Taxes and other amounts, if any, shall remain in the Special Tax Fund until the end of the Bond Year. At the end of the Bond Year any remaining funds in the Special Tax Fund which are not required to cure a delinquency in the payment of principal and interest on then-outstanding Bonds, or to restore the Reserve Fund to the amount of the Reserve Requirement, shall, without further action by any party, be deposited in the Surplus Fund and used in accordance with the Fiscal Agent Agreement and shall be free and clear of any lien thereon or pledge under the Fiscal Agent Agreement; provided, any funds which are required to cure any delinquency described above shall be retained in the Special Tax Fund and expended or transferred, at the earliest possible date, for such purpose.

Summary of Rate and Method

Special Tax Formula - Calculation of Annual Special Tax. The Rate and Method is used to allocate the amount of the Special Tax that is needed to be collected each fiscal year among the Taxable Parcels within the District, based upon their respective Commercial Square Footage, subject to a maximum tax rate. The Rate and Method is set forth in full in Appendix B; the following is a summary of the Special Tax formula.

Definitions. The following capitalized terms used in this summary of certain provisions of the Rate and Method have the following meanings:

“Accessory Parcel” means the lots numbered 11 through 16 as shown on Exhibit B-1 to the Development Agreement, or as they may be modified from time to time, and any other parcel (other than a Common Parcel) used exclusively for purposes accessory to commercial/office development, including but not limited to fitness, multi-media, day care/education, marina resources, aquatic, conference, restaurant/café, retreat, grounds and building maintenance, or public rest rooms.

“Annual Costs” means, for each Fiscal Year, the total of 1) an amount sufficient to pay Debt Service, 2) Administrative Expenses, and 3) any amounts needed to

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replenish bond reserve funds and to make up for any deficit caused by actual or estimated delinquencies in Special Taxes for the previous or current Fiscal Year.

“Annual Tax Revenues” means the amount of Special Taxes collected each Fiscal Year to pay the Annual Costs.

“Building Parcel” means, initially, the numbered lots 1 through 10 and the lettered lots 1P through 6P and 10P as shown on Exhibit B-l to the Development Agreement, and subsequently, any parcels into which such initial Building Parcels may be subdivided that are assigned Commercial Square Feet or Parking Units pursuant to Section 3 of the Rate and Method.

“Classification Date” means for Fiscal Year 2000-01, May 1, 2000, and for each Fiscal Year thereafter, each June 1 of the prior Fiscal Year.

“Commercial Square Feet” or “Commercial Square Foot” means the commercial square feet allocated to a Building Parcel pursuant to the schedule set forth in the Rate and Method, as such schedule may be modified by the City Manager pursuant to Section 3 of the Rate and Method.

“Common Parcel” means those parcels designated as lettered lots A through I on Exhibit B-1 to the Development Agreement, as they may be modified from time to time, including roads and parcels used to provide open space and recreational uses, along with complementary facilities, including but not limited to parks, playfields, berms, trails and paths.

“Debt Service” means the total amount that must be collected in any Fiscal Year in order to make timely payments of principal and interest on outstanding bonds of the District.

“Development Agreement” means that certain development agreement by and between the City and Pacific Shores Center Limited Partnership dated October 26, 1998 recorded August 6, 1999 as instrument #1999-134701 in the official records of the County, as it may be amended from time to time.

“Maximum Annual Special Tax Rate” means the maximum amount of Special Taxes per Commercial Square Foot that may be levied against a Taxable Parcel. For each Taxable Parcel, the Maximum Annual Special Tax Rate is $1.63.

“Net Taxable Square Feet” means the total amount of Commercial Square Feet subject to the levy of Special Taxes in any given Fiscal Year.

“Parking Unit” means the number of parking spaces assigned to a Building Parcel to serve Commercial Square Feet on a different Building Parcel pursuant to the Development Agreement, or a Final Development Plan when applicable.

“Parcel” means any Parcel within the boundaries of the District that is identified by an Assessor’s parcel number on the secured tax rolls of the County as of the January 1 lien date (or such other lien date as may be established by the Assessor) of the prior Fiscal Year.

“Prepaid Parcel” means any Parcel that has prepaid in full pursuant to the Rate and Method to be levied against such Parcel in satisfaction of its pro rata share of Annual Costs.

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“Principal Prepayment Amount” means the amount of unpaid outstanding bond principal and authorized but unissued bond principal of the District allocable to each Taxable Parcel as of the date of such calculation.

“Public Parcel” means any Parcel that is, or pursuant to a Final Development Plan, is designated to be, publicly owned and which is normally exempt from ad valorem taxes under California law, including public streets, schools, school district administrative offices, police and fire facilities, parks, and public drainage ways, rights-of-way, landscaping, greenbelts and open space.

“Residential Parcel” means any Parcel approved by the City for single or multi- family residential use which does not contain any Commercial Square Feet.

“Taxable Parcel” means any Building Parcel approved for Commercial Square Feet or Parking Units which is not a Prepaid Parcel.

“Tax-Exempt Parcel” means any Parcel that is a Prepaid Parcel, Public Parcel, Accessory Parcel, Common Parcel or Residential Parcel.

Tax Categories and Maximum Special Tax Rate. Parcels shall be classified as of their status applicable in the next Fiscal Year on each Classification Date. The secured property tax roll, land use codes and plot map books maintained by the County Assessor of the County, in combination with official records maintained by the City regarding the Development Agreement, Final Development Plans, recorded final maps, building permits issued, and other changes in parcel development status, will be the basis for classifying the Parcels in the District. Building Parcels shall be classified as either Taxable Parcels or, if the Special Taxes for such Parcels have been prepaid, Prepaid Parcels. Residential Parcels, Common Parcels, Accessory Parcels and Public Parcels shall be classified as Tax-Exempt Parcels. The Special Tax shall be levied only on Taxable Parcels.

Once a Parcel is classified as a Taxable Parcel it may not be removed from such classification unless Special Taxes allocable to such Parcel have been prepaid pursuant to Section 7 of the Rate and Method, in which case such Parcel shall be reclassified as a Prepaid Parcel. So long as any bonds of the District remain outstanding or authorized but unissued, save the exceptions for reallocation and subdivisions as expressly noted in Section 3 of the Rate and Method, Commercial Square Feet allocable to a Taxable Parcel may not be reduced.

A Special Tax rate per Commercial Square Foot shall be established annually by the City Council. The Special Tax rate shall then be multiplied by the Commercial Square Feet allocable to each Taxable Parcel to determine the Special Tax applicable to each such Taxable Parcel. For each Taxable Parcel, the Maximum Annual Special Tax Rate is $1.63 per Commercial Square Foot.

Apportionment and Levy. Prior to July 1 of each Fiscal Year for which Annual Costs are payable, the Special Tax rate allocable to each Taxable Parcel in the District shall be established as follows:

Step 1 The total Annual Costs for such Fiscal Year shall be projected.

Step 2 The sum of unexpended fund balances (including amounts collected in the prior Fiscal Year to be applied to Debt Service in such Fiscal Year) held under the Fiscal Agent Agreement that is available to pay Debt Service in such Fiscal Year shall be determined.

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Step 3 The amount of Debt Service due in such Fiscal Year payable from Annual Tax Revenues collected in the prior Fiscal Year shall be determined.

Step 4 The amounts calculated in Steps 1 and 3 above shall be added together and the amount determined in Step 2 above shall be subtracted from such sum to arrive at the Annual Tax Revenues to be collected in such Fiscal Year.

Step 5 The Maximum Annual Special Tax Rate shall be multiplied by the Commercial Square Feet corresponding to each Taxable Parcel.

Step 6 If the total of the amounts calculated in Step 5 is greater than the Annual Costs, the Special Tax rate shall be decreased until the Special Tax rate on all Taxable Parcels produces scheduled Annual Tax Revenue equal to the projected Annual Costs. If the total of the amounts calculated in Step 5 is less than Annual Costs, the Special Tax rate applicable to Taxable Parcels shall be established at the Maximum Annual Special Tax Rate.

Step 7 An annual Special Tax shall be determined for each Taxable Parcel by multiplying the Special Tax rate identified in Step 6 above times the number of Commercial Square Feet applicable to each such Taxable Parcel.

After each Parcel in the District has been annually classified, the annual Special Tax and Principal Prepayment Amount for each Taxable Parcel has been calculated, and a Special Tax Report for such Fiscal Year has been approved by resolution of the City Council in July of each Fiscal Year, the City Manager shall forward a Tax Collection Schedule showing the annual Special Tax liability for each Taxable Parcel with Commercial Square Feet thereon to the County Auditor, requesting that the Tax Collection Schedule be placed on the secured property tax roll for the applicable Fiscal Year. The Tax Collection Schedule shall be sent not later than August 10 or such prior date required by the County Auditor for such placement. Notwithstanding the foregoing, (i) if for any reason the Special Tax levy on a Taxable Parcel with Commercial Square Feet thereon will not be included on the County secured tax roll, the District may levy the Special Taxes for such Fiscal Year by means of a direct billing of the owners of the Taxable Parcels, and (ii) Section 6 of the Rate and Method contains certain alternative provisions for Taxable Parcels with only Parking Units assigned thereto. Failure of the District to directly invoice the owner of a Taxable Parcel subject to the levy of Special Taxes shall in no way affect the validity of such Special Tax levy.

Undivided Levy. The Special Tax levied on each Taxable Parcel allocated Commercial Square Feet shall include an undivided levy on any other Parcel or Parcels to which applicable Parking Units have been assigned by the City pursuant to the table in Section 8 of the Rate and Method or a Final Development Plan, as applicable, subject to any future subdivision or merger and the reallocation of Commercial Square Feet and Parking Units pursuant to Section 3 of the Rate and Method. For the purposes of collecting such Special Taxes, the City shall levy the entire tax on the Parcel to which Commercial Square Feet are assigned and on the Parcel or Parcels to which related Parking Units have been assigned. Special Taxes due on Taxable Parcels with Commercial Square Feet thereon shall be placed on the secured tax roll. The associated undivided Special Tax levy on the Parcel or Parcels to which applicable Parking Units have been assigned shall be billed directly to the owner thereof as provided for in Section 6 of the Rate and Method. If Special Taxes subject to an undivided levy which have been placed on the secured tax roll are paid in a timely manner, the associated undivided Special Tax levy billed directly to the owner of a Taxable Parcel shall, with no further action required by the owner or the District, be deemed paid.

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In the event Special Taxes become delinquent on a Taxable Parcel subject to an undivided levy, such Special Taxes shall be deemed delinquent on both the Parcel against which such delinquent Special Taxes are shown on the secured property tax roll, as well as on the Parcel or Parcels to which applicable Parking Units have been assigned by the City, the Special Taxes on which have been billed directly by the District, and the District shall pursue such foreclosure remedies as are available to it under the Fiscal Agent Agreement and the Act against both such Parcels.

Prepayment Special Taxes. The owner of any Taxable Parcel may prepay the Special Taxes to be levied against such Parcel through the term to maturity of the Bonds and authorized but unissued District bonds. Special Taxes may not be prepaid in part. Optional prepayment amounts for each Taxable Parcel shall be determined annually for each Fiscal Year at the same time annual Special Taxes are determined as follows.

Step 1 The total amount of unpaid Bond principal outstanding at the beginning of each Fiscal Year plus authorized and unissued District bond principal shall be determined, from which amount shall be subtracted any principal coming due in such Fiscal Year, the payment of which was provided for in the collection of the prior Fiscal Year’s Annual Tax Revenues.

Step 2 The result determined in Step 1 above shall be divided by the Net Taxable Square Feet for such Fiscal Year to arrive at the unpaid outstanding and authorized District bond principal per Commercial Square Foot for such Fiscal Year.

Step 3 For each Taxable Parcel, the unpaid outstanding and authorized District bond principal per Commercial Square Foot for such Fiscal Year as determined in Step 2 above shall be multiplied by the total number of Commercial Square Feet allocable to such Taxable Parcel to arrive at the Principal Prepayment Amount allocable to each such Taxable Parcel.

In each Fiscal Year, the owner of a Building Parcel may prepay the future Special Tax obligations of such Parcel by paying in cash the sum of i) the amount of any delinquent and unpaid installments of Special Taxes levied against such Parcel, together with any penalties, interest and costs due thereon, ii) the Special Taxes levied against such Parcel in such Fiscal Year, iii) the Principal Prepayment Amount allocable to such Taxable Parcel in such Fiscal Year, rounded up to the nearest integral multiple of $5,000, iv) a prepayment premium in an amount equal to the prepayment premium required under the Fiscal Agent Agreement to be paid on the outstanding Bonds to be called on the next permissible call date times the ratio that such Parcel’s number of Commercial Square Feet bears to the Net Taxable Square Feet in such Fiscal Year times the unpaid Bond principal outstanding at the beginning of such Fiscal Year, v) a reasonable fee, fixed by the City Manager, for the cost of administering the prepayment and the advance redemption of bonds, less vi) a credit for such Taxable Parcel’s pro rata share of the Reserve Fund balance (if any), and less vii) any credit due the owner of such Parcel as provided for in Section 10 of the Rate and Method in respect of certain administrative charges related to prior Special Tax levies.

Exemptions. Pursuant to Section 53340 of the Act, the Rate and Method exempts Public Parcels from the levy of the Special Tax; except that the Special Tax on a Taxable Parcel that is acquired by a public entity will remain subject to the Special Tax pursuant to the Rate

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and Method and Sections 53317.3 and 53317.5 of the Act.(1) Prepaid Parcels, for which the respective owner has prepaid and satisfied the Special Tax, are also exempt from further Special Taxes. See “SPECIAL RISK FACTORS —Exempt Properties.”

Termination. When all of the District’s Administrative Expenses and Debt Service obligations are satisfied and no bonds authorized for issuance by the District remain either unissued or outstanding, the City Council is required to determine that the Special Tax shall cease to be levied. Notwithstanding the foregoing, in no event shall the Special Tax be levied after the Fiscal Year ending June 30, 2022.

County Teeter Plan

The County of San Mateo and the other political subdivisions within its boundaries operate under the provisions of Sections 4701 through 4717, inclusive, of the Revenue and Taxation Code of the State of California, commonly referred to as the “Teeter Plan,” with respect to property tax collection and disbursement procedures. These sections provide an alternative method of apportioning secured taxes whereby agencies levying taxes through the County roll may receive from the County 100% of their taxes at the time they are levied. The County treasury’s cash position (from taxes) is insured by a special tax loss reserve fund accumulated from delinquent penalties.

The Board of Supervisors of the County may discontinue the procedures under the Teeter Plan altogether, or with respect to any tax or assessment levying agency in the County, if the rate of secured tax and assessment delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured rolls for that agency.

The Special Taxes have been and are expected to continue to be collected pursuant to the procedures described above. Thus, so long as the County maintains its policy of collecting taxes pursuant to said procedures and the City meets the Teeter Plan requirements, the City will receive 100% of the annual Special Taxes levied without regard to actual collections; however, there is no assurance that the County Board of Supervisors will maintain its policy of apportioning taxes pursuant to the aforementioned procedures.

(1) Section 53317.3 and 53317.5 of the Act read as follows:

53317.3. If property not otherwise exempt from a special tax levied pursuant to [the Act] is acquired by a public entity through a negotiated transaction, or by gift or devise, the special tax shall … continue to be levied on the property acquired and shall be enforceable against the public entity that acquired the property. However, even if the resolution of formation that authorized creation of the district did not specify conditions under which the obligation to pay a special tax may be prepaid and permanently satisfied, the legislative body of the local agency that created the district may specify conditions under which the public agency that acquires the property may prepay and satisfy the obligation to pay the tax. The conditions may be specified only if the local agency that created the district finds and determines that the prepayment arrangement will fully protect the interests of the owners of the district’s bonds.

53317.5. If property subject to a special tax levied pursuant to this chapter is acquired by a public entity through eminent domain proceedings, the obligation to pay the special tax shall be treated, pursuant to Section 1265.250 of the Code of Civil Procedure, as if it were a special annual assessment. For this purpose, the present value of the obligation to pay a special tax to pay the principal and interest on any indebtedness incurred by the district prior to the date of apportionment determined pursuant to Section 5082 of the Revenue and Taxation Code shall be treated the same as a fixed lien special assessment.

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Reserve Fund

The Fiscal Agent Agreement establishes a debt service reserve fund (the “Reserve Fund”) as a separate fund to be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, as a reserve for the payment of principal of, and interest and any premium on, the Bonds and moneys in the Reserve Fund are subject to a lien in favor of the Owners of the Bonds. The Reserve Fund is required by the Fiscal Agent Agreement to be funded in an amount equal to the Reserve Requirement which amount is, as of any date of calculation equal to the lesser of (i) Maximum Annual Debt Service on the Outstanding Bonds, (ii) one hundred twenty-five percent (125%) of average Annual Debt Service for any Bond Year, or (iii) ten percent (10%) of the original aggregate principal amount of the Bonds. The Reserve Requirement as of the date of issuance of the Bonds will be $634,000*.

Except as otherwise provided in the Fiscal Agent Agreement (with respect to the use of moneys in the Reserve Fund (i) for the payment of any rebate liability due to the federal government, (ii) for transfers in connection with Prepayments of Special Taxes, and (iii) the use of moneys in the Reserve Fund in excess of the Reserve Requirement to pay the scheduled debt service on the Bonds), 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. See Appendix C – “Summary of the Fiscal Agent Agreement.”

Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date, to the payment and redemption of all of the Outstanding Bonds. In the event that the amount transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund will be transferred to the City to be used for any lawful purpose of the City. Notwithstanding the foregoing, no amounts will be transferred from the Reserve Fund as described in the preceding sentence until after (i) amounts in the Reserve Fund are withdrawn for purposes of making rebate payments to the federal government in accordance with the Fiscal Agent Agreement following payment of the Bonds, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix C – “Summary of Fiscal Agent Agreement.”

Whenever Bonds are to be redeemed with proceeds of Prepayments of Special Taxes pursuant to the provisions of the Fiscal Agent Agreement, a proportionate share, determined as provided below, of the amount on deposit in the Reserve Fund shall, on the Business Day prior to the date on which such Bonds are to be redeemed, be transferred by the Fiscal Agent from the Reserve Fund to the Series 2012 Prepayment Account and shall be applied to the redemption of said Bonds; provided, however, that such amount shall be so transferred only 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). Such proportionate share shall be equal to the largest integral multiple of $5,000 that is not larger than the amount equal to the product of (a) the amount on deposit in the Reserve Fund on the date five (5) Business Days prior to the date notice of redemption of such Bonds is required to be given pursuant to the provisions hereof, times (b) a fraction, the numerator of which is the principal amount of Bonds to be so redeemed and the denominator of which is the principal amount of Bonds to be Outstanding on the day prior to the date on which such Bonds are to be so redeemed.

* Preliminary, subject to change.

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Covenant for Superior Court Foreclosure

Foreclosure Under the Act. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on the taxed parcel, the City may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale.

City Foreclosure Covenant. The City has covenanted in the Fiscal Agent Agreement for the benefit of the Bondowners that it will annually on or before August 1 of each year review the public records of the County of San Mateo relating to the collection of the Special Tax in order to determine the amount of the Special Tax collected in the prior Fiscal Year, and if the City determines on the basis of such review that the amount so collected is deficient of the total amount of the Special Tax levied in such Fiscal Year, it will within thirty (30) days thereafter institute foreclosure proceedings as authorized by the Act in order to enforce the lien of the delinquent installment of the Special Tax against each Taxable Parcel for which such installment of the Special Tax is delinquent, and any Parcel with related Parking Units (see “SECURITY FOR THE BONDS—Summary of Rate and Method – Undivided Levy”), and will diligently prosecute and pursue such foreclosure proceedings to judgment and sale. No assurance can be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale will be successful. The City is not required to be a bidder at any foreclosure sale.

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. Subject to the maximum rate, the Rate and Method is designed to generate from all non-exempt property within the District the current year’s debt service, administrative expenses, and replenishment of the Reserve Fund to the Reserve Requirement. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in payments to owners of the Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure 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 53356.6 of the Act, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a “credit bid,” where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser under a credit bid, the City 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. Neither the Act nor the Fiscal Agent Agreement requires the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the City has no intent to be such a purchaser.

The City will levy the Special Tax to pay the current year’s debt service and related administrative expenses and to replenish the Reserve Fund to the Reserve Requirement, subject to the Maximum Annual Special Tax Rate. However, in the event such superior court foreclosure proceedings are necessary, and if the Reserve Fund is depleted, there could be a delay in payments of principal of and interest on the Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. See “SPECIAL RISK FACTORS—Bankruptcy Delays” and “—Proceeds of Foreclosure Sales.”

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Investment of Moneys

Except as otherwise provided in the Fiscal Agent Agreement, all moneys in any of the funds or accounts established pursuant to the Fiscal Agent Agreement will be invested by the Fiscal Agent solely in Permitted Investments, as directed by the City. See Appendix C – “Summary of the Fiscal Agent Agreement” for a definition of “Permitted Investments” and for additional provisions regarding the investment of funds held under the Fiscal Agent Agreement.

No Parity Bonds

The City has covenanted in the Fiscal Agent Agreement not to issue any additional obligations payable from Special Taxes on a parity with the Bonds. However, nothing in the Fiscal Agent Agreement prohibits the City from issuing bonds or otherwise incurring debt secured by a pledge of any of the Special Tax Revenues subordinate to the pledge thereof under the Fiscal Agent Agreement.

THE DISTRICT

Location and Description of the District

The District is a community facilities district established by the City Council of the City pursuant to the Act in April of 2000 to finance certain public facilities (referred to in this Official Statement as the “Improvements”), including improvements and construction of additions to Seaport Boulevard, and improvements to the sewer system and storm drains serving the property in the District (including costs of right-of-way acquisitions, environmental, engineering and other incidental or related costs), all of which have been completed. The District includes 11 separate San Mateo County Assessor’s parcels subject to the levy of Special Taxes (referred to in this Official Statement as the “Taxable Parcels”) located within the Pacific Shores Center, a 106-acre waterfront corporate campus located at the northeast terminus of Seaport Boulevard in the City. See “THE DISTRICT—Development in the District.”

U.S. Highway 101 is approximately one mile west of the exterior boundary of the District. State Highway 84 (Woodside Road) begins on the west side of U.S. Highway 101, across the freeway from the terminus of Seaport Boulevard. It courses in an east/west direction, and provides access westward from U.S. Highway 101 to Interstate 280.

History of the District

Pursuant to the Act, the City Council of the City, acting in the capacity as the legislative body of the District, adopted Resolution No. 13849 (the “Resolution of Intention”) on March 13, 2000, stating its intention to establish the District and to levy the Special Tax within the District. Attached as Appendix G is the boundary map of the District. On April 24, 2000, the City Council, acting as the legislative body of the District, adopted resolutions forming the District and authorizing a special election with respect to the incurrence of indebtedness in a principal amount of $21,000,000 and the levy of the Special Tax. Subsequently, the then-owner of all of the land in the District, as the sole qualified elector for the District, approved the ballot propositions. On May 9, 2000, the City recorded, in the Official Records of the County Recorder for the County of San Mateo, a Notice of Special Tax Lien as required by Section 53328.3 of the California Government Code.

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On October 17, 2000, the City, for and on behalf of the District, issued the Prior Bonds in an initial principal amount of $21,000,000. The net proceeds of the Prior Bonds, $16,206,294, were deposited to an Improvement Fund established under the Prior Fiscal Agent Agreement and were used to pay costs of the Improvements. The Improvements have been completed, and excess funds in the Improvement Fund were used to redeem a portion of the Prior Bonds.

On January 9, 2012, the City Council of the City, acting in the capacity as the legislative body of the District, adopted a resolution authorizing the issuance of the Bonds, and approving and authorizing the execution of the Fiscal Agent Agreement, escrow instructions relating to the redemption of the Prior Bonds, the Continuing Disclosure Agreement and other related documents and actions.

Development in the District

The Pacific Shores Center (the “Center”), which includes all of the Taxable Parcels in the District and a number of other parcels with parking facilities and other related improvements, was constructed following the issuance of the Prior Bonds. The Center consists of a 106-acre waterfront campus with a 50-acre public access park, a full-featured, 38,000 square foot fitness center, a cafe and other amenities. The Center is currently managed by Cushman & Wakefield of California, Inc. pursuant to a contract that commenced on December 7, 2006, but which can be terminated upon 30 days notice. For a more complete description of the Center see the website for the Center at http://www.pacificshores.com. The City has not reviewed the website and cannot make any representation regarding the accuracy or the completeness of the information thereon.

The following page contains an aerial photo of the Center.

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A 1500 Seaport Boulevard 164,732 sf J 2100 Seaport Boulevard 149,125 sf B 1400 Seaport Boulevard 283,015 sf K Baseball Field C 1300 Seaport Boulevard 164,732 sf L Softball Field D 1200 Seaport Boulevard 98,022 sf M Fitness Center, 1100 Seaport Boulevard E 1600 Seaport Boulevard 283,015 sf N Amphitheater F 1700 Seaport Boulevard 127,342 sf O Outdoor Basketball Court G 1800 Seaport Boulevard 119,730 sf P Central Plaza H 1900 Seaport Boulevard 141,180 sf Q 3 mile Bike/Pedestrian Path I 2000 Seaport Boulevard 141,180 sf R Game Room, Grab & Go Café

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Land Ownership and Current Special Tax Levy

Land Ownership; Current Assessed Values. The table below shows the Taxable Parcels in the District that are subject to the levy of Special Taxes, their respective fee title owners and the current San Mateo County assessed value of each parcel.

Table 1 Land Ownership in the District and 2011-2012 Assessed Value

San Mateo County Taxable Assessor’s Building (1) Parcel Property Building Street Square 2011-2012 County Assessed Value Number Owner(1) Address Footage(2) Land Building Total 054-330-090 SRI Eight Pacific Shores LLC 1400 Seaport Blvd 269,000 $ 74,000,000 $27,700,000 $101,700,000 054-330-290 SRI Eight Pacific Shores LLC 1500 Seaport Blvd 150,622 39,400,000 19,800,000 59,200,000 Subtotal for SRI Eight Pacific Shores LLC Parcels: 419,622 $113,400,000 $47,500,000 $160,900,000 054-330-070 VII Pac Shores Investors L.L.C. 1200 Seaport Blvd 88,050 $ 10,000,000 $ 23,000,000 $ 33,000,000 054-330-080 VII Pac Shores Investors L.L.C. 1300 Seaport Blvd 150,622 16,000,000 38,000,000 54,000,000 054-330-110 VII Pac Shores Investors L.L.C. 1100 Seaport Blvd 38,000 8,365,999 1,045,749 9,411,748 054-330-170 VII Pac Shores Investors L.L.C. 2100 Seaport Blvd 131,000 7,843,123 47,058,745 54,901,868 054-330-190 VII Pac Shores Investors L.L.C. 2000 Seaport Blvd 133,000 6,065,348 44,758,094 50,823,442 054-330-210 VII Pac Shores Investors L.L.C. 1900 Seaport Blvd 133,000 6,065,348 44,758,094 50,823,442 054-330-230 VII Pac Shores Investors L.L.C. 1800 Seaport Blvd 109,706 5,019,599 37,856,145 42,875,744 054-330-250 VII Pac Shores Investors L.L.C. 1700 Seaport Blvd 116,000 5,200,000 38,300,000 43,500,000 054-330-270 VII Pac Shores Investors L.L.C. 1600 Seaport Blvd 269,000 18,900,000 78,400,000 97,300,000 Subtotal for VII Pac Shores Investors L.L.C. Parcels: 1,168,378 $ 83,459,417 $353,176,827 $436,636,244 Total for all Taxable Parcels: 1,588,000 $196,859,417 $400,676,827 $597,536,244

(1) Based on San Mateo County 2011-2012 Secured Property Tax Roll. (2) Equal to the “Commercial Square Feet” for the respective parcel, as such term is used in the Rate and Method. Source: Willdan Financial Services.

Historical Assessed Values. The following table sets forth the total San Mateo County assessed value for each of the Taxable Parcels in the District for the current and each of the last ten fiscal years.

Table 2 Historical Assessed Values of Taxable Parcels (figures are in dollars)

Fiscal San Mateo County Assessor’s Parcel Numbers Year 054-330-090 054-330-290 054-330-070 054-330-0-080 054-330-0-110 054-330-0-170 054-330-0-190 054-330-0-210 054-330-0-230 054-330-0-250 054-330-0-270 2001/02 43,647,551 19,694,496 17,381,907 25,113,426 10,200 16,441,249 15,163,845 14,093,729 10,300,617 10,877,798 40,880,753 2002/03 86,354,695 30,475,167 28,745,762 44,555,762 10,404 39,753,513 35,301,200 37,026,746 25,254,167 26,418,303 76,430,246 2003/04 59,500,000 31,084,669 20,600,000 34,600,000 10,612 26,500,000 23,700,000 23,700,000 20,200,000 21,750,000 54,500,000 2004/05 53,800,000 31,665,018 13,200,000 22,240,000 10,810 23,300,000 20,800,000 20,800,000 17,700,000 19,200,000 49,000,000 2005/06 48,112,550 21,885,635 14,213,000 23,062,480 11,026 20,351,250 18,000,600 18,000,600 15,354,100 16,648,140 43,113,000 2006/07 56,886,000 24,698,000 18,190,000 31,015,000 11,246 24,974,000 22,377,000 22,377,000 19,065,000 20,600,000 51,886,000 2007/08 112,100,000 61,000,000 37,500,000 63,000,000 9,000,000 52,500,000 48,600,000 48,600,000 41,000,000 44,100,000 103,300,000 2008/09 131,580,000 76,500,000 38,238,270 64,260,000 9,180,000 53,550,000 49,572,000 49,572,000 41,820,000 44,982,000 105,366,000 2009/10 110,900,000 64,600,000 38,400,000 62,800,000 9,363,600 54,621,000 50,563,440 50,563,440 42,656,400 45,881,640 106,500,000 2010/11 101,700,000 59,200,000 35,200,000 57,400,000 9,341,408 54,491,547 50,443,603 50,443,603 42,555,303 43,500,000 97,300,000 2011/12 101,700,000 59,200,000 33,000,000 54,000,000 9,411,748 54,901,868 50,823,442 50,823,442 42,875,744 43,500,000 97,300,000

The property in the District, including the 11 Taxable Parcels, was sold in December of 2006 by the original developer of the Pacific Shores Center, Pacific Shores Development, LLC, to VII Pac Shores Investors L.L.C., at which time the Taxable Parcels were reassessed by the County Assessor.

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Property Owner Information; Lessees. The owners of the Taxable Parcels have provided the following information with respect to their respective entities and the buildings owned by them in the District. The City makes no representation as to the accuracy or completeness of the following information, and prospective owners of the Bonds should contact the respective property owners regarding their information.

VII Pac Shores Investors, L.L.C. VII Pac Shores Investors, L.L.C. (“VII Pac Shores”) is a Delaware limited liability company that owns nine of the Taxable Parcels in the District, as well as related parcels on which parking and other amenities are provided. The nine Taxable Parcels are responsible for 73.57% of the Fiscal Year 2011/2012 Special Tax levy (see Table 3 under “—Special Tax Allocation” below).

Starwood Capital Group Global I, L.L.C., through a series of limited liability companies, maintains an ownership interest in VII Pac Shores. VII Pac Shores reports that there are two loans encumbering the portion of the Center owned by it in the amounts of $331,750,000 and $150,800,000, respectively (an aggregate of $482,550,000), and that no defaults have occurred with respect to the two loans. VII Pac Shores is currently negotiating with its lenders to extend the maturity dates for the two loans, and also is considering partial repayment or refinancing of the loans. Any encumbrance on the Taxable Parcels owned by VII Pac Shores securing the repayment of the two loans is subordinate to the lien on such parcels securing the payment of Special Taxes levied on the Taxable Parcels pursuant to the Notice of Special Tax Lien (see “THE DISTRICT – History of the District”).

VII Pac Shores reports that the current status of the leasing of the buildings located on the nine Taxable Parcels owned by it in the District is as follows:

Leasable Building Square Lease Lease Current Street Address Current Tenant Feet Start Date End Date Extension Option 2100 Seaport Blvd Informatica 149,125 7/15/2001 7/14/2013 5 Year Option 2000 Seaport Blvd Informatica 141,180 7/15/2001 7/14/2013 5 Year Option 1900 Seaport Blvd Nuance Communication 141,180 8/1/2001 7/31/2012 5 Year Option - Expired 1800 Seaport Blvd Dreamworks Animation SKG 119,730 8/1/2002 7/31/2012 5 Year Option - Expired 1700 Seaport Blvd Yoink Games, Inc. 3,379 5/12/2011 7/31/2013 none Sencha, Inc. 10,260 1/10/2011 1/31/2014 none Sencha 11,073 12/1/2011 11/31/2015 none DMB Associates Inc. 4,942 7/1/2006 6/30/2014 3 Year Option Currenex, Inc. 9,193 11/7/2004 10/31/2015 3 Year Option Ingenuity System 33,790 10/1/2005 11/30/2014 3 Year Option HeartFlow, Inc. 33,859 7/1/2010 6/30/2014 3 Year Option 1600 Seaport Blvd Broadvision 50,174 1/1/2007 6/30/2012 none Ceon 8,429 6/1/2005 11/30/2013 3 Year Option Computer Associates, Inc. 8,548 7/26/2011 7/31/2013 1 Year Option Zenprise, Inc. 15,250 5/9/2011 8/31/2014 3 Year Option Zenprise, Inc. 8,598 12/1/2011 8/31/2014 3 Year Option DreamWorks Animation SKG 8,721 5/19/2008 7/31/2012 5 Year Option - Expired Capital Asset Exchange and 9,611 4/1/2011 3/31/2016 5 Year Option Trading Oxygen Cloud, Inc. 6,444 5/15/2011 7/31/2013 none Rudolph & Sletten 44,928 6/1/2005 7/31/2015 5 Year Option Wildfire Interactive, Inc 34,210 6/15/2011 9/30/2014 3 Year Option 1200 Seaport Blvd Gunderson Dettmer Stough 98,022 1/1/2009 12/31/2018 5 Year Option 1300 Seaport Blvd Eidos, Inc. 62,118 4/1/2007 3/31/2014 5 Year Option

The building located at 1100 Seaport Boulevard is fully utilized by the Pacific Shores Club, an amenity of the Center.

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Expected future leases as reported by VII Pac Shores include the following:

Leasable Expected Expected Building Square Lease Lease Expected Current Street Address Expected Tenant Feet Start Date End Date Extension Option 1800 - Seaport Blvd Zazzle Inc 119,730 8/1/2012 7/31/2020 5 Year Option

1300 - Seaport Blvd First Virtual Group, Inc. 8,551 4/1/2012 9/30/2017 5 Year Option 1300 - Seaport Blvd The Thomas & Stacey Siebel 8,551 4/1/2012 9/30/2017 5 Year Option Foundation 1300 - Seaport Blvd C3, LLC 51,307 4/1/2012 9/30/2017 5 Year Option

Based on the foregoing, the buildings located at 2100, 2000, 1900, 1800 and 1200 Seaport Boulevard are all currently fully leased (the building at 1100 Seaport Boulevard is fully utilized by the Pacific Shores Club); and the overall vacancy rate for the buildings located on the nine Taxable Parcels currently owned by VII Pac Shores is approximately 16%, which vacancy rate is expected to drop to approximately 10% from and after April 1, 2012.

No assurance can be given that any current tenant in any of the buildings that are owned by VII Pac Shores in the Center will continue its tenancy for any particular time. Special Taxes are levied on the fee title owner of the respective parcel, and the payment of the Special Taxes are the responsibility of the fee title owners of the Taxable Parcels on which they are levied.

VII Pac Shores has advised that it is engaged in discussions to sell two of the Taxable Parcels (including the buildings thereon), but no assurance can be given that any such sale will occur.

SRI Eight Pacific Shores LLC. SRI Eight Pacific Shores LLC (“SRI Eight”) is a Delaware limited liability company that owns two of the Taxable Parcels in the District. The two Taxable Parcels are responsible for 26.43% of the Fiscal Year 2011/2012 Special Tax levy (see Taxable 3 under “—Special Tax Allocation” below). SRI Eight reports that there is a nonrecourse loan of $183,700,000 encumbering its parcels in the District, and that no defaults have occurred with respect to the loan. Any encumbrance on the two Taxable Parcels owned by SRI Eight Pacific Shores LLC securing the repayment of the loan is subordinate to the lien on such parcels securing the payment of Special Taxes levied on the Taxable Parcels pursuant to the Notice of Special Tax Lien (see “THE DISTRICT – History of the District”).

SRI Eight reports that the current status of the leasing of the buildings located on the two Taxable Parcels owned by it in the District, both of which are currently fully leased, is as follows:

Building Lease Lease End Street Address Current Tenant(1) Start Date Date 1400 Seaport Openwave Systems Inc./Biotech Corporation 4/30/2001 12/31/2021 Blvd 1500 Seaport Facet Biotech Corporation 1/01/2007 12/31/2021 Blvd

(1) SRI Eight reports that, at the time it purchased the two parcels indicated above in 2007 (i) Openwave Systems Inc., a Delaware corporation (“Openwave”) had leased the 1400 building in a lease that commenced on 4/30/01 and went through 4/30/13, (ii) Openwave had subleased the 1400 building to PDL BioPharma, a Delaware corporation (“PDL”), and (iii) PDL had entered into both an immediate direct lease for the 1500 building and a direct lease for the 1400 building when the existing Openwave lease expired, both of which expire on 12/31/21. In December 2008, PDL completed a spinoff of a portion of its business to a new entity called Facet Biotech Corporation, a Delaware corporation (“Facet”). SRI Eight consented to the assignment of the PDL lease and sublease to Facet conditioned on PDL and Facet remaining jointly and severely liable under the leases and an increase in the letter of credit securing the lease obligations to $5million. On April 21, 2010, Facet became a

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wholly-owned subsidiary of Abbott Laboratories, an Illinois corporation (NYSE: ABT) (“Abbott”). In January 2011, a Facet subsidiary subleased 193,000 square feet in the 1400 building to Pacific Data Images, LLC, a Delaware limited liability company, a wholly-owned subsidiary of DreamWorks Animation SKG, Inc., a Delaware corporation. SRI Eight consented to the foregoing sub, sub-lease conditioned on Abbott providing a guaranty of the leases for both the 1400 building and the 1500 building.

No assurance can be given that any current tenant in either of the two buildings that are owned by SRI Eight in the Center will continue its tenancy for any particular time. Special Taxes are levied on the fee title owner of the respective parcel, and the payment of the Special Taxes are the responsibility of the fee title owners of the Taxable Parcels on which they are levied.

SRI Eight has advised that, although it listed the parcels it owns in the Center for sale in 2011, it subsequently pulled the property from the market and has no current plans at this time to remarket the property.

Special Tax Allocation. The table below shows the Taxable Parcels in the District that are subject to the levy of Special Taxes and each parcel’s share of the total Fiscal Year 2011-12 Special Tax levy of $2,004,079.90. Based on the records of the County Tax Collector, the first one-half of the Special Tax levy for 2011-12 (that would be delinquent if not paid by December 10, 2011) has been paid for each of the Taxable Parcels.

Table 3 Taxable Parcels’ Share of Fiscal Year 2011-2012 Special Tax Levy

San Mateo Percentage of County Taxable Building Maximum Special FY 2011/12 Assessor’s Square Possible Annual Tax Levy FY Special Parcel Number Property Owner Footage(1) Special Tax(2) 2011/2012(3) Tax Levy 054-330-090 SRI Eight Pacific Shores LLC 269,000 $ 438,470.00 $ 339,482.06 16.94% 054-330-290 SRI Eight Pacific Shores LLC 150,622 245,513.86 190,087.24 9.49 Subtotal for SRI Eight Pacific Shores LLC Parcels: 419,622 $ 683,983.86 $ 529,569.30 26.43% 054-330-070 VII Pac Shores Investors L.L.C. 88,050 $ 143,521.50 $ 111,120.42 5.54% 054-330-080 VII Pac Shores Investors L.L.C. 150,622 245,513.86 190,087.24 9.49 054-330-110 VII Pac Shores Investors L.L.C. 38,000 61,940.00 47,956.56 2.39 054-330-170 VII Pac Shores Investors L.L.C. 131,000 213,530.00 165,323.96 8.25 054-330-190 VII Pac Shores Investors L.L.C. 133,000 216,790.00 167,848.00 8.38 054-330-210 VII Pac Shores Investors L.L.C. 133,000 216,790.00 167,848.00 8.38 054-330-230 VII Pac Shores Investors L.L.C. 109,706 178,820.78 138,450.62 6.90 054-330-250 VII Pac Shores Investors L.L.C. 116,000 189,080.00 146,393.74 7.30 054-330-270 VII Pac Shores Investors L.L.C. 269,000 438,470.00 339,482.06 16.94 Subtotal for VII Pac Shores Investors L.L.C. Parcels: 1,168,378 $1,904,456.14 $1,474,510.60 73.57% Total for all Taxable Parcels: 1,588,000 $2,588,440.00 $2,004,079.90 100.00%

(1) From Table 1. (2) Taxable Building Square Footage multiplied by Maximum Annual Special Tax Rate of $1.63 per Commercial Square Foot. See “SECURITY FOR THE BONDS—Summary of Rate and Method – Tax Categories and Maximum Special Tax Rate.” (3) Taxable Building Square Footage multiplied by Special Tax rate for Fiscal Year 2011-2012 of $1.26 per Commercial Square Foot. Source: Willdan Financial Services.

Note that the amount of the 2011/2012 Special Tax levy was based on the debt service that was projected to be due on the Prior Bonds on March 1, 2012 and September 1, 2012. The Prior Bonds will be defeased on the date of issuance of the Bonds and will be fully redeemed on March 1, 2012 (see “PLAN OF REFUNDING—Redemption of Prior Bonds”). Accordingly, it is expected that future Special Tax levies on the Taxable Parcels in the District will be

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substantially lower (see, e.g., Table 6 under “THE DISTRICT—Projected Debt Service Coverage” below).

Value-to-Burden Ratio

No Appraisal of Property in the District. The City has not commissioned an appraisal of the Taxable Parcels in the District in connection with the issuance of the Bonds. Therefore, the valuation of the Taxable Parcels in the District will be estimated for the purposes of the Act, and set forth in this Official Statement, based on the County Assessor’s fiscal year 2011- 12 assessed values.

Assessed Valuation. The valuation of real property in the City is established by the County Assessor. Assessed valuations are reported at 100% of the full cash value of the property, as defined in Article XIIIA of the California Constitution. Article XIIIA of the California Constitution defines “full cash value” as the appraised value as of March 1, 1975, plus adjustments not to exceed 2% per year to reflect inflation, and requires assessment of “full cash value” upon change of ownership or new construction. Accordingly, the gross assessed valuation of any particular parcel presented in this Official Statement may not necessarily be representative of the actual market value of that parcel.

General Information Regarding Value-to-Burden Ratios. The value-to-burden ratio on bonds secured by special taxes will generally vary over the life of those bonds as a result of changes in the value of the property that is security for the special taxes and the principal amount of the bonds.

In comparing the aggregate assessed value of the Taxable Parcels within the District and the principal amount of the Bonds, it should be noted that an individual parcel may only be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that parcel. The principal amount of the Bonds is not allocated pro-rata among the Taxable Parcels within the District based on assessed value; rather, the principal amount of the Bonds has been allocated based on the allocation of Special Taxes among the Taxable Parcels, and the total Special Taxes have been allocated among the Taxable Parcels within the District according to the Rate and Method.

Economic and other factors beyond the property owners’ control, such as economic recession, deflation of land values, financial difficulty or bankruptcy by one or more property owners, or the complete or partial destruction of Taxable Parcels caused by, among other possibilities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed values of the property within the District. See “SPECIAL RISK FACTORS—Property Value” and “Bankruptcy Delays.”

Value-to-Burden Ratio Distribution. The following table sets forth the distribution of assessed value-to-burden ratios among the Taxable Parcels based on fiscal year 2011-2012 assessed values and the estimated share of the principal of the Bonds.

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Table 4 Assessed Value to Burden Ratios for Taxable Parcels in the District

San Mateo Share of Value to County Assessor’s 2011-12 County Principal Allocable Parcel Number Property Owner Assessed Value(1) of Bonds(2) Bond Principal 054-330-090 SRI Eight Pacific Shores LLC $101,700,000.00 $1,073,967.29 94.70:1 054-330-290 SRI Eight Pacific Shores LLC 59,200,000.00 601,349.83 98.45:1 054-330-070 VII Pac Shores Investors L.L.C. 33,000,000.00 351,534.62 93.87:1 054-330-080 VII Pac Shores Investors L.L.C. 54,000,000.00 601,349.83 89.80:1 054-330-110 VII Pac Shores Investors L.L.C. 9,411,748.00 151,712.81 62.04:1 054-330-170 VII Pac Shores Investors L.L.C. 54,901,868.00 523,010.04 104.97:1 054-330-190 VII Pac Shores Investors L.L.C. 50,823,442.00 530,994.95 95.71:1 054-330-210 VII Pac Shores Investors L.L.C. 50,823,442.00 530,994.95 95.71:1 054-330-230 VII Pac Shores Investors L.L.C. 42,875,744.00 437,994.98 97.89:1 054-330-250 VII Pac Shores Investors L.L.C. 43,500,000.00 463,123.41 93.93:1 054-330-270 VII Pac Shores Investors L.L.C. 97,300,000.00 1,073,967.29 90.60:1 Totals: $597,536,244.00 $6,340,000.00

(1) From last column in Table 1. (2) Based on each respective parcel’s share of the Fiscal Year 2011-12 annual Special Tax levy (see last column in Table 3), and the estimated initial principal amount of the Bonds of $6,340,000. Source: Willdan Financial Services.

Note that the foregoing table does not take into account any direct and overlapping debt applicable to any of the Taxable Parcels. See “THE DISTRICT—Direct and Overlapping Governmental Obligations.”

Special Tax Levies and Delinquencies

Special Taxes were first levied in the District in fiscal year 2002-03. There have never been any delinquencies in the payment of Special Taxes levied in the District. See also “SECURITY FOR THE BONDS—County Teeter Plan.”

Direct and Overlapping Governmental Obligations

The current and estimated direct and overlapping obligations affecting the property in the District are shown in the following table. The table was prepared by California Municipal Statistics, Inc., and is included for general information purposes only. The City has not reviewed this report for completeness or accuracy and makes no representation in connection therewith.

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Table 5 Direct and Overlapping Bonded Debt (as of November 23, 2011)

2011-12 Assessed Valuation: $600,568,914(1)

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 1/1/12 San Mateo Community College District 0.419% $ 2,517,331 Sequoia Union High School District 1.022 3,506,175 Redwood City School District 3.564 1,700,185 City of Redwood City Community Facilities District No. 2000-1 100. 8,655,000 (2) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $16,378,691

OVERLAPPING GENERAL FUND DEBT: San Mateo County General Fund Obligations 0.459% $1,491,657 San Mateo County Board of Education Certificates of Participation 0.459 57,008 City of Redwood City General Fund Obligations 4.464 262,483 Midpeninsula Regional Park and Open Space District General Fund Obligations 0.370 468,283 TOTAL OVERLAPPING GENERAL FUND DEBT $2,279,431

COMBINED TOTAL DEBT $18,658,122 (3)

(1) Includes the assessed values of the Taxable Parcels, as well as the assessed values of six other parcels in the District that are not classified under the Rate and Method as Taxable Parcels. (2) Excludes refunding Mello-Roos Act bonds to be sold. Estimated amount to be sold: $6,340,000. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

Ratios to 2011-12 Assessed Valuation: Direct Debt ($8,655,000)...... 1.44% Total Direct and Overlapping Tax and Assessment Debt ...... 2.73% Combined Total Debt...... 3.11%

Projected Debt Service Coverage

The table below shows the projected debt service coverage from the annual Special Tax levy in the District for the Bonds, assuming a levy of the maximum Special Tax on all Taxable Parcels, less the Annual Administrative Expense Amount, and no Special Tax delinquencies.

Table 6 Projected Debt Service Coverage on Bonds*

Projected Debt Service Debt Service Maximum on the Coverage Bond Year Special Tax(1) Bonds(2) on the Bonds 2011-12 $2,563,440.00 $ 821,883.65 311.90% 2012-13 2,562,940.00 1,500,887.50 170.76 2013-14 2,562,430.00 1,497,087.50 171.16 2014-15 2,561,909.80 1,501,037.50 170.68 2015-16 2,561,379.20 1,497,125.00 171.09

Sources: Maximum Special Tax – Willdan Financial Services; Debt Service and Projected Coverage – the Underwriter. (1) Reflects Maximum Annual Special Tax Rate of $1.63 per Commercial Square Foot (see “SECURITY FOR THE BONDS—Summary of Rate and Method – Tax Categories and Maximum Special Tax Rate”) multiplied by the aggregate Commercial Square Footage of the Taxable Parcels of 1,588,000 (see Table 1 under “THE DISTRICT—Land Ownership and Current Special Tax Levy”), less the Annual Administrative Expense Deposit for the applicable Bond Year.

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(2) Estimated, based upon Bond principal of $6,340,000 and an average annual interest rate of 2.70%. * Preliminary, subject to change.

SPECIAL RISK FACTORS

The following is a description of certain risk factors affecting the District, the property owners in the District, the Taxable Parcels and the payment of and security for the Bonds. The following discussion of risks is not meant to be a complete list of the risks associated with the purchase of the Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the investment quality of the Bonds. There can be no assurance that other risk factors will not become material in the future.

Concentration of Property Ownership

Failure of any significant owner of the Taxable Parcels to pay the annual Special Taxes when due could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of the property upon a foreclosure or otherwise or prior to delinquency redemption after a foreclosure sale, if any. See, however, “SECURITY FOR THE BONDS— County Teeter Plan.” In that event, there could be a default in payments of the principal of and interest on the Bonds.

The 11 Taxable Parcels in the District are currently owned by only two different owners, with one owner’s nine Taxable Parcels responsible for 73.57% of the Fiscal Year 2011/2012 Special Tax levy and the other owner’s two Taxable Parcels responsible for 26.43% of the Fiscal Year 2011/2012 Special Tax levy. See “THE DISTRICT—Land Ownership and Current Special Tax Levy.” While there is an ability to increase the Special Tax levied on any particular Taxable Parcel up to the maximum Special Tax rate allowed under the Rate and Method (see “SECURITY FOR THE BONDS—Summary of Rate and Method”) in order to cover delinquencies in the payment of Special Taxes on other Taxable Parcels, there could be a delay in collections of Special Taxes or an unwillingness by property owners to pay Special Taxes when due. See “THE DISTRICT—Development in the District.”

Payment of the Special Tax is not a Personal Obligation

The owners of the Taxable Parcels in the District are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation that is secured only by a lien against the Taxable Parcels on which it is levied. If the value of the Taxable Parcels is not sufficient to secure fully the payment of the Special Tax, the City has no recourse against the landowners.

No General Obligation of the City or the District

The City’s obligations under the Bonds and under the Fiscal Agent Agreement are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues (other than the Annual Administrative Expense Deposit) and amounts in the Special Tax Fund, the Bond Fund and the Reserve Fund. The Bonds are neither general or special obligations of the City nor general obligations of the District, but are limited obligations of the City for the District payable solely from the revenues and funds pledged therefor under the Fiscal Agent Agreement. None of the faith and credit of the District, the City or the State of California or of any of their respective political subdivisions is pledged to the payment of the Bonds.

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Property Value

If a landowner defaults in the payment of the Special Tax, the only legal remedy is the institution of a superior court action to foreclose on the delinquent taxable parcel in an attempt to obtain funds with which to pay the Special Tax. The value of the Taxable Parcels in the District could be adversely affected by economic factors beyond the City’s control, 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 District, the supply of or demand for competitive properties in such area, and the market value of retail and commercial property in the event of sale or foreclosure; (ii) changes in real estate tax rates 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, wildfire, earthquakes, tsunamis and floods), which may result in uninsured losses. See “SPECIAL RISK FACTORS—Natural Disasters.”

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 such sale will be sufficient to pay the delinquent Special Tax installment. No appraisal of the Taxable Parcels in the District has been conducted (see, however, “THE DISTRICT—Value-to-Burden Ratio” for a description of the County Assessor’s valuation of the parcels in the District). Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale. The City is not obligated and does not expect to be a bidder at any such foreclosure sale. See “SPECIAL RISK FACTORS—Proceeds of Foreclosure Sale.”

Exempt Properties

Certain properties are exempt from the Special Tax in accordance with the approved Rate and Method. In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction, or by gift or devise, that is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. See “SECURITY FOR THE BONDS—Summary of Rate and Method – Exemptions.” In addition, 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, for outstanding Bonds only, 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.

In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property within the District, it may be unconstitutional. If for any reason property within the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Annual Special Tax Rate, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax. Moreover, if a substantial portion of land within the District becomes exempt from the Special Tax because of public ownership, or otherwise, the maximum rate that could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default would occur with respect to the payment of such principal and interest.

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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.

Parity Taxes and Special Assessments

The Special Taxes and any penalties thereon will constitute liens against the Taxable Parcels in the District until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is coequal to and independent of the lien for general property taxes regardless of when they are imposed upon the Taxable Parcel. The Special Taxes have priority over all existing and future private liens imposed on the property. The City, however, has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the Taxable Parcels within the District subject to the levy of Special Taxes. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes or assessments, and any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. The imposition of additional indebtedness could reduce the willingness and the ability of the property owners within the District to pay the Special Taxes when due.

Insufficiency of Special Taxes

In order to pay debt service on the Bonds, it is necessary that the Special Taxes levied against Taxable Parcels within the District be paid in a timely manner (see, however, “SECURITY FOR THE BONDS—County Teeter Plan”). The City has established the Reserve Fund in an amount equal to the Reserve Requirement to pay debt service on the Bonds to the extent Special Taxes are not paid on time and other funds are not available. See “SECURITY FOR THE BONDS—Reserve Fund” and Appendix C – “Summary of the Fiscal Agent Agreement.” Under the Fiscal Agent Agreement, the City has covenanted to maintain in the Reserve Fund an amount equal to the Reserve Requirement; subject, however, to the limitation that the City may not levy the Special Tax in any fiscal year at a rate in excess of the Maximum Annual Special Tax Rate permitted under the Rate and Method. See “SECURITY FOR THE BONDS—Special Taxes” and “—Summary of Rate and Method.” Consequently, if a delinquency occurs, the City may be unable to replenish the Reserve Fund to the Reserve Requirement due to the limitation of the Maximum Annual Special Tax Rate. If such defaults were to continue in successive years, the Reserve Fund could be depleted and a default on the Bonds would occur if proceeds of a foreclosure sale did not yield a sufficient amount to pay the delinquent Special Taxes.

The City has made certain covenants regarding the institution of foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. See “SECURITY FOR THE BONDS—Covenant for Superior Court Foreclosure.” If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest.

Tax Delinquencies

Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, are being billed to the Taxable Parcels within the District on the regular property tax bills sent to owners of the parcels. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments

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cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See “SECURITY FOR THE BONDS—Reserve Fund” and “-Covenant for Superior Court Foreclosure” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments. See also “SECURITY FOR THE BONDS—County Teeter Plan,” and “THE DISTRICT—Special Tax Levies and Delinquencies” for historical Special Tax delinquency history.

Bankruptcy Delays

The payment of the Special Tax and the ability of the City to commence a superior court action to foreclose the lien of a delinquent unpaid Special Tax, as discussed in “SECURITY FOR THE BONDS—Covenant or Superior Court Foreclosure,” 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. Any legal opinion to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

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

Proceeds of Foreclosure Sales

Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax, the City Council, as the legislative body of the District, may order that the Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. The City has covenanted in the Fiscal Agent Agreement that it will, under certain circumstances, commence such a foreclosure action. See “SECURITY FOR THE BONDS— Covenant for Superior Court Foreclosure.”

No assurances can be given that a Taxable Parcel in the District that would be subject to a judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale and the City has not in any way agreed nor does it expect to be such a bidder.

In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold and may have other redemption rights afforded by law. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale if the purchaser at the sale was the judgment

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creditor. If a foreclosure sale is thereby set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made.

If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of trust on the affected property could, but would not be required to, advance the amount of the delinquent Special Tax installment to protect its security interest.

In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in principal and interest payments to the owners of the Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions and other factors beyond the control of the City, including delay due to crowded local court calendars or legal tactics and, in any event could take several years to complete. In particular, bankruptcy proceedings involving the owner of the delinquent Taxable Parcel could cause a delay, reduction or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See “–Bankruptcy Delays.”

Natural Disasters

The value of the Taxable Parcels 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 Parcels and the continued habitability and enjoyment of such private improvements. Such occurrences include, without limitation, wildfire, earthquakes, tsunamis and floods. One or more of such 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, the value of the Taxable Parcels may well depreciate or disappear.

Like other areas of Northern California, property in the District is subject to the risk of major earthquake damage. During the past 150 years the San Francisco Bay Area has experienced several major and numerous minor earthquakes. The San Andreas fault, at its closest, is about seven miles to the west of the District; the Hayward fault, at its closest, is about 15 miles to the east. A significant earthquake along these or other faults is possible during the period the Bonds will be outstanding. The most recent major earthquake was the October 17, 1989 Loma Prieta earthquake with a magnitude of 7.1 on the Richter scale and an epicenter near Santa Cruz, approximately 50 miles south of the City. Although buildings and other structures in San Francisco, Oakland and other nearby local communities suffered damage from the Loma Prieta earthquake, buildings in the immediate vicinity of the District did not suffer any major property damage. There were no real property improvements in the District at the time of the Loma Prieta earthquake.

The land within the District primarily consists of bay fill; however, the City understands that the buildings on the Taxable Parcels were constructed on pilings, in accordance with current State earthquake standards and geotechnic consultant recommendations. Notwithstanding such construction, an earthquake or one or more of the other conditions described in the second preceding paragraph may occur and may cause damage to public and private improvements on parcels in the District of varying seriousness, and any such damage may entail significant repair or replacement costs (or such repair or replacement may never occur either because of the cost or because repair or replacement will not facilitate usability or because other considerations may preclude such repair or replacement). Consequently, the occurrence of any of these conditions could result in a

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significant decrease in the market value of the Taxable Parcels or in such property becoming unusable or unmarketable.

Hazardous Substances

The presence of hazardous substances on a parcel may result in a reduction in the value of a Taxable Parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well- known and widely applicable of these laws, but 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 Parcels be affected by a hazardous substance, is to reduce the marketability and value of the applicable 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 City has not independently verified, but is not aware of, the presence of any hazardous substances within the District.

Disclosure to Future Purchasers

The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the property is sufficient to justify payment, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The City has caused a notice of the Special Tax to be recorded in the Office of the County Recorder. Although 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 when purchasing a property within the District or lending money thereon, as applicable.

California Civil Code Section 1102.6b requires that, in the case of transfers, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser to pay the Special Tax when due.

FDIC/Federal Government Interests in Properties

General. The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest.

Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest.

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The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding.”

This means that, unless Congress has otherwise provided, if a federal governmental entity owns a Taxable Parcel within the District 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 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. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association (“FNMA”) is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States.

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

FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited.

The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC- owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent.

The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it

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recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes.

The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a Taxable Parcel in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Bonds.

No Acceleration Provision

The Bonds and the Fiscal Agent Agreement do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement or in the event interest on the Bonds becomes included in gross income for federal income tax purposes.

Taxability and Audit Risk

As discussed herein under the caption “TAX MATTERS—General,” interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement and otherwise designed to satisfy the requirements of the Code. There is no provision in the Bonds or the Fiscal Agent Agreement for special redemption or acceleration or for the payment of additional interest should such an event of taxability occur, and the Bonds will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Fiscal Agent Agreement.

In addition, Congress is or may be considering in the future legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. The City can provide no assurance that federal tax law will not change while the Bonds are outstanding or that any such changes will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. If the exclusion of interest on the Bonds from gross income for federal income tax purposes were amended or eliminated, it is likely that the market price for the Bonds would be adversely impacted.

The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax- exempt obligations to determine whether, in the view of the Service, interest on such tax- exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the City as a taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome.

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Enforceability of Remedies

The remedies available to the Fiscal Agent and the registered owners of the Bonds upon a default under the Fiscal Agent Agreement or any other document described in this Official Statement are in many respects dependent upon regulatory and judicial actions that are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. Any legal opinions to be delivered concurrently with the issuance of the Bonds will be qualified to the extent that the enforceability of the legal documents with respect to the Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.

Judicial remedies, such as foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. A California court may not strictly apply certain remedies or enforce certain covenants if it concludes that application or enforcement would be unreasonable under the circumstances and it may delay the application of such remedies and enforcement.

No Secondary Market

No representation is made concerning any secondary market for the Bonds. There can be no assurance that any secondary market will develop for the Bonds. Investors should understand the long-term and economic aspects of an investment in the Bonds and should assume that they will have to bear the economic risks of their investment to maturity. An investment in the Bonds may be unsuitable for any investor not able to hold the Bonds to maturity.

Proposition 218

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

Among other things, Section 3 of Article XIIIC states, “…the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, the Governor of the State signed a bill into law enacting Government Code Section 5854, which states that:

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

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

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

Nevertheless, the City has covenanted in the Fiscal Agent Agreement that it shall not initiate proceedings to reduce the maximum Special Tax rates in the District, unless, in connection therewith, (i) the City receives a certification from one or more Independent Consultants which, when taken together, concludes that, on the basis of the land and improvements existing in the District as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied in each Bond Year for any Bonds Outstanding will equal at least 110% of the sum of the estimated Administrative Expenses and gross debt service in each Bond Year on all Bonds to remain Outstanding after the reduction is approved, (ii) the City finds that any reduction made under such conditions will not materially adversely affect the interests of the Owners of the Bonds, and (iii) the City is not delinquent in the payment of the principal of or interest on the Bonds. The City has further covenanted in the Fiscal Agent Agreement that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIIIC of the California Constitution, which purports to reduce or otherwise alter the maximum Special Tax rates, it will commence and pursue legal action seeking to preserve its ability to comply with its covenant described in the preceding sentence. However, no assurance can be given as to the enforceability of the foregoing covenants.

The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See “—Enforceability of Remedies.”

Ballot Initiatives

Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California’s constitutional initiative process, and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The

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adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations.

TAX MATTERS

General. In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is excludable from gross income for federal income tax purposes. Bond Counsel is further of the opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that it is included in adjusted current earnings for purposes of the federal alternative minimum tax imposed on individuals and corporations. The opinions described in the preceding sentences assume the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City will covenant to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Bonds. Bond Counsel is of the opinion that under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from State of California personal income taxes.

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the owners of the Bonds. The extent of these other tax consequences will depend upon such owners’ particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Bonds.

Backup Withholding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007 to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The new reporting requirement does not in and of itself affect or alter the excludability of interest on the Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

Tax Treatment of Original Issue Discount. If the initial offering price to the public (excluding bond houses and brokers) at which a 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 (excluding bond houses and brokers) at which a Bond is sold is greater than the amount payable at maturity thereof, then the excess of the tax basis of a purchaser of such Bond (other than a purchaser who holds such Bond as inventory, stock in trade or for sale to customers in the ordinary course of business) over the principal amount of such Bond constitutes “original issue premium” for purposes of federal income taxes and State of California personal income taxes.

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Under the Code, original issue discount is excludable from gross income for federal income tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues actuarially on a constant interest rate basis over the term of each such Bond and the basis of such Bond acquired at such initial offering price by an initial purchaser of each such Bond will be increased by the amount of such accrued discount. The Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase such Bonds after the initial offering of a substantial amount thereof. Owners who do not purchase such Bonds in the initial offering at the initial offering prices should consult their own tax advisors with respect to the tax consequences of ownership of such Bonds. All holders of such Bonds should consult their own tax advisors with respect to the allowance of a deduction for any loss on a sale or other disposition to the extent that calculation of such loss is based on accrued original issue discount.

Under the Code, original issue premium is amortized for federal income tax purposes over the term of such a Bond based on the purchaser’s yield to maturity in such Bonds, except that in the case of such a Bond callable prior to its stated maturity, the amortization period and the yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such Bond. A purchaser of such a Bond is required to decrease his or her adjusted basis in such Bond by the amount of bond premium attributable to each taxable year in which such purchaser holds such Bond. The amount of bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of such Bonds should consult their tax advisors with respect to the precise determination for federal income tax purposes of the amount of bond premium attributable to each taxable year and the effect of bond premium on the sale or other disposition of such a Bond, and with respect to the state and local tax consequences of owning and disposing of such a Bond.

Changes in Federal and State Tax Law. From time to time, there are legislative proposals in the Congress and in the various state legislatures that, if enacted, could alter or amend federal and state tax matters referred to above or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. 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 issuance and delivery of the Bonds and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

Form of Opinion. The form of Bond Counsel’s anticipated opinion is included in Appendix D. The statutes, regulations, rulings, and court decisions on which such opinions will be based are subject to change.

Taxability and Audit Risk. See SPECIAL RISK FACTORS—Taxability and Audit Risk” for a discussion of certain risk factors applicable to the Bonds.

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LEGAL MATTERS

Concurrent with the issuance of the Bonds, Nossaman LLP, Irvine, California, Bond Counsel, will render its opinion substantially in the form set forth in Appendix D to this Official Statement. Quint & Thimmig LLP, San Francisco, is acting as Disclosure Counsel to the City with respect to the Bonds. Certain legal matters will be passed upon for the City by the City Attorney. Certain legal matters related to the Bonds will be passed upon for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. Payment of the fees and expenses of Bond Counsel, Disclosure Counsel and Underwriter’s Counsel is contingent on the issuance of the Bonds.

FINANCIAL ADVISOR

The City has retained William Euphrat Municipal Finance, Inc., San Francisco, California, as Financial Advisor in connection with the issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. The Financial Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. Compensation paid to the Financial Advisor is contingent upon the issuance of the Bonds.

NO RATING

The City has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds.

LITIGATION

The City is not aware of any pending or threatened litigation challenging the validity of the Bonds, the Special Taxes securing the Bonds, or any action taken by the City in connection with the formation of the District, the levying of the Special Taxes or the issuance of the Bonds.

Each of the two current owners of the Taxable Parcels will represent to the City, in connection with the issuance of the Bonds, that there is no litigation or administrative proceeding of any nature in which the respective parcel owner has been served, or is pending or threatened, which, if resolved against the respective parcel owner, would materially adversely affect the ability of the respective parcel owner to own and operate its Taxable Parcels or to pay the Special Taxes or ad valorem property taxes levied on its Taxable Parcels when due.

UNDERWRITING

The Bonds are being purchased through negotiation by Stifel, Nicolaus & Company, Incorporated DBA Stone & Youngberg, a Division of Stifel Nicolaus (the “Underwriter”). The Underwriter agreed to purchase the Bonds at a price of $______(which is equal to the par amount of the Bonds, less a net original issue discount [plus a net original issue premium] of $______, and less an underwriter’s discount of $______). The initial public offering prices set forth on the inside cover page may be changed by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof.

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CONTINUING DISCLOSURE

The City has covenanted in a Continuing Disclosure Agreement for the benefit of the Owners of the Bonds to provide certain annual financial information and operating data, and to provide notices of the occurrence of certain enumerated events. The City agreed in its certificate to file, or cause to be filed, with the MSRB such report and notices. See Appendix E – “Form of Continuing Disclosure Agreement” for the complete text of the City’s Continuing Disclosure Agreement. The covenants of the City have been made in order to assist the Underwriter in complying with the Rule. The City has not failed to comply in all material respects with any undertaking under the Rule in the past five years.

MISCELLANEOUS

Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City or the District and the purchasers or Owners of any of the Bonds.

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The execution and delivery of this Official Statement has been duly authorized by the City Council, acting as the legislative body of the District.

CITY OF REDWOOD CITY, CALIFORNIA for and on behalf of the CITY OF REDWOOD CITY COMMUNITY FACILITIES DISTRICT NO. 2000-1 (PACIFIC SHORES PROJECT)

By: Director of Finance

18008.02:J11563

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APPENDIX A

CITY AND COUNTY GENERAL DEMOGRAPHIC INFORMATION

The City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) (the “District”) is located in the City of Redwood City (the “City”) in San Mateo County (the “County”). The financial and economic data for the City are presented for information purposes only. The Bonds are not a debt or obligation of the City or the County, but are a limited obligation of the City for the District secured solely by the funds pledged for such payment under the Fiscal Agent Agreement.

The County is one of nine counties comprising the economic geographic unit known as the San Francisco Bay Area. The County is a major employment base, and is also accessible to the San Jose and Silicon Valley areas approximately 30 miles south via Interstate 280 or U.S. Highway 101. San Francisco International Airport is located in the County.

The City is located in the San Francisco Bay Area 25 miles south of San Francisco. It is the oldest bayside city in the County. The City was incorporated in 1867, and has been the County Seat since 1856. City limits cover approximately 34 square miles of generally level terrain. The City combines residential, industrial, and commercial elements in a largely urban environment. Its waterfront provides a yacht harbor and the only deep-water port in the South Bay. A wide variety of housing types are available. Services and trade, the County’s two largest industry divisions, are expected to provide close to two-thirds of anticipated growth in the next two years.

Population

The following table lists population estimates for the City, County and the State for the last five calendar years, as of January 1.

SAN MATEO COUNTY Population Estimates Calendar Years 2007 through 2011 as of January 1

2007 2008 2009 2010 2011 City of Redwood City 75,080 75,525 76,198 76,766 77,712 San Mateo County 701,838 707,820 713,818 718,614 724,702 State of California 36,399,676 36,704,375 36,966,713 37,223,900 37,510,766

Source: State Department of Finance estimates (as of January 1).

Employment and Industry

The unemployment rate in the San Francisco-San Mateo-Redwood City MD was 7.9% in October 2011, just below the year-ago estimate of 8.8%. This compares with an unadjusted unemployment rate of 11.2% for California and 8.5% for the nation during the same period. The unemployment rate was 7.2% in Marin County, 8.1% in San Francisco County, and 7.9% in San Mateo County.

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SAN FRANCISCO SAN MATEO REDWOOD CITY METROPOLITAN DIVISION (MARIN, SAN FRANCISCO AND SAN MATEO COUNTIES) Civilian Labor Force, Employment and Unemployment; Employment by Industry (Annual Averages)

2006 2007 2008 2009 2010 Civilian Labor Force(1) 912,600 935,800 962,600 965,200 961,800 Employment 877,100 898,600 914,700 882,700 874,300 Unemployment 35,500 37,200 47,900 82,500 87,500 Unemployment Rate 3.9% 4.0% 5.0% 8.5% 9.1% Wage and Salary Employment:(2) Agriculture 2,800 2,700 2,700 2,500 2,500 Natural Resources and Mining 200 200 200 200 200 Construction 43,100 45,400 44,300 35,100 32,000 Manufacturing 43,500 43,500 42,100 38,100 37,500 Wholesale Trade 26,700 27,100 26,800 24,500 24,100 Retail Trade 93,600 95,000 94,000 87,700 86,800 Transportation, Warehousing and Utilities 42,100 40,600 39,800 37,800 36,600 Information 39,000 39,500 40,800 39,600 38,500 Finance and Insurance 67,500 67,700 65,600 60,100 57,700 Real Estate and Rental and Leasing 21,200 21,100 21,200 19,500 19,100 Professional and Business Services 191,700 203,900 210,100 198,300 199,000 Educational and Health Services 103,200 105,200 107,400 108,700 108,300 Leisure and Hospitality 119,900 124,300 126,800 122,200 122,300 Other Services 37,300 38,600 39,400 38,000 37,700 Federal Government 19,900 19,400 19,200 18,900 20,100 State Government 34,100 34,900 35,600 35,400 35,300 Local Government 81,400 82,700 83,500 81,400 79,900 Total, All Industries(3) 967,200 991,800 999,300 947,800 937,700

(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. (3) Totals may not add due to rounding. Source: State of California Employment Development Department, March 2010 Benchmark.

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The following table shows the major employers in the County as of January 2011, listed in alphabetical order.

SAN MATEO COUNTY Major Employers (Listed alphabetically) January 2011

Employer Name Location Industry AB SCIEX Foster City Scientific Apparatus & Instruments-Mfrs Burlingame Millbrae Yellow Cab Burlingame Taxicabs & Transportation Service Electronic Arts Inc Redwood City Game Designers (Mfrs) Electronics For Imaging Inc Foster City Digital Printing (Mfrs) Forced Dump Debris Box Svc Burlingame Garbage Collection Franklin Resources Inc San Mateo Investment Management Franklin Trust Co San Mateo Mutual Funds Genentech Inc South San Francisco Drug Millers (Mfrs) Gilead Sciences Inc Foster City Pharmaceutical Consultants Guckenheimer Inc Redwood City Food Service-Management Health Science Library Daly City Services NEC Kaiser Permanente Medical Ctr Redwood City Hospitals Kaiser Permanente Medical Ctr South San Francisco Hospitals Oracle Corp Redwood City Computer Software-Manufacturers Peninsula Medical Ctr Burlingame Hospitals Rudolph & Sletten Inc Redwood City Building Contractors San Mateo County Human Svc Belmont County Government-Social/Human Resources San Mateo County Mental Health San Mateo County Government-Public Health Programs San Mateo County Transit Dist San Carlos County Government-Transportation Programs San Mateo Medical Ctr San Mateo Crisis Intervention Service SRI International Inc Menlo Park Research Service Stanford Linear Accelerator Menlo Park Research Service US Interior Dept Menlo Park Federal Government-Conservation Depts Visa International Svc Assn Foster City Credit Card-Merchant Services Visa USA Inc Foster City Credit Card & Other Credit Plans

Source: California Employment Development Department, extracted from The America’s Labor Market Information System (ALMIS) Employer Database, 2012 1st Edition.

The following table shows the principal employers in the City as of June 30, 2011.

PRINCIPAL EMPLOYERS City of Redwood City (as of 2011)

% of Total Number of City Employer Employees Rank Employment Oracle Corporation 6,700 1 17.63% Electronic Arts 3,416 2 8.99 San Mateo County 2,200 3 5.79 Kaiser Permanente 2,044 4 5.38 Sequoia Hospital 1,013 5 2.67 Redwood City School District 1,000 6 2.63 Broad Vision 759 7 2.00 Sequoia Union High School District 700 8 1.84 City of Redwood City 607 9 1.60 Informatica Corporation 400 10 1.05

Source: City of Redwood City, Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2011.

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Construction Activity

Provided below are the building permits and valuations for the City and the County for calendar years 2006 through 2010. Figures for 2011 are not yet available.

CITY OF REDWOOD CITY Total Building Permit Valuations (Valuations in Thousands)

2006 2007 2008 2009 2010 Permit Valuation New Single-family $ 1,509.6 $ 9,615.3 $ 6,051.1 $ 9,249.1 $ 10,002.2 New Multi-family 0.0 0.0 0.0 14,135.0 3,359.4 Res. Alterations/Additions 31,707.9 26,033.9 21,986.0 17,739.0 19,047.3 Total Residential 33,217.5 35,649.1 28,037.1 41,123.2 32,408.9 New Commercial 400.0 980.0 32,468.0 0.0 0.0 New Industrial 2,500.0 3,600.0 2,200.0 5,000.0 0.0 New Other 2,590.6 1,416.9 1,318.2 2,081.0 1,015.1 Com. Alterations/Additions 37,794.5 118,838.6 82,204.4 26,760.1 30,631.3 Total Nonresidential $43,285.0 $124,835.5 $118,190.7 $33,841.1 $31,646.3 New Dwelling Units Single Family 7 29 18 40 46 Multiple Family 0 0 0 105 16 TOTAL 7 29 18 145 62

Source: Construction Industry Research Board, Building Permit Summary.

SAN MATEO COUNTY Total Building Permit Valuations (Valuations in Thousands)

2006 2007 2008 2009 2010 Permit Valuation New Single-family $227,781.1 $316,491.4 $245,433.9 $147,515.5 $189,296.6 New Multi-family 101,114.4 67,181.1 122,424.2 74,329.6 21,309.0 Res. Alterations/Additions 305,663.4 274,263.6 272,177.0 204,482.0 262,592.1 Total Residential 634,558.9 657,936.0 640,035.2 426,327.0 473,197.6 New Commercial 218,650.9 366,581.6 114,968.0 17,942.0 62,510.5 New Industrial 127,900.5 29,263.8 2,200.0 5,000.0 0.0 New Other 50,057.9 74,829.0 85,470.2 70,410.1 66,274.8 Com. Alterations/Additions 329,062.3 336,069.0 315,260.4 235,373.3 283,752.5 Total Nonresidential $725,671.6 $806,743.4 $517,898.6 $328,725.5 $412,537.8 New Dwelling Units Single Family 445 658 312 236 216 Multiple Family 492 367 630 393 111 TOTAL 937 1,025 942 629 327

Source: Construction Industry Research Board, Building Permit Summary.

Effective Buying Income

“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by

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corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”

The following table summarizes the total effective buying income for the City, the County of San Mateo, the State and the United States for the period 2006 through 2010. Figures for 2011 are not yet available.

City of Redwood City; County of San Mateo Effective Buying Income As of January 1, 2006 through 2010

Total Effective Buying Median Household Income (000’s Effective Buying Year Area Omitted) Income 2006 City of Redwood City $ 2,144,220 $50,560 San Mateo County 21,837,738 62,749 California 764,120,963 46,275 United States 6,107,092,244 41,255 2007 City of Redwood City $ 2,275,185 $60,874 San Mateo County 23,043,253 65,262 California 814,894,438 48,203 United States 6,300,794,040 41,792 2008 City of Redwood City $ 2,381,243 $63,326 San Mateo County 23,925,603 67,466 California 832,531,445 48,952 United States 6,443,994,426 42,303 2009 City of Redwood City $ 2,409,628 $65,556 San Mateo County 23,835,480 69,276 California 844,823,319 49,736 United States 6,571,536,768 43,252 2010 City of Redwood City $ 2,335,918 $62,617 San Mateo County 23,489,013 66,508 California 801,393,028 47,177 United States 6,365,020,076 41,368

Source: The Neilson Company (US), Inc.

Commercial Activity

In 2009, the State Board of Equalization converted the business codes of sales and use tax permit holders to North American Industry Classification System codes. As a result of the coding change, data for 2009 is not comparable to that of prior years. A summary of historical taxable sales within the City during the past five years in which data is available is shown in the following table. Total taxable sales during calendar year 2009 in the City were reported to be $1,387,335,000, a 13.3% decrease over the total taxable sales of $1,600,517,000 reported during calendar year 2008. Figures for 2010 are not yet available.

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CITY OF REDWOOD CITY Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets Number of Taxable Number of Taxable Permits Transactions Permits Transactions 2005 986 1,162,294 2,206 1,594,319 2006 1,043 1,236,743 2,249 1,704,224 2007 1,047 1,257,101 2,228 1,711,777 2008 1,005 1,126,550 2,138 1,600,517 2009 1,193 961,033 1,987 1,387,335

Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

In 2009 the State Board of Equalization converted the business codes of sales and use tax permit holders to North American Industry Classification System codes. As a result of the coding change, data for 2009 is not comparable to that of prior years. A summary of historical taxable sales within the County during the past five years in which data is available is shown in the following table. Total taxable sales during calendar year 2009 in the County were reported to be $11,327,022,000, a 13.8% decrease over the total taxable sales of $13,137,913,000 reported during calendar year 2008. Figures for 2010 are not yet available.

COUNTY OF SAN MATEO Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)

Retail Stores Total All Outlets Number of Number of Permits on Taxable Permits on Taxable July 1 Transactions July 1 Transactions 2005 9,282 $8,495,119 21,440 $12,451,350 2006 9,467 8,723,143 21,082 12,900,391 2007 9,278 8,998,981 20,202 13,326,306 2008 9,098 8,421,727 19,853 13,137,913 2009 11,143 7,455,767 18,840 11,327,022

Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

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APPENDIX B

RATE AND METHOD

RATE AND METHOD APPORTIONMENT OF SPECIAL TAX FOR CITY OF REDWOOD CITY COMMUNITY FACILITIES DISTRICT NO. 2000-1 (PACIFIC SHORES PROJECT)

Section 1. Definitions

The defined terms below shall apply wherever such terms are used in this Rate and Method of Apportionment.

“Accessory Parcel” means the lots numbered 11 through 16 as shown on Exhibit B-1 to the Development Agreement, or as they may be modified from time to time, and any other parcel (other than a Common Parcel) used exclusively for purposes accessory to commercial/office development, including but not limited to fitness, multi-media, day care/education, marina resources, aquatic, conference, restaurant/café, retreat, grounds and building maintenance, or public rest rooms.

“Act” means the Mello-Roos Community Facilities Act of 1982 (Chapter 2.5, Part 1, Division 2, Title 5 of the California Government Code), as amended from time to time.

“Administrative Expenses” means the actual or estimated costs incurred by the City on behalf of itself or the CFD to determine, levy and collect the Special Taxes, including salaries of City employees and the fees of consultants, bond paying agents, fiscal agents and bond fiscal agents; the costs of collecting installments of the Special Taxes; preparation and maintenance of required records and reports; preparation of financial audits; and any other costs required to administer the CFD or any bonds of the CFD.

“Annual Costs” means, for each Fiscal Year, the total of 1) an amount sufficient to pay Debt Service, 2) Administrative Expenses, and 3) any amounts needed to replenish bond reserve funds and to make up for any deficit caused by actual or estimated delinquencies in Special Taxes for the previous or current Fiscal Year.

“Annual Tax Revenues” means the amount of Special Taxes collected each Fiscal Year to pay the Annual Costs.

“Assessor” means the Assessor for the County or his or her designee.

“Auditor” means the Auditor for the County or his or her designee.

“Building Parcel” means, initially, the numbered lots 1 through 10 and the lettered lots 1P through 6P and 10P as shown on Exhibit B-l to the Development Agreement, and subsequently, any parcels into which such initial Building Parcels may be subdivided that are assigned Commercial Square Feet or Parking Units pursuant to Section 3 hereof.

“CFD” means City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project).

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“Classification Date” means for Fiscal Year 2000-01, May 1, 2000, and for each Fiscal Year thereafter, each June 1 of the prior Fiscal Year.

“City” means the City of Redwood City, California.

“City Council” means the City Council of the City acting as the legislative body of the CFD.

“City Manager” means the city manager of the City.

“Commercial Square Feet” or “Commercial Square Foot” means the commercial square feet allocated to a Building Parcel pursuant to the following schedule, as such schedule may be modified by the City Manager pursuant to Section 3 hereof.

Building Parcel Commercial Square Feet 1 131,000 2 133,000 3 133,000 4 107,894 5 116,000 6 269,906 7 88,050 8 150,622 9 269,906 10 150,622 1P 0 2P 0 3P 0 4P 0 5P 0 6P 0 10P 0 Total 1,550,000

“Common Parcel” means those parcels designated as lettered lots A through I on Exhibit B-1 to the Development Agreement, as they may be modified from time to time, including roads and parcels used to provide open space and recreational uses, along with complementary facilities, including but not limited to parks, playfields, berms, trails and paths.

“County” means County of San Mateo, California.

“Debt Service” means the total amount that must be collected in any Fiscal Year in order to make timely payments of principal and interest on outstanding bonds of the CFD.

“Development Agreement” means that certain development agreement by and between the City and Pacific Shores Center Limited Partnership dated October 26, 1998 recorded August 6, 1999 as instrument #1999-134701 in the official records of the County, as it may be amended from time to time.

“Final Development Plan” means a site plan and overall architectural and/or landscaping plan describing contemplated development on a Parcel, as more specifically defined in the Development Agreement.

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“Fiscal Year” means a period beginning July 1 and ending the following June 30.

“Maximum Annual Special Tax Rate” means the maximum amount of Special Taxes per Commercial Square Foot that may be levied against a Taxable Parcel.

“Net Taxable Square Feet” means the total amount of Commercial Square Feet subject to the levy of Special Taxes in any given Fiscal Year.

“Parking Unit” means the number of parking spaces assigned to a Building Parcel to serve Commercial Square Feet on a different Building Parcel pursuant to the Development Agreement, or a Final Development Plan when applicable.

“Parcel” means any Parcel within the boundaries of the CFD that is identified by an Assessor’s parcel number on the secured tax rolls of the County as of the January 1 lien date (or such other lien date as may be established by the Assessor) of the prior Fiscal Year.

“Parcel Classification” means the placement of each Parcel into its respective classification as such parcel exists on each Classification Date.

“Prepaid Parcel” means any Parcel that has prepaid in full pursuant to this Rate and Method of Apportionment the Special Taxes to be levied against such Parcel in satisfaction of its pro rata share of Annual Costs.

“Principal Prepayment Amount” means the amount of unpaid outstanding bond principal and authorized but unissued bond principal of the CFD allocable to each Taxable Parcel as of the date of such calculation.

“Public Parcel” means any Parcel that is, or pursuant to a Final Development Plan, is designated to be, publicly owned and which is normally exempt from ad valorem taxes under California law, including public streets, schools, school district administrative offices, police and fire facilities, parks, and public drainage ways, rights-of-way, landscaping, greenbelts and open space.

“Residential Parcel” means any Parcel approved by the City for single or multi-family residential use which does not contain any Commercial Square Feet.

“Special Tax” or “Special Taxes” means any tax levy by the City Council with respect to the CFD under the Law on Taxable Parcels.

“Special Tax Report” means the report prepared annually pursuant to Section 3 hereof.

“Tax Collection Schedule” means the document prepared by the City Manager for use by the Auditor in collecting the Special Taxes each Fiscal Year pursuant to Section 6 hereof.

“Taxable Classification Date” means the date on which a Parcel is first classified as a Taxable Parcel.

“Taxable Parcel” means any Building Parcel approved for Commercial Square Feet or Parking Units which is not a Prepaid Parcel.

“Tax-Exempt Parcel” means any Parcel that is a Prepaid Parcel, Public Parcel, Accessory Parcel, Common Parcel or Residential Parcel. However, Taxable Parcels that are acquired by a public entity shall remain subject to the applicable Special Tax pursuant to Section 53317.4 of the Law.

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Section 2. Basis of Special Tax Levy

A Special Tax under the Law applicable to each Taxable Parcel shall be levied and collected according to the Special Tax liability determined by the City Council through the application of the procedures described below.

Section 3. Determination and Classification of Parcels Subject to Special Tax

Prior to the first issuance of bonds, and thereafter prior to July 1 of each Fiscal Year, the City Manager shall cause to be prepared a Special Tax Report setting forth: 1) the classification as of the Classification Date applicable for such Fiscal Year of each Parcel within the boundaries of the CFD, 2) a projected sources and uses of funds for the CFD in such Fiscal Year showing that projected Annual Tax Revenues are sufficient to pay projected Annual Costs, 3) the number of Net Taxable Square Feet subject to taxation in such Fiscal Year, 4) the Special Tax rate necessary to satisfy such Annual Costs applicable to such Net Taxable Square Feet, 5) the amount of Special Taxes to be levied on each Taxable Parcel in the next ensuing Fiscal Year, 6) the annual Principal Prepayment Amount allocable to each Taxable Parcel, and 7) a Tax Collection Schedule.

Parcels shall be classified as of their status applicable in the next Fiscal Year on each Classification Date. The secured property tax roll, land use codes and plot map books maintained by the County Assessor of the County, in combination with official records maintained by the City regarding the Development Agreement, Final Development Plans, recorded final maps, building permits issued, and other changes in parcel development status, will be the basis for classifying the Parcels in the CFD. If the land use code on the secured property tax roll is incorrect for any Parcel, the City may assign the appropriate code based on its review of the status of the Parcel.

Building Parcels shall be classified as either Taxable Parcels or, if the Special Taxes for such Parcels have been prepaid, Prepaid Parcels. Residential Parcels, Common Parcels, Accessory Parcels and Public Parcels shall be classified as Tax-Exempt Parcels.

Once a Parcel is classified as a Taxable Parcel it may not be removed from such classification unless Special Taxes allocable to such Parcel have been prepaid pursuant to Section 7 hereof, in which case such Parcel shall be reclassified as a Prepaid Parcel. So long as any bonds of the CFD remain outstanding or authorized but unissued, save the exceptions for reallocation and subdivisions as expressly noted in this Section 3, Commercial Square Feet allocable to a Taxable Parcel may not be reduced. Notwithstanding the prohibition against reducing Commercial Square Feet allocable to a Taxable Parcel, Commercial Square Feet may be reallocated among Building Parcels according to the actual number of Commercial Square Feet constructed or to be constructed thereon; provided, however, the Net Taxable Square Feet after such reallocation may not be less than 1,550,000 square feet, less the amount of Commercial Square Feet allocated to any Prepaid Parcels. In connection with any such reallocation, Parking Units shall also be reallocated as is appropriate.

If a Building Parcel is subdivided, the City Manager shall assign Commercial Square Feet and Parking Units to the successor Parcels (including zero assignments) pursuant to the applicable Final Development Plan for such Parcel, provided that the total number of Commercial Square Feet on such successor Parcels may not be less than the Commercial Square Feet assigned to the predecessor Parcel.

The Special Tax shall be levied only on Taxable Parcels. The amount of the Special Tax for each Taxable Parcel shall be determined in accordance with the provisions of Section 6

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hereof. Each Taxable Parcel’s Special Tax for the next Fiscal Year shall be levied against such Parcel’s assessor’s parcel number as it was shown on the County Assessor’s records of Parcels in the CFD as of the prior January 1 lien date, or such other lien date established by the County Assessor.

Section 4. Termination of the Special Tax

When all of the CFD’s Administrative Expenses and Debt Service obligations are satisfied and no bonds authorized for issuance by the CFD remain either unissued or outstanding, the City Council shall determine that the Special Tax shall cease to be levied. The City Council shall then direct the City Clerk to record a Notice of Release of Special Tax as provided by law. Notwithstanding the foregoing, in no event shall the Special Tax be levied after the Fiscal Year ending June 30, 2022.

Section 5. Maximum Annual Special Tax Rate

For each Taxable Parcel, the Maximum Annual Special Tax Rate shall be $1.63.

Prepaid Parcels and Tax-Exempt Parcels shall not be subject to the levy of Special Taxes.

Section 6. Apportionment, Levy and Selection of Special Tax Rates

A Special Tax rate per Commercial Square Foot shall be established annually by the City Council. The Special Tax rate shall then be multiplied by the Commercial Square Feet allocable to each Taxable Parcel to determine the Special Tax applicable to each such Taxable Parcel.

Prior to July 1 of each Fiscal Year for which Annual Costs are payable, the Special Tax rate allocable to each Taxable Parcel in the CFD shall be established as follows:

If No Credits Are Due the Owners of Parcels Pursuant to Section 10 Hereof:

Step 1 The total Annual Costs for such Fiscal Year shall be projected.

Step 2 The sum of unexpended fund balances (including amounts collected in the prior Fiscal Year to be applied to Debt Service in such Fiscal Year) held under the fiscal agent agreement securing outstanding CFD bonds that is available to pay Debt Service in such Fiscal Year shall be determined.

Step 3 The amount of Debt Service due in such Fiscal Year payable from Annual Tax Revenues collected in the prior Fiscal Year shall be determined.

Step 4 The amounts calculated in Steps 1 and 3 above shall be added together and the amount determined in Step 2 above shall be subtracted from such sum to arrive at the Annual Tax Revenues to be collected in such Fiscal Year.

Step 5 The Maximum Annual Special Tax Rate shall be multiplied by the Commercial Square Feet corresponding to each Taxable Parcel.

Step 6 If the total of the amounts calculated in Step 5 is greater than the Annual Costs, the Special Tax rate shall be decreased until the Special Tax rate on all Taxable Parcels produces scheduled Annual Tax Revenue equal to the projected Annual Costs. If the total of the amounts calculated in Step 5 is less than Annual

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Costs, the Special Tax rate applicable to Taxable Parcels shall be established at the Maximum Annual Special Tax Rate.

Step 7 An annual Special Tax shall be determined for each Taxable Parcel by multiplying the Special Tax rate identified in Step 6 above times the number of Commercial Square Feet applicable to each such Taxable Parcel.

If Credits Are Due the Owners of Parcels Pursuant to Section 10 Hereof:

Step 1 The annual Special Tax rates shall be calculated as provided for in Step 5 above without any adjustment to Annual Costs to reflect the credit due as provided for in Section 10 hereof (the “Initial Special Tax Rate”).

Step 2 A Special Tax shall be calculated for the Parcel or Parcels due a credit by multiplying the Initial Special Tax Rate times the number of Commercial Square Feet applicable to such Parcel or Parcels (the “Initial Special Tax”). For each applicable Parcel, the credit as due shall be subtracted from the applicable Initial Special Tax to determine the adjusted Special Tax due on such Parcel or Parcels (the “Adjusted Special Tax”).

Step 3 The Commercial Square Feet applicable to the Parcel or Parcels due an Adjusted Special Tax shall be subtracted from the total of all Commercial Square Feet subject to taxation in such Fiscal Year (the result of such calculation being the “Revised Commercial Square Feet”) and the total amount of Adjusted Special Taxes shall be subtracted from the Annual Costs for such Fiscal Year (the result of such calculation being the “Revised Annual Costs”).

Step 4 The Revised Annual Costs shall be distributed among the remaining Taxable Parcels not due any credits in the proportion that the Commercial Square Feet of such Taxable Parcels bear to the Revised Commercial Square Feet; provided, however, that the Special Tax rate per Commercial Square Foot produced by such calculation may not exceed the Maximum Annual Special Tax Rate applicable to such Taxable Parcels.

Step 5 In the event that the sum of the Revised Annual Costs and the Adjusted Special Tax on all Parcels due a credit is less than Annual Costs for such Fiscal Year, the credit due on each Parcel shall be reduced by equal proportions until Annual Costs are satisfied, and any unpaid credit shall credited in the following Fiscal Year.

After each Parcel has been annually classified, the annual Special Tax and Principal Prepayment Amount for each Taxable Parcel has been calculated, and a Special Tax Report for such Fiscal Year has been approved by resolution of the City Council in July of each Fiscal Year, the City Manager shall forward a Tax Collection Schedule showing the annual Special Tax liability for each Taxable Parcel with Commercial Square Feet thereon to the County Auditor, requesting that the Tax Collection Schedule be placed on the secured property tax roll for the applicable Fiscal Year. The Tax Collection Schedule shall be sent not later than August 10 or such prior date required by the County Auditor for such placement. Notwithstanding the foregoing, if for any reason the Special Tax levy on a Taxable Parcel with Commercial Square Feet thereon will not be included on the County secured tax roll, the CFD may levy the Special Taxes for such Fiscal Year by means of a direct billing of the owners of the Taxable Parcels.

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The undivided Special Tax levy on Taxable Parcels with only Parking Units assigned thereto shall not be placed on the secured tax roll but shall be billed directly to the owners thereof by the CFD. Such Special Tax invoices issued by the CFD to the owners of Taxable Parcels with only Parking Units assigned thereto that are subject to an undivided levy pursuant to Section 8 hereof shall clearly state 1) all Assessor’s parcel numbers subject to the applicable undivided Special Tax levy, 2) the undivided Special Tax levied against each such Taxable Parcel, 3) the undivided Special Tax due on the Taxable Parcel for which the invoice has been issued, 4) that the payment of the Special Tax on Assessor’s parcel number [list the Assessor’s parcel number placed on secured tax roll to which the undivided Special Tax levy also applies] (which Special Tax obligation has been placed on the secured tax roll) will satisfy the payment due under this invoice and that no further payment need be made if Special Taxes on Assessor’s parcel number [list the Assessor’s parcel number placed on secured tax roll to which the undivided Special Tax levy also applies] are paid in full, and 5) failure to pay the undivided Special Taxes on [list Assessor’s parcel numbers of the Taxable Parcels subject to the undivided Special Tax levy] of [show amount] shall result in foreclosure proceeding against all such Taxable Parcels in accordance with the terms of the fiscal agent agreement securing the outstanding CFD bonds and the Mello-Roos Act of 1982, as amended.

Failure of the CFD to directly invoice the owner of a Taxable Parcel subject to the levy of Special Taxes shall in no way affect the validity of such Special Tax levy.

The City shall make every effort to correctly assign the Special Tax rates and calculate the annual Special Tax liability for each Taxable Parcel and the annual Principal Prepayment Amount for each Taxable Parcel. It shall be the burden of the taxpayer to correct any errors in the determination and classification of the Parcels subject to the Special Tax and their respective Special Tax and Principal Prepayment Amount liabilities.

Section 7. Prepayment of Special Taxes

Prepayment Prior to the Initial Sale of Bonds. Prior to the first sale of CFD bonds secured by the Special Taxes, the owner of each Building Parcel shall have the option to prepay future Special Taxes to be levied against such Building Parcel with a single cash payment. The amount of such optional cash payment shall be determined as follows:

Step 1 Prior to the first sale of CFD bonds, the total number of Commercial Square Feet allocable to all Building Parcels in the CFD shall be determined as of the applicable Classification Date.

Step 2 The maximum approved bonded indebtedness of the CFD as specified in the City’s resolution expressing its intention to form the CFD adopted on March 13, 2000 shall be determined. From such amount shall be deducted the following bond financing costs: the projected amount to be deposited to bond debt service reserve funds, interest projected to be capitalized from the proceeds of bonds, and any projected underwriter’s discount and bond insurance premiums, all as identified in the report caused to be prepared by the City Manager in connection with the formation of the CFD as required under Sections 53321.5 and 53325 of the Law. All other budgeted costs of creating the CFD and issuing bonds approved by the City Council shall be included as project costs.

Step 3 The amount determined in Step 2 above shall be divided by the Commercial Square Feet determined in Step 1 above.

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Step 4 The quotient resulting from Step 3 above shall, for each Building Parcel, be multiplied by the number Commercial Square Feet allocable to each such Building Parcel. The product of such multiplication shall be the optional cash payment amount assigned to each such Building Parcel.

Notice shall be given by mail to each owner of Building Parcels within the CFD of a 10- day period prior to the initial sale of bonds within which cash payments may be made. Only cash payments in whole may be accepted in lieu of the payment of annual Special Taxes. Parcels for which the prepayment of Special Taxes in whole has been made shall be reclassified as Prepaid Parcels and shall no longer be subject to the levy of Special Taxes.

Prepayment Subsequent to the Initial Sale of Bonds. The owner of any Building Parcel may prepay the Special Taxes to be levied against such Parcel through the term to maturity of outstanding CFD bonds and authorized but unissued CFD bonds. Special Taxes may not be prepaid in part. Optional prepayment amounts for each Building Parcel subsequent to the first sale of CFD bonds shall be determined annually for each Fiscal Year at the same time annual Special Taxes are determined as follows.

Step 1 The total amount of unpaid CFD bond principal outstanding at the beginning of each Fiscal Year plus authorized and unissued CFD bond principal shall be determined, from which amount shall be subtracted any principal coming due in such Fiscal Year, the payment of which was provided for in the collection of the prior Fiscal Year’s Annual Tax Revenues.

Step 2 The result determined in Step 1 above shall be divided by the Net Taxable Square Feet for such Fiscal Year to arrive at the unpaid outstanding and authorized CFD bond principal per Commercial Square Foot for such Fiscal Year.

Step 3 For each Taxable Parcel, the unpaid outstanding and authorized CFD bond principal per Commercial Square Foot for such Fiscal Year as determined in Step 2 above shall be multiplied by the total number of Commercial Square Feet allocable to such Taxable Parcel to arrive at the Principal Prepayment Amount allocable to each such Taxable Parcel.

In each Fiscal Year, the owner of a Building Parcel may prepay the future Special Tax obligations of such Parcel by paying in cash the sum of i) the amount of any delinquent and unpaid installments of Special Taxes levied against such Parcel, together with any penalties, interest and costs due thereon, ii) the Special Taxes levied against such Parcel in such Fiscal Year, iii) the Principal Prepayment Amount allocable to such Taxable Parcel in such Fiscal Year, rounded up to the nearest integral multiple of $5,000, iv) a prepayment premium in an amount equal to the prepayment premium required under the fiscal agent agreement to be paid on outstanding CFD bonds to be called on the next permissible call date times the ratio that such Parcel’s number of Commercial Square Feet bears to the Net Taxable Square Feet in such Fiscal Year times the unpaid CFD bond principal outstanding at the beginning of such Fiscal Year, v) a reasonable fee, fixed by the City Manager, for the cost of administering the prepayment and the advance redemption of bonds, less vi) a credit for such Taxable Parcel’s pro rata share of the reserve fund balance (if any) established under the fiscal agent agreement for any CFD bonds, and less vii) any credit due the owner of such Parcel as provided for in Section 10 hereof.

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Section 8. Undivided Levy

The Special Tax levied on each Taxable Parcel allocated Commercial Square Feet shall include an undivided levy on any other Parcel or Parcels to which applicable Parking Units have been assigned by the City pursuant to the following table or a Final Development Plan, as applicable, subject to any future subdivision or merger and the reallocation of Commercial Square Feet and Parking Units pursuant to Section 3 hereof. For the purposes of collecting such Special Taxes, the City shall levy the entire tax on the Parcel to which Commercial Square Feet are assigned and on the Parcel or Parcels to which related Parking Units have been assigned. Special Taxes due on Taxable Parcels with Commercial Square Feet thereon shall be placed on the secured tax roll. The associated undivided Special Tax levy on the Parcel or Parcels to which applicable Parking Units have been assigned shall be billed directly to the owner thereof as provided for in Section 6 hereof. If Special Taxes subject to an undivided levy which have been placed on the secured tax roll are paid in a timely manner, the associated undivided Special Tax levy billed directly to the owner of a Taxable Parcel shall, with no further action required by the owner or the CFD, be deemed paid.

In the event Special Taxes become delinquent on a Taxable Parcel subject to an undivided levy, such Special Taxes shall be deemed delinquent on both the Parcel against which such delinquent Special Taxes are shown on the secured property tax roll, as well as on the Parcel or Parcels to which applicable Parking Units have been assigned by the City, the Special Taxes on which have been billed directly by the CFD, and the CFD shall pursue such foreclosure remedies as are available to it under the fiscal agent agreement securing outstanding CFD bonds and the Law against both such Parcels. The payment of Special Taxes subject to an undivided levy on more than one Taxable Parcel shall be deemed satisfied on all Taxable Parcels subject to such undivided levy if paid on any one such Taxable Parcel.

Then the Parking Units If the Commercial Square associated with such Commercial Feet is on the Building Square Feet is on the Building Parcel designated in the Parcel designated in the Development Agreement as: Development Agreement as: 1 1P 2 2P 3 3P 4 4P 5 5P 6 6P 10 10P

Section 9. Application of Surplus Tax Revenues

Any amounts collected in excess of Annual Costs shall be applied as stipulated in the fiscal agent agreement securing outstanding bonds of the CFD.

Section 10. Administrative Changes

The City Manager has the authority to make necessary administrative adjustments to the Rate and Method of Apportionment in order to remedy any portions of this Rate and Method of Apportionment that require clarification, provided that no such adjustment shall result in a tax levy on any Taxable Parcel in excess of the Maximum Annual Special Tax Rate.

Any taxpayer that believes that the amount of the Special Tax levied on a Parcel is in error may file a written notice with the City Manager appealing the Special Tax. Any such

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notice of appeal must be filed by January 1 of the Fiscal Year for which the Special Tax in question has been levied. The City Manager or his designee will then promptly review all such timely-filed appeals, and if necessary, meet with the appellant. If the findings of the City Manager verify that the Special Tax should be modified, a recommendation at that time will be made to the City Council and, as appropriate, the Special Tax shall be corrected and, if applicable, a credit shall be granted against future Special Taxes to be levied on such Parcel as provided for in Section 6 hereof. The City Manager, in his sole discretion, may review appeals filed after the January 1 deadline, regardless of the merit of any such appeals. Under no circumstances will the City be obligated to grant refunds of Special Taxes already levied.

Interpretations may be made by resolution of the City Council for purposes of clarifying any vagueness or ambiguity as it relates to the Special Tax or the Maximum Annual Special Tax Rate, the method of apportionment, the classification of properties, or any definition applicable to the CFD.

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APPENDIX C

SUMMARY OF THE FISCAL AGENT AGREEMENT

[to come]

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APPENDIX D

FORM OF OPINION OF BOND COUNSEL

[Bond Closing Date]

[Addressees]

Re: $______City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) Special Tax Refunding Bonds, Series 2012

Ladies and Gentlemen:

We have acted as bond counsel to the City of Redwood City (the “City”) in connection with the issuance by the City of its $______City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) Special Tax Refunding Bonds, Series 2012 (the “Bonds”), on behalf of City of Redwood City Community Facilities District No. 2000-1 (Pacific Shores Project) (the “District”). The Bonds are being issued pursuant to the Mello- Roos Community Facilities Act of 1982, as amended (Section 53311 et seq., of the California Government Code) (the “Act”), a Fiscal Agent Agreement, dated as of January 1, 2012 (the “Fiscal Agent Agreement”), between the City on behalf of the District and U.S. Bank National Association (the “Fiscal Agent”). We have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. Capitalized undefined terms used herein have the meanings ascribed thereto in the Fiscal Agent Agreement.

As Bond Counsel we have examined copies certified to us as being true and complete copies of the proceedings of the City and in connection with the authorization and sale of the Bonds. Our services as Bond Counsel were limited to an examination of the transcript of such proceedings and to rendering the opinions set forth herein. In this connection, we have also examined such other documents, opinions and instruments as we have deemed necessary in order to render the opinions expressed herein. In such examination, we have assumed the genuineness of all signatures on original documents (other than signatures of the City) and the conformity to the original documents of all copies submitted to us. We have also assumed the due execution and delivery of all documents (other than with respect to the City) which we have examined where due execution and delivery are a prerequisite to the effectiveness thereof. As to the various questions of fact material to our opinion, we have relied upon statements or certificates of officers and representatives of the City, public officials and others.

On the basis of the foregoing examination and assumptions and in reliance thereon and on all such other matters of fact as we deemed relevant under the circumstances, and upon consideration of the applicable law, we are of the opinion that:

1. The City is duly created and validly existing as a public body, corporate and politic, with the power to adopt the resolution authorizing the issuance of the Bonds, enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein and issue the Bonds.

2. The Bonds have been duly authorized, executed and delivered by the City and are valid and binding limited obligations of the City, payable solely from the sources provided therefore in the Fiscal Agent Agreement.

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3. The Fiscal Agent Agreement has been duly entered into by the City and constitutes a valid and binding obligation of the City enforceable upon the City. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement for the security of the Bonds.

4. Interest received by the owners of the Bonds is excludable under existing statutes, regulations, rulings and court decisions, from gross income for Federal income tax purposes pursuant to Section 103(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although the interest is included in adjusted current earnings in calculating corporate alternative minimum taxable income. Interest received by the owners of the Bonds is exempt from personal income taxes of the State of California under present law.

In rendering the opinions expressed in paragraph 4 above, we are relying upon representations and covenants of the City in the Fiscal Agent Agreement and in the Tax Certificate of the City, dated as of the date hereof, concerning the use of the facilities financed with Bond proceeds, the investment and use of Bond proceeds and the rebate, if any, to the Federal government of certain earnings thereon. In addition, we have assumed that all such representations are true and correct and that the City will comply with such covenants. We express no opinion with respect to the exclusions of the interest from gross income under Section 103(a) of the Code in the event that any such representations are untrue or the City fails to comply with such covenants. Except as stated above, we express no opinion as to any Federal tax consequences of the receipt of interest on, or the ownership or disposition of, the Bonds.

Certain agreements, requirements and procedures contained or referred to in the Fiscal Agent Agreement, the Tax Certificate and other relevant documents may be changed, and certain actions (including, without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any payment of interest on the Bonds if any such change occurs or action is taken or omitted to be taken upon the advice or approval of counsel other than ourselves.

Further, we note that the rights of the owners of the Bonds and the enforceability of the Bonds or the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State of California. We express no opinion with respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions contained in the foregoing documents, nor do we express any opinion with respect to the plans, specifications, maps, reports, or other engineering or financial details of the proceedings, or upon the Rate and Method or the validity of the Special Taxes levied upon any individual parcel. Finally, we undertake no responsibility herein for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Respectfully submitted,

NOSSAMAN LLP

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT

[to come]

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APPENDIX F

DTC AND THE BOOK-ENTRY ONLY SYSTEM

The information in this Appendix F has been provided by The Depository Trust Company (“DTC”), New York, NY, for use in securities offering documents, and the City does not take responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the beneficial owners of the Bonds (the “Beneficial Owners”) either (a) payments of interest, principal or premium, if any, with respect to the Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement.

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

Neither the issuer of the Bonds (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Bonds (the “Agent”) take any responsibility for the information contained in this Appendix.

No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 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 Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100

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countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). On August 8, 2011, Standard & Poor’s downgraded its rating of DTC from AAA to 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 and www.dtc.org. The information contained on this Internet site is not incorporated herein by reference.

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

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

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

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

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

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

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

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

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APPENDIX G

DISTRICT BOUNDARY MAP

[to come]

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